RE:RE:RE:RE:RE:A relevant exampleOnce again from Goldencrane July 2014 on the more optimistic side. AGG facts and valuations if they deliver - big time upside In the recent road show management have been taking the following as part of the presentation: Plant capacity 200tph = 1.75mtpa or 1.7 mtpa with some down time. $20m for the plant delivered to site by Gekko and another $20m for site works, inventory etc etc. Around 50-60% of feed is discarded with an upfront cyclone to slimes with low gold losses (previous SGS work indicated 5% gold losses) Balance of material treated through the plant with gravity concentration but a final intensive cyanide leach. Conservative costs of mining, processing and overheads at $18per tonne. They also believe the resource update will led to higher grades but potentially with some loss of total ozs. There is no shortage of ozs but a higher grade would be a huge win. Even with the current resource at only 0.87g/t there was talk of a mine feed grade (reserve) well in excess of 1g/t. They emphasize the study will IGNORE the nugget effect as it is not bankable. In other words the nugget effect is upside only to the base case. If you work backwards from those numbers at a very crude scale you have feed grade at say 1.2g/t (pre nugget effect), recovery at say 80% including slimes loss for recovered grade of 0.96g/t. Cost at $18 per tonne = 18/0.96 = 18.75 per gram = 18.75*31.1 = $583/oz. Production is 1.7mtpa * 0.96 = 1.6mgramspa = 1.6/31.1 = 52kozpa At 1320 gold you're making 1320-583 = 737/oz = 0.052*737 = $38m pa. In other words, you're making a pre tax profit of 95% pa on the initial investment under the base case. Now of course if you look at the Robex feasibility and take some costs from there (which is a full CIL so should be more expensive), the $18/t AGG is assuming looks very conservative. From Robex numbers something more like $12/t looks realistic. Using $12 per tonne costs and 1.2g/t feed and 80% recovery we're at $12.5 per gram recovered or 12.5*31.1 = $388 per oz. for those that want to include a nugget effect on top the numbers look even better. If you take the 1.2g/t feed and apply a 50% nugget effect, you're at 1.8g/t or 1.44g/t recovered. Using the $18/t treatment cost you come up with $12.5 a gram or $388/oz cost (production also rises to 1.7*1.44/31.1 *1000 = 79kozpa!!). Using the $12 per tonne cost you come up with $8.33 a gram or $259/oz on production of 79kozpa. So on a really "bullish" case you could be making $1061 per oz profit at spot on 79kozpa of production. This equates to a pre tax profit of $84mpa. This is over 200% of the initial investment. If they deliver the base case, there will be no trouble financing the project and investors will make some serious money. If you get really bullish and they deliver, this will be one of the best gold investments anyone will make. Of course delivery will be the key which has in the past not happened. The good news is that there is some new blood to help on delivery. From a value perspective you should also consider the starting project is exact that, jut a start. There is easily enough resource today for 100-150kozpa of production. The implication of this is that the valuation if they deliver will be quite high. If you took the base case of a annual $38m profit and valued it at 10x that number you get $380m (or $360m after deducting say $20m of debt). If you take the $84m and apply a 10x multiple to it you get $840m ($820 after deducting the debt). Even assuming a share count of 300m the value if they get this project up is massive - on the 360m that equates to US$1.20 per share and on the bullish case it equates to US$2.73 per share. So the key will be to see what the resource update delivers and what kind of mining reserve they come up with. Also the metallurgical testing to confirm the fines percentage for early disposal and the ultimate recovery. Of course there are some risks, but as things stand the project looks fantastic and quite incomparable to others out there. There are a lot of ifs still out there but running through the basic maths shows the project has some very serious upside for investors. Read more at https://www.stockhouse.com/companies/bullboard/v.agg/african-gold-group,-inc#AL7CqGPhHqCOPLAM.99