What's taking so long? Re-examining the bull case As we all know, the feasibility study (FS) currently is conducted by Kappes, Cassiday and Associates, will be out by early Q3 2021 (i.e. July).
What could be taking it so long? I think it is the leach tests. What we want to see at the end of leaching tests is gold recovery of 80% or more. 70% is OK but 90% is the best. The last zone that was drilled, was in Mid-November 2020. There is likely a backlog at Kappes since GPY may not be the only customer.
In 2019, non-cyanide Enviro-leach tests led to 90% recovery from gold sulphides, but we don't know if GPY will be able to use Enviro-leach throughout (for all the ores from all zones). So I believe, they have to test for recovery with conventional leach tests as well which can take 2 to 3 months. Crushing size also needs to be tested.
Now onto the bull case for Brewery Creek Mine:
1. past producing mine with all permits in place with Tr’ondk Hwch’in First Nation support. Mine was stopped not due to reserve exhaustion but due to low gold price during the gold bear market.
2. mining permits only need to be renewed in phase 1 restart of the mine, so this only takes months. Not a new permit application at all which can take years. Expansion of mine in later phases may require amendments of permit but that would occur AFTER initial production has started. Ground water environmental monitoring data has been collected continuously for several years.
3. Janet Sheriff is the key architect of the ESG aspects of the mine, especially the First Nation support, and she will continue to be the key driver even after the mine has started. Would you like to invest in a mine that is constantly exposed to disgruntled exploited people will threaten strike and stop work at any time? None of that will happen because of Janet's work!
This was Janet's passion, advancing Brewery Creek Mine for the Tr’ondk Hwch’in First Nations' benefit. Enviro-leach was one of the selling points too. How was Eric Sprott convinced to finance GPY at a significant premium to market trading price? Normally investors finance at a discount! (https://www.goldenpredator.com/_resources/news/nr_20190725.pdf)
4. William Sheriff is the Executive Chairman, who will secure financing and the technical knowledge to advance the mine. His other project, EnCore Energy (EU.V), although uranium ISR is a now a roaring success (go take a look at EU.V if you haven't). His reputation enhances GPY financing. That is why VivaGold needs him (too bad for Viva shareholders only looked at the mine and not the people, their share price now tanking as well).
5. Mine production facilities can be completed in one season, since it is an existing mine. Preparatory work has already started since 2019 with the 49-person all-season camp completed, 80-person industrial kitchen, in addition to the 24-person camp for maintenance and office facilities. The mine is not in an isolated area, but 55 km from Dawson City, 17 km from grid power. The only issue is that this was before Covid-19. With Covid-19, the requirement for social distancing will increase costs. Let's hope that the supply of vaccine will arrive in time so that the pandemic is ended by 2021 or early 2022. Otherwise, more money has to be spent unnecessarily on the facilities.
6. Now coming to the macroeconomic case: Gold now above 1800/oz, inching towards 2000/oz. The mine feasibility study is based on 1500/oz. Once gold clears 2000/oz either this year or next, (depends on the banksters who controls the rate of ascent but not the inevitability of ascent), the timing will make the economics of the mine very profitable at production in 2022.
As the share price stays low, while gold rockets to 2000/oz, when will GPY shares be recognised for their value? In a gold bull market, leaders like Franco-Nevada and Barrick will rise and reach target price first. Speculators then rotate to laggards.
That is why I hold a mixture of leaders and laggards in my portfolio. Once the supply of GPY shares from weak hands run out, it is very difficult to buy them undervalued, unless you are an accredited investor and can participate in the future private placements at a discount. Target share price is north of CAD0.50.