RE:Where Is Ganndolph Now?auburn2,
First of all, I added to my share position in ORVMF ahead of earnings and have been accumulating this stock for several years. It makes no difference to me whether I buy at 17 cents or 19 cents, because my target on this stock is the December 2010 high at $3.97.
Furthermore, I think that the Q1 2017 quarterly report reinforces the bullish case for owning this stock not withstanding the very high all in sustaining cost numbers that were reported for the Don Mario and El Valle current reporting quarter. While many companies might have amortized the large capital expenditure items such as the Don Mario CIL project over multiple quarters or over the life of the mine, Orvana has taken the accounting decision to expense these items in the current quarter, and so this results in higher ont time costs for the current quarter.
But those current AISC numbers do little to inform what the AISC number will look like in the succeeding quarters.
One accounting improvement that has been made at Don Mario is a switch from co product accounting to by product accounting, which makes the cost numbers far easier to understand.
Taking a look at page 25 of Orvana’s MD&A which breaks down Don Mario's cost of gold production, the total mining cost was $8,539,000 USD.
Then subtract by product revenue of $7,263,000 USD for copper,
Subtract $1,491,000 USD for silver by product revenue.
Then subtract $21,000 USD for lead by product revenue, and the cash cost of producing 5232 ounces of gold is negative $243,000!
In other words, copper and silver by product revenue from concentrate sales paid for the entire cost of gold production. Add in $2.296,000 for G&A cost, community cost, sustaining capex, and exploration cost, and the AISC for Don Mario is $393 USD per ounce of gold sold.
Then let's move on to El Valle, where cost reporting has been affected by several factors:
- 1895 ounces of gold production remained unsold at the end of the quarter;
- $1.762 million US dollars in concentrate and dore receivables finished the quarter on the asset balance sheet instead of being booked revenue;
- El Valle increased underground development in some low grade oxide areas, This development ore was no doubt processed through the plant resulting in abnormally low ore grades.
In spite of these factors, when one adds in the unsold gold plus the revenue which did not make it to the books before the end of the quarter, EVBC was running at a cost of $1278 USD per ounce or roughly at break even. And the weighted mean of AISC is $960 USD per ounce of gold production (net of one time non sustaining capital expense items.).
So you have one mine where the cost of gold production is already negative, and where free cash flow will increase substantially over the next three quarters and a second mine where throughput already has been ramped up to near 2000 tpd and underground development has been accelerated to reach their high grade oxide zones beginning in the second half of 2017.