RE:RE:How are they going to pay for Greenstone?Partypanther21 wrote: I don't think you're far off that it's a major risk. Fortunately, Santa Luz spend is basically done now which is huge.(knock on wood). Getting that mine ramped up is very important because it's supposed to have such lower AISC. The market is likely nervous that EQX hasn't announced commercial production or even given a revised timeline of when that might be. Because the technology is somewhat unique (to my understanding) a lot of investors will be wary of the stock until results come out on AISC and the mine is in commercial production providing FCF to pay for Greenstone.
Now for Greenstone, The costs are spread out pretty decently over a number of years which helps because FCF from operations should help them maintain a decent cash balance. It also doesn't help that we don't know what their expected AISC costs are next year for all their assets (I would expect them to be lower than this year because of Santa Luz and hopefully more stability at the mine sites. In terms of cost overrun potential, of course it is possible a cost overrun happens, but with the massive $177M contingency (14% I believe), the revised estimate with secured quotes and the ability to lease the trucks to defer capital, the $1.2 billion is more like $1.1 billion total USD with a lot of wiggle room. That's $700M for EQX share which is a lot of money, but definitely doable.
if gold drops below long term trend and there is a major recession, then that would be really bad.
Thanks for clarifying the Santa Luz situation, Partypanther.
As to your question: what will EQX AISC be once Santa Luz is in production: my calculation assumed ~$1300 because that was their Jan guidance for H2 "due to Santa Luz mine transitioning from construction and commissioning to operations starting in Q2 2022." You might argue AISC could be lower depending on Santa Luz, but even an extra $30m over 2 years wouldn't change their financing situation IMO.
Greenstone capex: if I add the gold revenue from pre-production and 5% cost overrun above their contingency*, I'm getting $700m capex. I think the cost overrun will be higher (diesel prices) but they could offset that by leasing the mining fleet. So let's call it $700m capex.
All of this doesn't really change the conclusion from my previous post. We're not going to be happy if gold prices don't hold at $1800. I think a recession would really help here, on its own and because it may encourage the Fed to keep real interest rates from rising too high (which is bad for gold).
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* A 14% contingency isn't as big as you may think. "Mine" inflation last year alone was 15%, if it's the same for 2022 then your contingency is gone. On their last call they admitted they were on track to spend more than the contingency, and trying to find cost savings.