Improved economics from grade increase I was just taking a walk back through the history of the project and its economics and thought it was worth pointing out that just through the simple fact of increasing the grades, the annual production has jumped by almost 120k ozs per year without having to increase anything else. The 2009 PEA envisioned a 20,000 tpd operation. Back in 2009 the average grade was only 1 g/t, so that generated an annual production of about 200,000 ozs per year once you factored in mining dilution and recovery percentages. With the most recent resource estimate, the average grade is now 1.66 g/t. If you use the same mining dilution and recovery percentages, annual production at 1.66 g/t on a 20,000 tpd operation would come in around 330,000 ozs per year as per their corporate presentation. That is a 65% increase in annual production. If the high-grade discovery in the south block proves to be more than just an anomaly, they will probably ramp production up on lower grade ore but then hit the higher grade in the first couple of years, and as a result they could probably manage over 350k ozs per year early on just due to higher grades.
For worst-case estimation purposes, page 25 of the corporate presentation offers a "Double PEA' scenario, which is an extrapolation of the 2009 PEA but at twice the production cost and twice the capex. It still produces annual cashflow of $343m per year and a payback of 1.72 years.
The concern for the longer term is share dilution. That will ultimately depend on where the sp happens to be when they go out for the financing they will need to build the mine. Hopefully by then the sp is well over $2 and so they can find a nice balance of equity/debt.
All in all, the second half of the year is going to be an interesting period of time for BSX. The PFS is currently scheduled for August and the BFS for December. There are at least 106 new holes to include in the next resource update. It would be nice if it was all step-out and extension drilling, but we know that a lot of it is infill and some of the extension drilling turned up some marginal results. On the other hand, some of that infill drilling discovered higher grades than the average, so it all helps. I'm going to guess the updated estimate will add about 400k-500k ozs to the total, which will take BSX over the 4m ozs mark.
glta...eebler