Rough Scoping of HD Mine Updated FS From published sources ( eg 2022 FS ) and other Research.
1....$30 million for Nugett Pond will not be needed
2..XRAY sorter and associated infrastructure will not be used, saving $15 million
The original capex of $75 million CAD less the two items above is reduced to $30 million.
Trucking distance per trip reduced from 280 km to 190 km ( Pine cove 45 km closer ) but heavier loads offset this gain so no net gain .
Oil prices averaged $94 US per bbl compared with about $70 US per bbl now.
Energy costs are a substantial contributor to mining costs.
If oil prices remain near $70 per bbl, this will be a signifucant savings in operating costs.
Also, the HD site has already been removed of surface brush etc , so is ready for stripping.
I assume a 10% increase in the HD mine 5 year mine life, comprised of gains from extensional drilling in 2022-23 plus lower cutoff due to much higher POG
Estimated main costs
The HD mine will require approximately 3 months of pre-production for waste stripping to expose enough ore to maintain mill targets.
Estimated costs.......$5 million
50,000 meters of closely spaced grade control drilling will be needed to spatially define economic ore and to reduce waste ore mining.
Assumed $300 per meter for a total cost of $15 million
I assume that the remaining $10 million of $30 million will be needed for mining bench definition and pushbacks plus other miscellaneous costs such as early sustaining capital.
Ie, total capex costs of $30 million CAD for the initial 5 year portion of the 10 year LOM contributed by the HD mine...Orion , Stoger etc will provide the back 5 years.
Contribution of Interim Production plus Boot trapped production for last 6 months of 2025
Mining rates are expected to start at 15 kt/d and increase to 43 kt/d in Year 2....ie at 35% of normal full mining rate
The current expected mine life is 5 years for mining related activities which is about 5000 ounces per month of which 35% is 1750 ounces per month times 6 months = 11,000 ounces .
Add 5000 ounces from interim production of stockpiles and total production in the first year of pre production is about 15,000 ounces amounting ton about $50 million CAD in gross revenues @ $2500 US per ounce .
Net margin of 50% and cash flows from interim production + BS are about $25 million CAD to offset HD capex of $30 million .
Net capex would be about $5 million CAD.
Left out of these calculations is possible labor rate increases since late 2022.
Almost certainly there will be some increases .
I will add $10 million for increased labor rates which increases the net initial capex to mine HD to about $15 million CAD.
Now, even $30 million CAD is remarkably minor capex to get a high grade mine into production.
Valentine Lake will cost nearly $1 billion....Goldboro $271 million and counting
Why so low Capex ?
Largely because we do not have to invest $200 million for a mill, tailings Ponds, all infrastructure, permiting etc which costs a small fortune these days and takes 6-8 years to go from Reserve Resource Estimate to Mine production.
Uncertainties
....Changes in POG
...Changes in energy price relative to 2022
...gains from Tolling NFG ore
...optimization gains
.....??
Any and all comments to improve estimates are welcome.
My Assessment
It's extremely rare these days to invest in a 10 year high grade gold mine with such modest initial capex . As the 2022 FS illustrated, even at $1750 US, the IRR was 48% which is well above normal levels .
At $2500 US , the updated IRR will be above 75% taking just 3-4 months to pay back.
The 2022 FS study estimated free cash flows of $41,7 million CAD per year, assuming $75 million capex at $1750 US POG.
That will more than double at $2500 US POG.
MAE, as far as I can determine, will be Dundee's largest investment in a mining company at fair value.
They love making money.
AIMHO
GLTA