RE:RE:RE:RE:RE:RE:RE:RE:RE:what will happen now?I can’t believe the selling pressure on the stock. I know gold is taking a beating today, but it’s trading like Karma is pushing up daisies. Everyone should keep in mind that all mining companies have issues with the local communities to some extent or another. Let’s not forget while the local communities around Karma may have some issues, they desperately need all the benefits that the project brings with it. For example: employment; a fair wage for the employees who would otherwise earn an average income per capita of €250 (US$300) in BF; all the transportation infrastructure that is built and shared with the local communities; all the contributions to local schools, health clinics, community centers, etc. made by the mine; and the purchase of supplies from local suppliers, to name a few. The budget for community relations probably exceeds several million annually.
The government of BF has a lot at stake here too, and will push or assist in getting issues resolved. They have a 10% carried interest in the project and will earn royalties on top-line revenues, payroll taxes, as well as income taxes. Gold is BF’s number 1 export – they won’t kill the golden goose, as killing one project will seriously deter others from investing in BF. The project has been delayed, not cancelled, and the delay won’t be years as was indicated in one post. It will likely be a quarter at most. Also, the delay doesn’t mean the gold-bearing ore is lost – the Au ounces just get pushed out a quarter.
The damage, assuming it’s in the $4-8M range, while material, is not a show-stopper. Anything but human life can be replaced, even if it needs another small equity raise or small loan to cover this amount. Hopefully, the course-of-construction insurance policy will kick in and cover the damages and the business interruption policy will provide for the expenses related to the delay; however, if I recall, these policies might have exclusions on damages caused by war, terrorism, riots, etc. In the event no coverage is available, the $4-8M financial loss is not insurmountable.
The local residents may have some issues, and I don’t intent to belittle them, but they will be resolved in order that the project can move forward. A lot of community meetings were held well in advance of Karma being kicked off, so these new issues will be resolved even if it costs TGM a bit more. With all-in sustaining costs of ~US$700/oz, the company stands to earn healthy returns and print money at any gold price. As of Jan/2015, they’ve completed about 40% of the project spend, they continue to expand their resources and reserves through exploration of their other nearby deposits, and, most importantly, this world-class project is fully funded. Once the issues are resolved, the fundamentals of the project will positively reflect on the stock price, and as we approach and enter the production stage, the project risk decreases further and share price targets will be increased substantially in line with other mid-tier producers. Be patient and be buyers at these prices.