How Quickly Will Production Double Re reading the 2022 SRK report, I was surprised at how quickly we Will mining the new high grade ore from the wall cutback for New mining bench #1....and receive their benefits to halve mining cash costs.
In that report, it is forecast that just two changes will boost 2023 production to 78,000 ounces from 39,000 ounces in 2022.
The first is that ore grade will double to 1.20 gm/ton from 0.60 gm per ton in 2022.
The second change is that the strip ratio of 7.04 in 2022 reduces to just 3.26 in 2023.
Strip ratio is the number of tons of waste that must be removed to expose 1 ton of economic ore.
Also, surprising is that forecast tonnage of ore mined in 2023 is 1.9 m tons which is the same volume mined in 2022.
So, we will have the same amount of ore to mine and process in 2023 as we have in 2022.
However, we will have to remove less than half the waste tonnage to mine this ore and the grade will be twice that of 2022.
We know that the cost of mining per ton is the same regardless of contained grade .
That is, doubling the gold grade in 2023 for the same tonnage mined as in 2022 will recover twice the ounces of gold and halve the cash costs.
Waste mining is a significant cost and with the 2023 waste strip ratio being less than 50% of that of 2022, we are going to see cash costs in 2023 reduced even further, relative to 2022....ie significantly less than half of 2022.
There will be virtually no additional costs to achieve this as milling volumes will be the same as 2022.
Recall that the HKEX is exclusively for inorganic growth...ie acquisitions
From all of this, regardless of the success or otherwise HKEX listing, 2023 is going to be a huge year for our current two mines, with production doubling and cash costs less than 50% of 2022.
In addition, our free cash flow will more than double that of 2022 ( $ 25 m USD added in 2022 ) to about $60 million US by my estimates, boosting our cash position from about $58 million USD at exit 2022 to about $115 million USD at exit 2023.
Thats about $145 million in CAD or about $0.14 per share in cash at exit 2023.
Looking at 50 million shares post consolidated in 2023, we have an excellent probability of exiting 2023 with nearly $3 per share in cash and no debt.
Given the extended production outlook of about 20 years from our current two mines in a temporal trend of increasing production, it becomes obvious that a sustained regular dividend of about $0.25 per share or more can easily be invoked in 2023, at a modest cost of just 20% of 2023 free cash flows .
I need not state that the quickest way to increase share price of a gold stock is via a regular dividend.
A yield of 1.5% is high normal for gold stocks ( ie a share price 65 times the annual dividend ) which implies a share price in the $15 range in 2023....or about $10.50 net for our 70% ownership
That is, about $ 0.80 per share in pre consolidated shares as our expected target price in 2023