RE: RE: RE: Alka Singh article from today says Kia Total capex and opex over the LOM is estimated to be $3.1B. Total production is estimated to be 3.5m ozs. That yields a total cash cost of $896/oz. Anything over $900/oz gold is therefore profitable, although the closer to $900 it is, obviously the less it is of a going concern in terms of returns. At $1000, it would produce marginal returns of $34m in ebitda. At $1500 gold that jumps to over $200m per year.
All of that assumes that they will maintain the current production and corresponding capex, so no argument that based on current facts that the return is "questionnnable" if gold is $1,000. That is a big IF and one which I for one am not about to admit will happen. Sovereign debt, inflationary pressures, talk of return to gold standard, etc. are all enough to convince me that it would take a worldwide return to the stone age for gold to lose value on that scale for anything more than a microblip in the overall macro trend of ever-increasing prices.
So, recognizing that they need to improve the IRR in order to secure financing, it would not come as a surprise to see them decide to drop production capacity to 250k ozs per year for the first couple of years, and then self-fund production growth up to the 300k-350k range at some point in the future. A production capacity of 250k ozs probably means a capex of $350m-$400m. That changes the opex as well. Also, if they have higher grade material to run in the first year or two - ie. Kiaka South - then the payback period is shortened. Also there is no consideration for optimization of the resource in the first few years. Kiaka starts near surface so if they plan the digging accordingly, they can reduce strip ratios drastically in the first year or two while they dig primary ore, and only in subsequent years as they go deeper would waste start to climb. Current finance assumptions are based on a generic model with no optimization effort.