New NPV
Looking at page 230 of the PFS, it appears that GBB has done an interesting sensitivity analysis on their pre-tax NPV. For those that don’t know, such a sensitivity analysis basically calculates the new pre-tax NPV when some parameter (like the gold price) changes.
Let’s look at a change in the baseline gold price of $1400 CDN to 1540 CDN (= the price it is now). This increases the pre-tax NPV from $24.7M to $33.6M. We can see that a rise in the POG of 10% leads to an increase in the pre-tax NPV of 36%.
Now let’s look at a change in the head-grade (= what we think the grade is of the ore we toss in the mill) of 30%. This corresponds to a nugget effect of 30%, something that is not unreasonable to assume given historical information (see my earlier post). Now we see the pre-tax NPV rise from $24.7M to $51.4M. That’s an increase of 108%.
Combining these two realistic parameter changes, we get that our new pre-tax NPV becomes $60.3M instead of $24.7M. If we assume a tax rate of 20%, the new after-tax NPV becomes $48M. Given that our original after-tax NPV was $19.5M, this translates into an increase of 146%. With $48M, a junior mining company can do quite a lot. Our current market cap is $17M.
Keep in mind that this new figure is calculated without taking into account the recent dramatic drop in fuel prices.
Burrito