NPV: reserves vs. resourcesThe devil is in the details! Consider the following:
"The Net Present Value ("NPV") and Internal Rate of Return ("IRR") are based on current mineral reserves outlined over the life of mine (LOM) as of April 22, 2007 and do not include additional conversion of Resources to Reserves or additional delineation of resources. The Company currently has five drills operating on the project." - ENDQUOTE
and...
"Definition of the mineral Reserves and Resources in the PFS were subject to more stringent parameters for an "Ore Reserve" calculation." - ENDQUOTE
As a result of the above, the company only used a reserve of 1,886,769 tonnes to plug into their calculations. I would suggest that if one just includes the total resources demonstrated so far for the project, you would have at least doubled the tonnage. Keep in mind that most of the high grade results we have seen reported during the last few months would not appear in either the current reserve or resource numbers. However, a feasibility study is only going to use the most conservative data and will not even consider that the company will be able to mine that other resource material at a nice profit. If there is not enough data to qualify it as a RESERVE, it does not exist for the purposes of the study.
That is why you have such a ridiculously low NPV generated.
Now the reason this report is so bullish is that they have indicated that the net costs will be negative, ie. the costs per ounce of silver will be free plus a about an extra buck of credits, after all processing and mining costs have been included. That is pretty impressive.
I would also say that the company has significant upside for exploration, and once that mill is up and running it will serve as the anchor for the entire property area, so that any new discovery can be rapidly advanced to production. The company recognized this and chose to locate the mill near the center for the property instead of closer to the existing mines.
I do not react to the daily noise of the trading. This story just continues to improve and investors can seem to wait to throw their shares away. I have seen similar behaviour too many times, and I make money of it by buying and holding while others piss away their winners and chase rainbows elsewhere.
cheers!
COACH247