Discussion with TMAC Investor RelationsI spent about 20 minutes on the phone with Lisa Wilkinson today trying to get a better understanding of what is happening at the mill. She was helpful and knowledgable.
- There has been a lot of change in 2Q19 and the gravity concentrators were still being commissioned throughout the quarter.
- There were a lot of issue with the commissioning of the gravity concentrators and logistical issues with getting replacement parts in a timely manner (spare parts sometimes take days to reach them). This had a major impact on recovery rates and the resin columns coudn't keep up.
- The gravity project is now complete. The concentrators are now fully functioning and the surge bins are in place. 3Q19 should be the first clean quarter from that perspective.
- The surge bins allow the plant to keep running when there are problems on front end with the ore. Previously the entire plant would have to be stopped and started when issues occured on the front end. Plant runs 24 hours a day all year long.
- All that really needs to be done now is add the scavenger columns and they won't impact operations as they are added at the back end and only will increase the recovery rate. These won't go in until near the end of Q3 and therefore the results will show up in Q4.
- Because of the issues they purposely sequenced the ore to keep the grades lower.
So for Q3 I would expect the recover rates should be back in the 85% range or so.
They will continue to release operational results shortly after the quarter end going forward. For the 2Q19 financials discussion on Aug 2 they will go into far more details.
I also wanted a better understanding of the debt refinancing as they seemed to reduce payments but the princple payment came earlier? What this does is create a refinancing window in the near future with the assumption that the company will be in a healthier financial position and get a better deal with someone (either a lender or strategic partner).
Finally, they are excited (as I am) about the drill holes 325M further along the BTD Extension. Where they continue to find super high-grade deposits.
My conclusion: they've been trying to change the wings on a plane in the air and it's been a painful process. Q2 marks the end of the major changes (gravity concentrators and surge bins) and we should see a major improvements in recovery rates in Q3 (85%) and further improvements in Q4 (90%?). With the plant issues largely resolved, hopefully the story can return to the massive gold strike the mill is situated on.
Gold is a hedge in these trouble times is another great reason to be in this sector.
This has always a long term play for many of us and I believe that this quarter marks be the end of the beginning.
As Warren Buffet says: "The stock market is a device for transferring money from the impatient to the patient."
Patience is a virtue and we will be rewarded.