RE:RE:Ely Remains Dirt-Cheap at This Price!Trey Wassers reply #1 in the comment section of Taylor Darts article.
mrmrre
17 Nov. 2020
Comments (7)
Taylor
First, let me point out that as a Canadian reporting company, all our numbers are in Canadian Dollars.
Regarding Lincoln Hill, I would point out that the negative $33.5MM cash flow was due to $36MM in capex over the same period. This is being spent on high pressure grinders, improvements at the Merrill Crowe plant and new leach pads. The HPGR system is resulting in much higher recoveries and in fact, operating cash flow increased in the quarter.
As you point out, Lincoln Hill ore is much higher grade gold than the Rochester Ore. In fact, at 4gpt gold and 10 grams silver, (using $1825 gold and $22 silver), the Lincoln Hill ore is valued at $US30.77 per ton. They are processing 36,000tpd at Rochester and we have figured 1/3 or 12,000tpd will come from Lincoln Hill. At 68% recoveries, our 2% NSR equates to $US$1,794,675 or CDN$2,361,414. This is based on the 2014 technical report filed by Rye Patch. BTW we paid US$1.7MM for the 2% Lincoln Hill NSR.
At Fenelon, I would refer you to a September 9, 2019 Wallbridge press release where they confirm that they are permitting a 400-500tpd small mining permit. This permit was originally due by mid-year but, has been delayed do to the China Virus. Their 2018/2019 bulk sample resulted in their developing 6 levels of mine infrastructure including an exploration drift on the 6th level. Today, they are doing development drilling on the Main Gabbro Zone with 50-100 meter drill holes. The small miners permit would allow them to develop another 6-8 levels and drift over the Tabasco and Cayenne Zone for development/definition drilling. Fulling defining these zones from surface with 600-800 meter holes would be very difficult and too costly. Wallbridge is not talking about this permit much, probably because they do not want the market to think this is going to be a 400-500tpd mine. Once these high grade zones are fully defined and "test mined", they can make a proper on-site mill decision. That will likely be a 1000-3000tpd mill. So, I am on record as admitting to being a bit "out on a limb" with this projection (using 400tpd and 10gpt) but, I think that as soon as the permit is received, Wallbridge will ease the market into my "development" story. They are currently drilling at the 6th level so the resumption of mining at Fenelon and toll milling at Camflo could begin very shortly after receiving permits.
Clearly, any more delays in permitting will have to be reflected in our projections. But, longer term this is going to be a great long lived asset. BTW we paid CDN$600,000 for the 2% Fenelon Royalty before Wallbridge started reporting on the Tabasco and Cayenne discoveries.
These two royalties are excellent examples of the value in buying future production at deep discounts to NAV rather than focusing on current revenue.
Keep up the good work.
Trey Wasser, President & CEO, Ely Gold Royalties.