RE:RE:RE:$1400 AISC?auburn2,
Isn't it strange that this "inferior, cash losing asset" traded up almost 10 percent on a quarterly earnings report where they reported a All In Sustaining Cost (AISC) of $1699 USD per ounce of gold? And Teranga Gold which is widely perceived to be a stock that should be trading at $2 to $4 USD, and reported a profit of 3 cents per share last quarter, went down 6 cents today on 7.9 million shares breaking the B point of an ABC down?
The market reaction makes sense when you step back and consider that Teranga Gold has to mine 320 tones of dirt to produce one ounce of gold. while Orvana produces one ounce of gold for every 20 tones of dirt. In terms of revenue per ton, Teranga mines low grade, high strip ratio deposits and has $5.70 USD in revenue per ton. While Orvana's richly mineralized ore fetches $120 USD per ton of revenue.
In terms of the economics of the two stocks, Teranga is operating a huge mill that needs 4.5 million tons of ore in order to operate at capacity and maximum efficiency. Teranga's problem is that their last year of high grade ore is 2017, and after that profitability goes down unless POG sky rockets. And to double production what did Teranga's management need to do? Acquire Gryphon to get the Banfora project and dilute their shareholders by over 100 million shares. To double gold production, Teranga would need to build another 4.5 million ton per year mill to mine Banfora, and that project will take until 2019 to increase TGZ's gold output by a factor of 2 and it will probably take around $100 million USD to do.
So what does Orvana have to do to double gold production? Put an existing mine Carles back into production at ZERO capex, and step on the gas at the EVBC mill and run it at 2000 tons per day with 50 percent oxide ore. Cost less than $10 million USD for the underground development and power enhancements. And the timeline for doubling gold production is 6 months instead of 4 years!
That is why I sold my TGZ stock back in October, and bought shares of USAPF and ORVMF.