Sprott Gold Report ..Why Gold Deposits not getting developed
As per usual, the report is replete with statistical reviews of the contributing factors determining the POG and Investment Capital , including ROC / IRR from gold stocks by production classes.
With respect to the latter, note as per usual but ignored by the current market that the highest return on capital has been small gold producers with a ROC above 25% .
Capital payback in years is inversely related to ROC, hence the strategic importance of this financial metric
Note that the most recent..2022..FS study for the HD mine had a IRR of 48% and payback of just 1.8 years..including $50 million for upgrading the Nuggett Pond mill, a capital cost no longer needed with the acquisition of the double capacity Pine Cove mill.
Anyway, an excellent read whose conclusions have a strong footing in facts..
https://sprott.com/insights/sprott-gold-report-gold-mining-stocks-a-clear-and-compelling-investment-case/
First Mining ( which holds the Hope Brook Option ) is developing a low grade gold deposit in Quebec.
Average grade is 1.51 grams per ton which is quite normal for open pits .
Its FS is contained in the link below..
But, at even a marginal IRR ...22%..First Mining needs to mine 15,000 tons of ore per day.
This requires a huge mining camp and associated infrastructure along with a 15,000 tod mill.
Total capex is listed at $1.45 billion which means that the mill is costing $100,000 per thousand tons of processing capacity .
And that's being conservative .
IMO, it won't get developed unless POG goes to $3000 per ounce.
The second example is Valentine Lake of Marathon Gold recently taken over by CXB.
Its 2022 FS is in the link below.
Average grade is 1.62 grams per ton .
It needs to mine 10,000 tons per day just for the same marginal IRR of 22% as First Mining.
A 400 person mining camp would be needed to mine and process the 10,000 tons per day.
Total capex costs were listed at $977 million which again is $100,000 tons pe thousand tons of milling capacity .
That is now much higher due to inflation induced cost over runs .
This goes back to Sprott's repeated point about the replacement value of gold mills at current prices makes current mills extremely valuable .
MAE two mills have 2100 tpd processing capacity which at the current rate of $100,000 per 1000 tons of milling capacity values them at about $200 million
Along with that no mining camps are needed, as the skilled mining crews live in nearby mining communities and unencumbered by long term debt such as Marathon had .
Thats why decent grade open pit deposits like Hope Brook or Matadors or NFG cannot ...excepting $3000 POG..be developed without access to excess milling capacity such as avaikable from MAE.
Furhermore, that also applies to those 134,000 ounces in the tailings Pond ..
As per usual, the report is replete with statistical reviews of the contributing factors determining the POG and Investment Capital , including ROC / IRR from gold stocks by production classes.
With respect to the latter, note as per usual but ignored by the current market that the highest return on capital has been small gold producers with a ROC above 25% .
Capital payback in years is inversely related to ROC, hence the strategic importance of this financial metric
Note that the most recent..2022..FS study for the HD mine had a IRR of 48% and payback of just 1.8 years..including $50 million for upgrading the Nuggett Pond mill, a capital cost no longer needed with the acquisition of the double capacity Pine Cove mill.
Anyway, an excellent read whose conclusions have a strong footing in facts..
https://sprott.com/insights/sprott-gold-report-gold-mining-stocks-a-clear-and-compelling-investment-case/
First Mining ( which holds the Hope Brook Option ) is developing a low grade gold deposit in Quebec.
Average grade is 1.51 grams per ton which is quite normal for open pits .
Its FS is contained in the link below..
But, at even a marginal IRR ...22%..First Mining needs to mine 15,000 tons of ore per day.
This requires a huge mining camp and associated infrastructure along with a 15,000 tod mill.
Total capex is listed at $1.45 billion which means that the mill is costing $100,000 per thousand tons of processing capacity .
And that's being conservative .
IMO, it won't get developed unless POG goes to $3000 per ounce.
The second example is Valentine Lake of Marathon Gold recently taken over by CXB.
Its 2022 FS is in the link below.
Average grade is 1.62 grams per ton .
It needs to mine 10,000 tons per day just for the same marginal IRR of 22% as First Mining.
A 400 person mining camp would be needed to mine and process the 10,000 tons per day.
Total capex costs were listed at $977 million which again is $100,000 tons pe thousand tons of milling capacity .
That is now much higher due to inflation induced cost over runs .
Simply put, the cost of developing a gold deposit right now is excessively high which explains the low liquidity and market cap of gold microcap developers and explorers .
The exception is when open pit deposit grades are high..such as 3 grand at Turnakura .
This goes back to Sprott's repeated point about the replacement value of gold mills at current prices is huge makes current mills extremely valuable .
My other investment MAE has two mills with 2100 tpd processing capacity which at the current rate of $100,000 per 1000 tons of milling capacity values them at about $200 million .
Along with that no mining camps are needed, as the skilled mining crews live in nearby mining communities and unencumbered by long term debt such as Marathon had .
Selinsing with 3000 tpd mill is valued at $300 million , and it too needs no mining camp , drawing its miners from local communities along with not being encumbered with debt .
Which is why our mining costs are so low and which cannot be matched by new gold mines of similar grades.
And average grades of new gold discoveries just keeps dropping ..
Thats why decent grade open pit deposits like Hope Brook or Matadors or NFG cannot ...excepting $3000 POG..be developed without access to excess milling capacity such as avaikable from MAE.
Furhermore, that also applies to those 134,000 ounces in the tailings Pond ..
Which also applies to MMY whose tailings pond should contain gold fines of the order of 1.15 times total gold production since 1998 ....and near pure cash flows
GLTA