RE:RE:RE:RE:RE:RE:Eagle costs and market reaction todayMVargas wrote:
Stilll hoping to get shares at 40-41 cents after posting that there was another 150 million shares of dilution coming? Yes, I am actually still looking at buying a few hundred thousand shares at 40-41c/share. My financing estimate was optimistic (shares offered at 45c), the offering was at 44c. And yes, I expect another financing later on this year, to reach the 150M new shares.
Ore to the Olive leach pad happens in Year 9. VIT will be flush will cash long before that happens and the cost to construct the heap leach pad is a part of AISC anyway and would not have been included in the FS cost to construct. The money to build the second leach pad (based on FS) was already spent on something else. All the AISC and projected returns are based on FS capital estimate. The cash they will generate in Year 9 was supposed to be profit for shareholders - it does not comfort me to know we will be paying for it twice.
Sure the construction cost overruns were unfortunate, but manageable without incurring additional debt so the debt payback period is not affected. IMO more debt would have been better though than the additional 7 - 8% dilution. The construction costs were not unfortunate, they are a direct result of poor cost estimate, poor project management and the efforts to keep schedule at all costs (as the shareholders pay for it anyway).
There is absolutely no basis to expect a 50% increase in operating costs and AISC. In John's most recent interview he reiterated that at $1250 gold, VIT will generate US $100 million or C$133 million of cash flow per year. By 2020 the POG is likely to be much higher, but even at the current gold price, the current market cap is just over 3 times next years cash flow. AISC are based on FS capital estimates , the actual capital cost is 43% higher. I can guarantee the AISC will be much higher than projected in the FS (my estimate is 50% higher).
VIT's total debt once in operation will be less than US$250 million which is consistant with the forecast of a 2.7 year payback at current forecasts for operating costs and AISC and a $1250 POG. They will not be able to generate the cash required to service this debt in 2.7 years. Debt re-financing is guaranteed, the costs to refinance that debt will be steep.
Is there any risk that operating costs could be higher? Sure, maybe as much as 10%, but the POG could very well be 10% higher than $1250 too and the FS was based on a 78-cent dollar. Underestimated capital costs in FS means the operating costs and AISC are underestimated by the same margin. I would be pleasantly surprised to learn their operating costs are only 10% higher than specified in FS. Based on what I have seen so far I am not banking on tight cost controls, as the shareholders will pay...