GREY:PTQMF - Post by User
Post by
wwadehammeron Mar 27, 2014 8:52pm
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Post# 22379249
Need Plan
Need PlanIf a deal comes out in the $50 to $60 million range, then management needs to explain how they intend to get out of debt. I assume all the $50 to $60 million will go to pay off the bank loans. That leaves $90 to $100 million outstanding debt.
If they can process 3,000 tons a day through the mill at 2.5 gpt, the production would be 88,000 ounces a year. If all in costs are $900 an ounce then they make a profit of around $400 an ounce which translates to $35 million a year profit. The auditors bought off on the heap-leach pile that could be processed in two years for a $57 million profit so that's $28 million per year profit, assuming they can get the heap-leach to work as planned. They are earning $20 million a year on the aggregate for the next two years which is a plus. So best case is if the plant is up and running and the heap-leach works as planned, they can earn $105 million a year at todays gold price for the next two years. This is the equivalent of 72 cents per share for the two year period. That first year would pay off the debt. The second year profit could be used for start-up at Palimilla, Bojota, and Oro Del Norte.
After two years it becomes very problematic as the high-grade ore will be mostly gone and if the company is to survive, it will have to become mostly a heap-leach operation. That might not be bad. The company could earn $58 milliona year in profit (25 cents eps) by processing 4.5 million tons of ore per year thru heap-leaching, recovering .5 gpt. at an all in cost of $500 per ounce (Production is 72,500 ounces per year at a profit of $800 an ounce).
Supposedly, we are building pads to process 700 tons per cycle. Assuming each heap-leach cycle is six months, then we need to triple the size of the heap-leach pads by the end of the next two years. Just looking at the current NI 43-101, we have enough low grade ore to run the pads for over seven years even without the gold from oro del norte. We're not dead yet but management has to get heap-leach working soon or we will be dead. Even if heap-leach starts producing, it will take over two years for the share price to start coming back. I would imagine it would stay in the 20 - 30 cents per share range and could get to back over a dollar in three years if things work out. The best case. GLTA