Post by
nozzpack on Feb 14, 2024 8:17am
On the merits of High Grading
High grading among miners is much more common than you think, simply because it makes sense.
Make your money when the Sun is shining and save your low grade ore for when metal prices reach their cyclical highs.
We have two great examples of this on the Baie Verte Peninsula.
Richmont discovered high grade gold among lower grade lenses in late 1990s at our HD discovery .
While gold prices were high...I was a shareholder ...during 2000-2004 , RIC mined 143,000 ounces at an incredible grade of 16 grams a ton, producing huge cash flows in doing so.
Mining ended when POG began a secular decline subsequently ....leaving behind substantial open pit gold resources at nearly 5 grams per ton which we now own.
Secondly, Rambler did the same when it took over the Ming mine and Firefky is doing the same thing now by drilling up the deeper high grade copper lenses .
So, the current FS upgrade of HD might include a high grade open pit option.
We had 275,000 ounces of open pit Reserves available at 4.5 grams for the 2022 FS.
M&I was open pit 330,000 ounces.
This FS will include Orion and Stoger Tight along with new drilling results for the main open pit, Orion and Golden Anchor along with contributions from the planned additional drilling in 2024.
In short, there should be no problem in having available at least 425,000 ounces of Open Pit reserves at 4.5 grams for the Updated FS.
With 95 % recovery, 400,000 ounces of high grade low cash cost open pit ore will be mined .
Why not mine that over 4 years , leaving new duscoveries and lower grades for later on, funded by robust cash flows from the first 4 years of mining.
AISC was $912 US ( $1200 cad ) in the 2022 FS study .
Higher volumes / lower unit costs, and reduced trucking costs plus eliminating about $40 million for Nugget Pond mill upgrades should mean
that AISC will not increase .
So, at $2000 US POG = $2500 cad POG , we will produce 400,000 ounces times $1300 CAD per ounce = $520 million in free cash flows excepting income tax .
We have about $30 million in future tax loss pools plus some of that $520 million will be used to fund exploration and development of our dozen or so advanced projects plus mill expansion costs.
Tax rate is 27% which would be about $150 m less $30 m for tax loss pools plus exploration costs .
Lets say net $70 million in tax costs leaving unencumbered free cash flows of $450 million cad over those 4 years .
These are factually based numbers that will likely be fine tuned in the update .
So, I foresee...as with Marathon et al, ...the new FS including a 10 year mine life , with the option of high grading HD open pit for the first 4 years .
In fact, I will bet on it.
Its why I have MAE as another 10 bagger .
You can view my latest 10 bagger...T.VLE ...as an example of patiently accumulating when no one wants to buy obvious value, strong growth potential and strong management
GLTA