Price expectation of 50 cents reasonable.Custom milling of the high grade concentrate will have very low AISC (all in sustaining costs)
per ounce of production. Recoveries of roughly 90% to 93% per tonne would be good, but I expect that this number will be just as good or better once the tailings pond gets the final permits in place. When everything is peforming optimally at 100 tonnes per day, about 2 months from now, then the total output will be roughly 24,000 ounces per annum, but that number may be a conservative projection if the average grade yields more than expected. It is not known just what the size of the high grade ore shoot is, and how many high grade ounces are insitu. More definition drilling would be needed to ascertain that number, or the company may just mine out the core of this ore body and process it over a period of 4 or 5 years. There could be 100,000 ounces in that one ore shoot alone.
CMC Metals is highly leverage to the price of gold because of the low AISC and the prospect of much higher gold prices ahead for many different fundamental and technical reasons.
So, if an ounce can be produced on an AISC basis for $600 to $700 US, and the gold price moves north to 1600 or 1800 or 2000, then you can do the math and figure out the profitability per ounce. For example, if cost is $700 and the gold price wlll be $1700, then at a $10000 profit per ounce on 24,000 ounces of production would give us a profit of $24 million to be shared with our partner. So, $12 million of profit plus about 3.5 million in revenue to the Bishop mill for custom milling charges would accrue to the bottom line for the next 5 years or more based upon just that high grade core area. There is the potential for the expansion capacity of the Bishop mill to 200 tonnes per day if everything goes according to plan.
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