Maybe this Duck isn't quite dead. Look at their market!I decided to take a more in depth look at Nordex's customer base.
How are they doing? Would you believe quite well? Over the next week I will present a different potential customer for Nordex. Some of these customers, they already service. Others they have bid on in the past. Some previously were unavailable to Nordex just because they were thought to not have the critical mass to supply a medium to large sized company. Now that Nordex has shown that they can achieve quarterly sales of $5.3M an additional 25% growth is not that difficult for some of these bigger mining companies to imagine. The one good thing about the fund raise was that it did allow them to expand their production capabilities.
Let's first go out a bit to one edge of the envelope and consider Detour Lake Gold. I don't believe that Nordex delivers to this company yet, but it is entirely possible that they could be bidding for the contract as I write this. Let us have a look at how they are doing:
Detour Lake Gold Mine (DGC:TSX)
Detour has gold reserves of 15.8 M oz.
In Q1 , 2014. DGC mined 4.9 Mt and processed 4.1 Mt of ore through the mill to produce 107,154 oz. at a mill grade of .90 g/t gold. Detour Lake poured its first 4 bars in February 2013 on schedule and later declared commercial production on September 1, 2013.
They experienced problems in December were forced to shut down at a cost of +$4M. Because of this Q1 gold sales were negatively affected; that is they produced 107,154 oz. but only sold 84,560. Those ozs., which are now in circuit, would have added approximately $28M to the bottom line. It is my understanding from what I have read that they will be cashflow positive from mining operations for 2014 and would thus make a very good long term customer for Nordex.
In their annual report they are projecting average total cash costs per oz. of $759 over the next 5 years and gold production of 600,000 oz on average. These total cash costs TCC are well below present TCC.
Nordex would have to build storage and perhaps wash facilities as well on site as well as dedicate at least one pumper unit.
The DGC Q2 report will be out July 29,2014.
The Detour Lake Mine is located 299 km. from Kirkland Lake. To get there on Google maps from Kirkland Lake, follow Hwy-66 to Hwy-11 then ON-652.
The following are 2 excerpts from their 2014 Q1 MDA.
From page 10,
“The Company continues to focus on completing the ramp-up of the Detour Lake mine to design capacity by improving operating efficiencies. The main focus for the second quarter is to complete the southwall pushback which, along with the completion of the final south ramp access, will provide improved access to higher grade ore. As per the mine plan, gold production is expected to be higher in the second half of 2014 as mining activity reaches the higher grade benches and the mill throughput attains design capacity of 55,000 tpd in the fourth quarter, thereby further reducing unit operating costs.
Capital expenditures are expected to be higher in the second and third quarter as the construction of the tailings facility accelerates. Sustaining capital expenditures below includes deferred stripping costs of approximately $35 million.”
From page 15,
“The Company produced 232,287 ounces of gold from the Detour Lake mine in 2013 and expects to produce between 450,000 and 500,000 ounces of gold in 2014. The Company reported negative operating cash flows for the years ended December 31, 2012 and 2013. The Company expects to continue to incur losses and to report negative operating cash flow unless and until such time as the Detour Lake mine generates sufficient revenues to fund its continuing operations. The generation of such revenues will depend upon a number of factors, including, among others, the worldwide market price of gold and the quantity of gold produced by the Detour Lake mine.
There can be no assurance that...”
Best of luck to all.