THE BIGGEST & TRUEST SUPPORTER OF (LIO)
Some very positive share action from a veteran Café member/GATA supporter on a junior gold company, whose share action has been very impressive compared to so many in the sector. Lion One Hello Bill, For about the past four years I’ve written about Lion One Metals (LIO.V) as it worked towards developing the Tuvatu gold mine in Fiji. I’m not going to repeat observations and opinions I’ve already made in the Cafe for the second or third time, as they are available through the "Search" feature. What is now important is that last weekend Lion One unveiled the results of its Preliminary Economic Analysis at an investment conference in Vancouver. The document is at the company web site: https://www.liononemetals.com/news/news-releases/lion-one-announces-robust-preliminary-economic-assessment-for-high-grade-gold-operation-at-tuvatu-project-in-fiji The first thing to understand is that Lion One was able to develop a practical plan as gold fell to $1,200 an ounce. Though the bad gold market devastated exploration companies around the world, management was able to develop this project to the point where it will be soon financed without a lot of dilution and the mine will be cash flow positive from the start. It looks like internally generated cash flow will pay down the financing and fund further exploration. So Tavatu will grow without the company having to go to the market with endless rounds of new stock issuance. Key metrics from the PEA include: Cash Cost per Ounce ($US) $567 All in Sustaining Cost per Ounce ($US) $779 Mine production years 1-3 (oz AU) 262,386 Initial Project Life (Years) 7.4 IRR (%) Pre-Tax 67 IRR (%) After-Tax 52 Payback Period (Years) Pre-Tax 1.25 Payback Period (Years) After-Tax 1.50 Base case gold price (US$/oz) 1,200 These are great numbers. That Lion One came this far in such adverse circumstances speaks highly about the quality of its management. In a difficult business like exploring for gold, management is by far the single most important factor in business success. While it is true that miners get bought out based on the value of their reserves, it took good management to bring a mine to the point that it has value. Exploration and development companies run by bad or mediocre managers don’t get bought out-they go out of business. So far as I know, as of today, no other early-stage junior in the world is in such a good position as Lion One in Tavatu. If I’m wrong I would really, really like to hear about that company. As Lion One is a Canadian company, the PEA is prepared according to the regulations of Canada, and, as it trades in Australia and the USA, the regulations of those countries. Though I’m not an expert in this area, my understanding is that the PEA was developed with a 20 grams/ton cut-off. It is done this way to make it difficult for an unscrupulous promoter to hype the numbers. The way I think of this is: the PEA shows the best numbers allowable by regulation. It does not reflect the actual economics of the mine. As only management has the "real" operational plan, and they won’t talk to me about it, I obviously don’t know what to expect. However, I do have an opinion. In my opinion, it is very likely that once they go underground and start mining the results will be better than those shown in the PEA. I’ve linked to this map from the company web site before. It shows areas with grades far above the 20gram/ounce cut-off point. If I’m right, the payback times will be far better than presented in the PEA. The link is to the Lon One presentation to the Metals Forum on May 31, 2105. Go to