Value of Lom Poy is Much GreaterGoing through the 202 pages is no fun but does give you insight into where potential future earnings would come from. The F-20 shows that we have been running very high grade ore through the mill for the last three years as follows: 2013 - 2,72 gpt, 2012 - 3.44gpt and 2011 - 2.86 gpt. Proven and probable ore at Molejon averages 1.30 grams per ton so you can see we've been processing the high grade ore which will leave very low grade ore for coming years. Bojita and Pamilla average grades are less than half of Molejon. As the milling plant is limited to 3,500 tons per day, it works out that production of gold ounces will drop by approximately 67 percent in one or two years as the gpt drops below 1. Not a pretty picture. It also points out the importance of heap-leach. If we want to maintain current production levels at molejon (75,000 ounces per year), we will have to produce around 50,000 ounces of gold through heap-leach by 2016.
If Lom Poy proves out, you get 800,000 ounces of gold and 17 million ounces of silver from high grade ore. Milling at 1,000 tons per day would give you a Lom Poy mine life of over 17 years. The plan to start shipping 1,000 tons per day of high grade ore to Panama from Spain solves the problem of low grades at Molejon but at a cash cost of approximately $200 greater than current Molejon production costs ($750 - $550). Multipling Lom Poy equivilent gold ounces of 1.1 million times $200 gives you increased cash costs of $220 million over the life of the Lom Poy mine. If you can build a mill that handles 1,000 tons per day in Spain for less than $220 million you would do that instead of shipping ore to Panama.
Ideally, you would build the 1,000 tons per day gold plant in Spain remembering that there are other properties we are looking at besides Lom Poy. Each day, from 1000 tons of ore processed, you get 189 equivilent ounces of gold. At todays gold price, cash operating profit would be $142,000 per day, $52 million per year or 23 cents EPS per year for 17 years.
When you process ore at less than 1 gram per ton at Molejon, the production cash cost go from approximately $550 an ounce that we're currently running to around $1,300 per ounce as you get a lot less gold for the same amount of digging, hauling and processing. Obviously, it doesn't pay to run the Molejon plant at some point and that point is approaching rapidly (two years is my guess). At that point, you hopefully have heap-leach fully cranked-up and can process 50,000 ounces of gold per year.
So what does all this mean? To me it means selling all Panama while it is still worth something and move on to Spain. Other than PDI, and the ability to torment FQ, Panama's assets aren't worth all that much. If we get $150 million to pay off all debts and $100 million to start Spain, I'm all for it. Let's hope FQ can come up with $250 million. That would mean no payout to share holders, but the present value of Lom Poy looks to me to be around $2.50 per share. I've been here 19 years, I can wait another 5.