Baru Gold Corp V.BARU

EAS.v - Full launch ahead to gold production

[brodeur]

Expert opinion by Mexico Mike on 7 Jul.
https://forum.mexicomike.ca/viewtopic.php?f=2&t=18183

I caught up with the prez of EAS yesterday for a telephone update. The lawyers are working with senior government officials to wrap up the AMDAL that will enable development of a mine to commence at Sangihe. This process has been underway for a while, and I have no doubt it will conclude favorably because there is too much money involved for all parties to screw it up. Right now its about getting agreement on the dollars involved and that is just part of the business climate in SE Asia. Things have changed a lot in Indonesia (for the better) since the last time EAS was active and I think they can work in good faith with the leadership of the country to get a mine built and create value for all parties. Terry has also been in discussion with interested parties to put together a variety of financing options for the first (and second) phase of mine development.

I know they can do a small royalty streaming deal and get the money. However, this involves life of mine contracts and all further development work to expand the project after, funded entirely by EAS, would still create a windfall of streaming leverage at rock bottom revenues to the streaming company. I do not think it is outrageous to assume gold may be trading above $2000 or even $5000 some years in the future. It would be very painful for EAS to be delivering some of the gold @ $500 per ounce (to pick a number) for the life of mine thereafter. for My opinion is there are better options in this market.  

Ideally, a gold loan will be arranged that locks up a certain amount of funding in exchange for a back-end payment in gold several quarters down the line after production is established. There are risks involved in this kind of transaction too, but it is close-ended and when the last ounce of gold has been paid off the company is debt free to expand with full leverage to production thereafter. 

My opinion is that EAS management at the current time is leveraged towards operating strength. That means I have greater confidence that the first phase of the mine will be built at a reasonable budget, within a reasonable time, and will operate within sight of planned economics to produce the expected gold output. If so, that means a gold loan package is very reasonable. Gold loan deals go off the rails when management drops the ball and cannot get a mine to produce enough gold at the expected operating profits. I have no doubt there will be a learning curve, and some challenges encountered along the way. That is mining. But I have confidence they can get it running to optimum, and the projected economics are so strong that the window to get there is very wide.

The second phase will involve scaling mining and production up to support a larger monthly production target. The increased cash flow from the operation can then flow towards creating value at Miwah, or completing exploration around Sangihe to build the mine life further. I would add that mine life is unlikely to be the limiting factor here, as they can probably outline a confirmed mineral inventory of several million ounces near surface for the mine if they invest in some confirmation drilling. Then, the exploration upside is superb at other targets around the deposit.

I also like that Terry is already looking ahead to consider creating value for Miwah. There is probably no value at all priced into the current market cap for this multi-million ounce gold deposit. In fact, Miwah could be the flagship for a junior on its own, and carry a value above a hundred million dollars in a rational market. There are explorers active in Australia today with deposits at a fraction of that resource that have much higher market value than EAS.

The progression is in place to resolve the hurdles in the path for EAS to gain value. All of them are achievable in my opinion. I am encouraged to see things move forward with limited promotion and I expect the targets will be presented in future guidance that are reasonable to support a stronger company. Thereafter as long as management can deliver on the expectations, and start producing steady gold output to achieve positive cash flow, the road ahead for this company looks very good to me. I continue to hold a core position of shares.

cheers!
mike