RE:RE:RE:RE:RE:RE:RE:Sprott lending planned bankruptcy therager wrote:
I mentioned this back in June regarding the project was not all that it was being purported to be. This is apparent from the PWC report as well as the actions (or lack thereof) taken by ES/Greg Gibson. To sum up, it was determined there’s definitely gold at Dufferin and Tangier, but extensive exploration drilling needs to be performed to develop a mine plan to optimally mine for the resource. It is also easy to conclude that restarting the mine was not as simple as the financial model that was presented and no one could figure out how the economics made sense to just hold and drill for an extended period of time, given the high carrying cost of the projects even in their inactive state.
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There is a quite a bit of truth to what therager wrote. Dufferin gold was not well defined. Only 58,000oz are defined as indicated .. and "ready" to mine. The 150,000 is inferred and needs more drilling to get it to the indicated level.
58,000oz is about 2.5 years worth of mining which in my mind was enough time to get the ball rolling.
In contrast, Anaconda is ratcheting up its value by raising cash (and increasing shares) and drilling. The comparison ends there. Anaconda has an older mine in production and has cash coming in.
By my math RCG took a 65% haircut on the in-situ gold value in Dufferin, Tangier, and Forest Hill assuming they got nothing for the mill the mining infrastructure at Dufferin.
Putting it together. Had RCG developed the inferred to indicated at Dufferin they might have increased, say, a $1M value of inferred by five fold to $5M. A 65% haircut insolvency would have taken that back down to $1.75M. A more appropriate and likely lower number would take into account the cost to drill and dilution of shares.
I gave RCG the benefit of the doubt that they had a good approach and that the upside would be worth the risk and inefficiencies of a cold reboot.
Downside risk was worse than I suspected. It seems RCG got zero for the improvements to Dufferin. In case of insolvency it is a weaker approach than defining the resource by drilling.
Cash flow is critical. RCG ran a ground when it had insufficient cash to pay Sprott Lending.