FDR: Time to ask - *Greater* than Great Bear?An indication of FDR’s current high status (and potential) is the arrival yesterday of the first serious, substantive CEO.ca post asking whether we’re going to be a more successful company than GBR. Too much hype? Let’s take a look at this question, and some of its implications.
Yes, I realize I’ve just started building an argument on a mere bull board post. But TheButcher based his opinion on the actual facts. And his explicit modesty re: possible alcohol influence does him credit. I’ve been tipsy over FDR since at least the August breakout.
There are two ways to look at the FDR vs. GBR comparison.
First, we can try to estimate the odds of whether FDR’s takeout price will be greater than GBR’s. That’s relatively straightforward.
Kinross paid approximately Cdn$1.5B for GBR in Feb 2022. At the time, GBR had “proven up” only 5 million oz, with an average grade of 2.5 grams/ton. Though clearly everyone knew the resource would be bigger.
In fact, part of GBR’s compensation hinged on the deposit getting to 8.5 million oz, including indicated resources. That 8.5 million oz requirement was a low bar, expected to be met very quickly, else why include it in the deal?
If we take the deposit to have been 8.5 moz at the time of sale, it suggests a ~Cdn$175/oz purchase price. Ordinarily, I would guess FDR’s price per oz will be lower, possibly by 50% or more. Meaning we would need to find at least 17 moz before a buyout. Unlikely.
But don’t call the race just yet. We’ve got some powerful factors on our side.
For starters, while the province of Ontario might be a friendly mining jurisdiction, Canada’s federal government regularly passes business-destroying environmental laws. To say nothing of the uncertainty caused by Ottawa’s failure to resolve land claims by aboriginal groups.
FDR, by contrast, has the enthusiastic support of Suriname’s full government. Why? Because gold mining isn’t just an important industry there, it’s essentially still the *only* industry, the new offshore oil discoveries notwithstanding. Does anyone think land disputes or environmental concerns are going to keep FDR from fully defining its deposit? Or keep our buyer from mining it? And the buyers will know this too, when bidding.
GBR had Chris Taylor to tell the story, with occasional in-person support from Bob Singh for the detailed geo sections of the slide decks. We’ve got at least two great salesmen: Padget and Voegeli, whose styles complement each other. Who knows what other members of our management / Board will step up in future? And national treasure Eric Coffin will keep playing as hard for our team as he did for GBR, I have little doubt.
GBR had a paved, 2-lane highway and power lines running through its property. We’ve got an *airstrip* on ours! Plus a navigable river next to it. Throw in the swarms of artisanal miners who’ve spent decades “incidentally” painting giant X’s on the ground for our drill teams. Include those waiting piles of tailings. And don’t even get me started again on how great it is to have near-instantaneous assay lab turnaround. Maybe 17 moz isn't too crazy a dream after all.
Finally, and perhaps most importantly, the gold price chart is a lot more bullish now than in late 2021. We can’t underestimate just how powerful an influence on the final buyout figure this might be. GBR never had a formal bidding war. FDR's future is still wide open on that front.
So, it is possible our resource size could make up for any deficiency in per-ounce deal price. And also possible such deficiency might not matter. Odds? Perhaps 50/50 at this point, if gold prices do break out. In other words, yes - we *could* be greater than Great Bear.
Stay tuned tomorrow for a discussion of the second, perhaps more useful way of looking at the FDR vs. GBR question.