RE:RE:RE:A few pts auburn2,
IMHO, the problem at Alio Gold is at San Francisco, not Florida Canyon. Let's take a look at the economics of San Francisco.
Ore grade milled 0.46 g/t. At $1200 USD gold that gives you $17.74 USD in in situe value per tonne of ore.
The problem is they have to mine 3.83 tonnes of rock to obtain a tonne of ore at $2.14 USD/tonne mining cost so thats
$8.19 USD/t in mining cost,
$5.25 USD/t in processing cost, and
$0.73 USD/t in G&A cost, so total cost =
$14.17 USD/t which means Break even is at 79% recovery, and last quarter they got 52.3 percent recovery.
Heading into winter in northern Mexico that is usually the worst quarter for recovery at around 60 percent. If they did 60 percent recovery in Q4, then they lose $3.50 USD per ton of ore mined. So small wonder that their best manager has been shifted over to Florida Canyon, and the mining rates at San Francisco have been curtailed.
Florida Canyon is a lower ore grade only .34 g/t which nets you $13.11 USD in in situe value at $1200 USD/oz gold. However, at Florida Canyon the strip ratio is much lower so only 2.13 tonnes of rock need to be mined at $2.02 USD/t =
$4.30 USD/t in mining cost,
$4.30 USD/t in processing cost, and
$0.58 USD in G&A cost so total cost/t at FC is only
$8.32 USD which implies that Florida Canyon can break even at 63.4 percent recovery which is achievable for a heap leach operation.
So small wonder that the Ana Paula group has been fired, the CFO has been fired, and Alio Gold has gone into survival mode stopped all stripping of waste rock at San Francisco and reduced the mining rate to minimize losses.
Now contrast that situation with the economics at El Valle at $1200 USD/oz gold with head grades up to 3.7 g/t gold.
One tone of ore contains $142.76 USD in gold in situe value, which at 93 percent recovery
nets $132.77 USD/t of gold revenue, plus.
$5.00 USD per tonne in silver by product revenue, and
$24.00 USD/t of copper by product revenue, so each tonne of ore at El Valle generates
$161 USD in revenue with the average cost per tonne at
$117 USD/t.. That is a margin of
$44 USD/t at $1200 USD gold, and so Orvana Minerals has the advantage of being able to high grade production when metal prices are low in order to meet its financial targets.
The following chart shows that Alio Gold closed below its 2016 swing low at $0.72 USD which was made on 356,318 shares. The most recent swing low was $0.63 USD with 1,321,417 shares. The lower swing low on higher volume says that ALO is headed lower in the short to
intermediate time frame. At current metal prices ALO is in a no win situation. They needed to acquire a cash flow positive producer. Instead they went for a carbon copy of themselves with a lower grade, but at least they picked up $11 million in cash which enabled them to safe face for Q2.
Q3 and Q4 are going to be challenging quarters for ALO, and I wouldn't be surprised if the CEO has to do a secondary share offering similar to what ASM just did to its shareholders. Here's my chart on ALO:
