RE: Analyze This................Glad to see you are still hanging around Carkis. Maybe, just maybe we will see something come out of Yemen in our lifetime.
Al Hariqah has been quite the dilemma for our Board of Directors. For the past 3 years they have mentioned that they have been unsure whether to high-grade or mine the whole deposit. The difference in the BOD comes down to the fact if high-graded the remainder of the deposit may be uneconomic to develop. Do we settle for a relatively small amount of value now, for the sake of cash flow, or wait for real shareholder value to be seen? Perhaps a little discussion on the subject here can assist Chuck and company in making a final decision. Yeah right!
Okay - let’s analyze. Fact - the previous 28 holes in the northern 1100 meters of the deposit points to a resource of 16Mt @ 1.65g/t. Now, let’s make some assumptions on high-grading the deposit. Assume we can exploit 1Mt @ 5g/t. That’s an inground mineral value of somewhere in the high $80’s to low $90’s million. Development cost should run $5 to $6 million, to set up the operation and by the time all other mining cost are looked after profit should be in the mid $20’s to low $30’s million. That equates to about 11 or 12 cents per current share value.
Let’s continue our analysis. Fact – we know that the deposit out crops for 4kms (4000 mtrs.) and has two zones 30 to 50 meters wide. Let’s assume our current drilling program begins to prove up a resource in the neighbourhood of 60Mt @ 1.65g/t . Well, if that is true, there is your billion dollars! That would put us in the 2 to 3 million oz category. Let’s assume 2.7 million oz. – which I believe is feasible for a deposit of that size. Now we are up to $1.35 billion inground with gold at $500/oz.
Again there are cost associated with getting the stuff out of the ground. Mine development should be in the $150 to $200 million range, probably in the lower end of that range. Add in a JV partner for a project of that size and we are most likely looking at a profit for Cantex between $350 and $400 million with gold in the $500 oz. range. That equates to somewhere between $1.20 to $1.40 current share value.
The thing with the Al Hariqah deposit is that it is very sensitive to the price of gold and that could be a major plus for shareholders as the deposit’s value grows almost exponentially as the price of gold increases. At $400 oz. gold Al Hariqah was barely economic if at all, at $600oz. gold and up look out. The IRR will skyrocket!
Which brings me back to the BOD. I understand some have been dragging the feet on this project – perhaps that explains why. If you can afford to wait out better times – why not.
P10