VGCX NPV@5% Discount After TaxAs per the VG Technical Report,
VG NPV@5% Discount After Tax at today's gold price and the CAD dollar nearing .73 cents is about ~ $2 Billion CAD. Yes, that's 2 Billion with a B! And the NPV numbers in the Technical Report are
based on LOM average AISC of $1,114 US, .65 gpt and using a $1,700 gold price and .75 cents CAD dollar.
vgcx_-_2023_eagle_mine_technical_report_final.pdf For those novice investors, as the price of gold goes higher, margins go higher and as the CAD dollar goes lower, the NPV increases even more, yet VG market cap today is a mere $492 million CAD, a quarter of it's NPV
After Tax. And VG is a producers of nearly 170,000 ounces in 2023 but is getting priced by the market like a start up exploration company.
So why is that? Well there's a few things: 1) VG management has had too many stumbles and has lost the trust of investors. The Q1 production results being the latest disappointment. In my opinion, this is going to eventually improve in the coming quarters because if it doesn't I'm sure investors with deeper pockets than most of us will be driving management changes at VG.
2) Short sellers are all over this stock at every opportunity. With the low float, it's pretty easy for a larger share holder(s) to control the share price and that's exactly what we're seeing now. I'm not sure if it's because a Hedge Fund is working with a client to to intentionally suppress VG share price so their client company can make a hostile takeover bid (and cut them into the deal), but that would seem to be the most likely cause. Case in point, go have a look at Arogonaut Gold (AR) and see what they did to that stock before Alamos finally stepped up and took out the parts they wanted. And look who the Hedge Fund was that was a major aquirer of AR shares leading up to and then heavily just beofre the deal close.
Hint: None other than GMT Capital which by coincidence (or maybe not) just happens to be VG's largest shareholder. That AR transaction had to be planned and ongoing on for months. With VG management's stumbles these past 2 years, higher debt, they are just the type of candidate Hedge Funds pray on for this kind of move. Feel free to form your own conclusions.
3.) AISC is too high. AISC is high at $1,484 US in 2023. And yes Q1 AISC is going to be even higher than that based on the slightly less than 30K ounces produced in Q1, although the higher gold price will help to offset that a bit. With Q2 and Q3 production near 50,000 ounces the AISC will come back down. It's important to realizie, however, the average AISC for gold miners in 2023 was actually about $1,400 US per ounce. Even Newmont, the world's largest gold miner had AISC in 2023 in the high $1,400 range largely due to inflation and so if even the big guys can't get their costs down with their buying power, how can anyone reasonably expect a one mine producer like VG to do so. So is VG AISC really so bad and out of whack, I'd say no while other's here will of course disagree.
4) Perception is that the current debt level of about US $190 million or C $236 million is too high and is very concerning for some VG share holders. So think about this for a minute...VG has an
After Tax NPV of about $2 Billion CAD today and has $236 million CAD debt. So putting this into perspective, that's about 10% debt to NPV or it's like you having a $100,000 mortgage and owing $10,000 dollars. But your bank account is a little drained due to all the inflation related expenses you incurred over the past 2 years doing all that drilling and building the critical mine infrastructure that would surely cost far more the longer you delayed. So you talk to your neighbour (the doomsday type ...you know like drunk@noon) who says, hey Joe you're in trouble man if you can't pay your mortage the bank is gonna Repo your house and you'll be out on the street, ha. ha, ha! Joe says, but there must be something I can do until I get that bonus my boss says is coming? The neighbour says, ah I don't know Joe I think you're in BIG trouble!
Sound familiar? This scenario is VG's situation today but won't be for long. How you say? Well, does any reasonably minded investor on this Bullboard seriously think VG has a major debt problem with a 10% debt to NPV After Tax? And if so, do you honestly think VG couldn't possibly get some short term financing while they turn things around over these next few quarters and and go full bore in 2025? Yes, as MVargas recently pointed out, the timning of the Flow Through shares issuance is suspicious in occurring on Mar 28 when the Q1 debt payment of $11 million was due at the end of Q1, but the $10.5 million Flow Through Shares issue wasn't done because VG is on the brink of bankruptcy as some here may be thinking. It was done because why would they draw more debt down on the debt facilities or go to a bank or other creditor and pay more interest when issuing a mere 1.2 million shares solves this short term issue?
My Conclusion: The doom and gloom that is being fed to VG shareholders on this Bullboard is not near as dire as some would have us believe, but then hey fear is a lot easier to sell based on human nature.
Is this the best Gold stock to invest in today, absolutely not, is it the worst, absolutely not. Can VG management get their act together and with gold at these prices and probably going higher, will VG share price be a lot higher by the end of 2025? Well, I'm quite certain that it will because although I like to listen to the feedback of VG posters, I also like to dig deep into the facts and draw my own conclusions. Of course that takes a little effort which some here ott to give a try. For those that linger on the VG Bullboard just to bash others but never offer any intelligent analysis, why are you really here? I already know the answer, you're here to save us all from this terrible investment, yeah that's it!
As always, my opinion only, do what you will with it, I really don't care. DYODD
HB77