RE: Just my old post.some cheerleaders quickly shoThe Main problem with LSG is they over promise and under deliver.
They also did over, ripped of HOC who funded the company through thin and thin. (as there was no thick)
As I understand it
Bell Creek Mill
When bought could process 1500 tpd, it can now process a whopping 2000tpd if they meet the target for the end of next quarter, (fingers crossed).
Then there are the three mines Bell creek, timmins and next door thunder creek.
total reserves 800koz
cost of these reserves $60M in exploration spend since 2008. Yes thunder creek should add a lot in H2 but it seems that it's is always around the corner. (also don't forget the excellent wti takeover where LSG gave up 33% of the mill, 33% of the timmins mine and 33% of the bell creek mine for a 7% increase in ownership in thunder creek) Rip off !!!!
Also mine development and mill spend has been $240M over the last three years.
So they have spent $300M in total
and they get
This year they aim to produce 125k oz at a cash cost of $575/oz, but what is the on going capital (mine development) spend going to be to maintain production at this level?
Broken down
on 125k oz production
lets say average gold price $1450
- cash cost $ 575/oz
= leaves $875/oz profit
Then there is
Exploration budget for 2011 $31M
On going Capex at the mine $30M (estimate (conservative given the last three years has averaged $66M))
That knocks off another $488/oz from the profit
leaving $387/oz
Just under $50M to play with,
There is likely to be a similar amount of capital expenditure ($30M) required at the mines to increase mining rates from 2000tpd to say 3500tpd.
But where will this get processed ?
Oh an expansion at bell creek and what will this cost? well secular bull mkt in the mining industry lead times on mills etc increasing, etc etc it's not going to be cheap (guessetimate $50M) if lucky imo.
So that explains partly why LSG now needs to borrow money the $50M credit facility.
But yes a mine expansion is great and LSG could double production. agree wonderful why don't we concentrate on this.
But hang on someone offered Tony some magic beans again, the Gib project, simply, yet more exploration spend and development cost and if the asset turns out to be half decent Barrick can take control and not even pay back what LSG have had to pay for the project. Marvellous
Sorry for the post being long, I’m just a bit miffed at LSG’s underperformance, which I put down to lack of focus on the project and bad deals.
And now the sugar daddy HOC has gone LSG will be raising in the mkt and borrowing from banks and hence the shareprice weakness. (and yes I am aware that many other gold miners have been hit recently