MMike update on BARU gold project cashflow and construction. Well followed analyst and investor in BARU comments
I spoke with Terry today. They are negotiating land use agreements with the local farmers to compensate for surface rights for the mining operations and deposit area. This is a relatively low cost expenditure and they are not trying to drive the hardest deal because they want the community to remain in support of the mine, but they also want to keep the costs reasonable because they will have to continue the same process in the years ahead as they expand the mine area. Setting a lower agreement cost today will save money down the road. Negotiations are a part of Asian culture and Terry has lived in Asia for more than 30 years so its not unusual to to advance through this process gradually. The plan is to buy out a few of the land users early and when they are spending some money and upgrading their lifestyle the others will probably get on board too.
There is very little economic activity on the island and this mine is going to bring a lot of new money into the area. Terry is already buying fertilizer for the local farmers and planning ahead to purchase trees as part of the land reclamation process once the mined out areas are restored to the natural state. Again this works to gain local support and demonstrate that the company is serious about the environment.
The first ore may be stacked on the leach pad as early as May. Drilling will be underway in April for grade control. The preliminary oxide ore zone extends down to about 50 feet, and with a wide deposit area and a shallow pit they may be able to achieve a strip ratio of 1:1 which is exceptional. Perhaps as soon as July the first gold pour may be completed. Exploration drilling work this summer should provide additional positive news flow.
Right now the resource is estimated at 119K ounces Indicated. They expect to add another 50K to that once they can prove up a previous historic resource zone. As income from operations starts to increase they will advance to Phase 2 of the development plan and build a Merrill Crowe recovery plant that can process more gold and gain higher recovery. In particular the silver by-product will contribute a boost to earnings from this upgrade.
I think they are on track to provide a solid foundation for this company. By mid-summer we should be watching a small scale operation gain efficiency and generate income, with validation of the forward guidance achieved and a road map in place for growth. The potential for additional discovery upside should also support the share price.
I continue to hold my position and may try to add another block if it stays below the teens. Baru runs a paid ad on this website.