The question of the hour.Our little pennant is drooping a little. However there is some storm clouds in the distance. Goldcorp announced today a stunning revelation.
https://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/goldcorp-shares-rise-on-release-of-ambitious-growth-plan/article33650008/
Apparently slashing capital investment and exploration has created a dearth of new gold projects and gold production is going to come crashing down shortly. None of the majors has an appetite for megaprojects for capex that starts with a B. Our little high grade mini mammoth can be bought for 400 million and put into production for 200-300 million for a 8000tpd mill that will produce 16,000 grams per day thats 16 kilograms or 34 lbs or 500 troy ounces for rough and dirty numbers. 500 ounces a day is 180,000 ounces a year. We can do that at 2gpt cut off for 10 years and maybe 1 gpt cut off for another 10 years. So 700 million investment puts 230,000,000 in revenue with a opex cost of 300 an ounce ( think average head grade of .6gpt with average cost of 1000 an ounce so 2 gpt is roughly a third less mining for the same gold, a third less crushing, floating). So at 180,000,000 net revenue after opex payback is 4 years or 25% irr with paying 400 million for deposit. Erdene sells BK and AN and AA and KEEPS the other 400,000 hectares they have, pays a special dividend of 2.50 and has 50 million to keep looking for the next deposit.
Watch for G and ABX to go out and soak up some decent gold deposits in the next year. We are barely off the bottom of the tsx venture and it's still at 15 year lows. This stock has lots of room an the hot money is just starting to pour into metals again, especially with new governance to the south. Careful with shedding too much ERD, hogs get slaughtered but there is still lots of upside.
I have taken down my position slightly and added to FVL.
Cheers.