RE:RE:RE:RE:Covid19 is the new "Murphy"Greatdaysahead wrote: Ramp up has been slower than anticipated.
So yes, and with May production at 7756 vs 10'000 forecasted,and YTD at 25'000, we can expect 135'000 by end of the year (25'000 + 7 months @ 15'000 at best).
Greatdaysahead, I always appreciate your thoughtful point of view. You could very well be right about your forecast for this year's production, but I would have instead said 7 months @ 15,000 at worst.
Although still ramping up to full production, in the March - May period 2,354,000 tonnes of ore at a 0.84 g/t were stacked on the HLP. The contained gold is more than 63,500 oz. The recoverable gold at a 76% recovery rate is 48,300 oz, or an average of more than 16,000 oz/month. Because of the heap leach process, it matters little to me how much of that gold was recovered to the end of May. What matters is the ore tonnage stacked on the HLP. Again remember this period included a very cold month of March when operations were re-started and having to put measures into place to deal with COVID-19. Productivity has to be affected when some workers have to spend 14 days in quarantine before their 28-day shift.
Having said that, it was still a bit disappointing to see a decline in ore tonnage placed on the HLP in May and only 7,756 ounces declared as produced, especially when John forecasted 10,000 only about a week prior. However the differece could be nothing more of the timing of the pouring of the last bars where they could been poured on June 1 instead of May 31. Or more likely the ounces are not declared until refined by the Canadian Mint because the true numbers are not known until then and the May end of month was missed.
We won't get a true picture of production and cash costs and AISC costs until the third quarter financials that will be reported in November. Until then AISC costs are not even calculated. I'm expecting 3Q production to be between 50,000 - 55,000 oz.
Life of Mine AISC costs were estimated to be less than $800, but they will certainly be higher than that until the debt is paid off because interest costs were not included. However fuel costs (a major expenses item) are lower as well as the Canadian dollar. Perhaps an AISC for the first full year of operation (after CP) of $1,000 can reasonably be expected. But with a POG of $1700, the company is and will continue to generate a lot of cash.
If the company can produce just 45,000 oz in Q3 at an AISC of $1,000 and the POG stays around $1700, then Q3 cash flow will be US$ 31.5 million or approx. C$42.5 million. There are no income taxes payable in 2020 or 2021 - just a Yukon quartz tax of ~ 10 million in 2020, so say 2.5 million for Q3. Earnings therefore would be $40 million or about 65 cents/share. On an annual basis, that is $2.60/share.
Profitable, well-run gold companies can command P/E multiples of 20 or more, but even we only give Victoria a multiple of 10, that is still $26/share. They would only have to produce 180,000 opy and the POG would have to stay around $1700. Time will tell. I expect both production ounces and gold prices to be both higher.
By the time they have to pay income taxes, the debt should be almost paid off which means no more interest costs to be paid. Victoria should command a higher P/E multiple when debt-free.