Earnings Growth vs Ore Reserve & Recovery GrowthLurk & Learns: If we check the WGC definition recently posted by GM007, we would see:
1. exploration & study costs (
o) listed under AISC; and
2. exploration & study costs
(w) listed under AIC;
As we may have heard in the most recent Q & A, DR mentioned the LOM (dynamic) ore reserve life of 10 years. Meaning the AISC (o) COULD represent the (drilling & drifting) costs required to sustain the BF mine production for the "next 10 years" (or initial 10 including past production) or other time period. It is this (in-fill) drilling within this BF ore block that is going to drive the re-rating of the BRD pps going foward ... especially during the present downturn in the POG, now testing the 1200 level/resistance(?).
At these levels, and historically, many operations have had to resort to high grading in order to survive. BRD either by good planning or good fortune is in the process of drilling to locate/target the development drifts to the recently announced bonanza grades with drifts that can come from either the east or (much closer) west zones. Note to vent: pressure differential require belt curtain or roll up doors? LOL
At the CC the last (designated/QUALIFIED) questioner sought clarification on this strategy..and not long after over 1 million shared was crossed by his brokerage. Meaning IMHO, that there are those who speak of AISC & AIC wrt "muddy waters".. and those that ask about drill hole strategy .... knowing (and apparently approving) the HUGE impact of the BRD expenditure in this low POG environment. Did he see the upside possible from spreadsheeting (aka "what ifs") for UG grades of 4,6,8,10 & ?? if the UG contribution is capped at 800, 1000 and 1200 tpd and the OP making up the difference as per the CC, with the total capped at 2200 tpd. How much capacity is added by upgrading the crushing circuit as part of the $70-$80 mill mods to accomodate BF ore versus sending same to CM at Holt (already made the required mods). Met A + Met B = Met C (maybe, maybe not).
Listen intently (again) to the discussion again on the CC and try to decide if the 10-12 holes designed to generate development targets (for ramping & ore block development.. recall longhole stoping .. and of course the now infamous "sanitized ore")...as apposed to generating data for an ore reserve update. See posted link of BRD`s 2012 development strategy.
I digress....conversely, the non-sustaining "exploration & study costs (
w) listed under all in cost (AIC) could represent the drilling costs at Grey Fox (Contact, 147 & GFS) as these costs incurred in a separate location (4 kms away) as these costs are not required to sustain BF operations; but to establish a new mine (GF).
https://www.streetinsider.com/Corporate+News/Brigus+Gold+%28BRD%29+Revises+Black+Fox+Mine+Outlook%3B+Appoints+New+CFO/7707367.html
Again, from the CC, we (FINALLY) learn the reason for the delay ... the historical mantra of "underpromise and over deliver" not withstanding, has to do with metallurgical testing (83%+ recovery) of GF (something that could have been gleaned from stratiagraphic neighbour`s Ross & SAS`s Hislop ore some time ago, see also Trevali's (former BWR's & Blue Note) Cariboo Mine in NB for history and resolution of a similiar challenge).
While earnings growth works for "turn on a dime" widgetologists.. in mining, the term measure twice (hence 1 mln for 10-12 holes) cut once is extremely important, as many a manager has trucked down HY 101 (is replaced) when they (vicariously) drive a drift that does not establish an optimum longhole stoping block. Thus, in mining one would prefer to see resource-reserve (and in the case of BF grade) expansion, open along strike and down dip, and especially increased mill recovery, as this is `free ore`. This expenditure (while not states as such) will lead to holy grail of earnings growth...POSSIBLY for the next 10 years by increments.
BWDIK.. On the bright side, as this BF drilling of the 10 to 12 holes are released (or not), potential dance partners (most recently using CIBC??), COULD continue to load up.. for potential (OR NOT) upside.
Cheers
Stanley