Ever wonder why VGCX production dropped so much in 2022? Well I have a theory that I've yet to see raised on this discussion forum so here goes.....
Production was ramping up nicely in 2020 and 2021 with annual EPS at $1.30 and $1.96 per share respectively. Looking great right? shares up near $20 then in 2022 production starts declining significantly and EPS drops to .54 cents per share. So what suddenly happened and why?
Well if you look back at the mine plan, the plan included commencing the dumping of ROM (Run of Mine Ore) on the HLP in mid to late 2021 which is exactly what was done. Then the production troubles all started in early 2022 but why? Well apparently adding ROM ore to the HLP isn't quite as straight forward as some would believe and here's a link to a research report written by a Newmont Geotechnical Engineer in 2012 that explains troubles that Newmont had, why and what to do and what to avoid.
Sustainable issues related to heap leaching operations (scielo.org.za) In the fall of 2022 I spoke to JM via phone on a few occasions and he was very good at answering all my questions. We had arranged to speak again via phone in early Oct 2022 and so I sent him an e-mail in advance outlining some of the things I wanted to discuss. One of the items I included was my theory about the recent dumping of ROM ore on the HLP as a possible cause for the sudden production issues (which included the above link), but for some reason after I sent him that e-mail it was the last I heard from him. I thought perhaps I offended him by sending him this info but perhaps I was onto something that he wasn't prepared to discuss with me.
Since then (over these past 6 months), I see that the company has since hired a new Mine Operations Manager, stopped the dumping of ROM ore on the HLP, installed new (higher capacity) solution drip lines (so that more leaching solution can get past the additional ROM ore that was stacked), etc. And it's also interesting to see that the company has since announced they've ceased the dumping of ROM Ore on the HLP citing that the costs are too high to transport the ore and placing ROM Ore on the pad is cost prohibitive. Well Yes it's cost prohibitive alright but my guess is that's because added ROM ore screwed up the 2022 production results and no doubt added a whole whack of unanticipated costs! So is it a coincidence that JM never called me back in October? Well knowing what I know now, I think not.
The good news is that if my theory is correct (and I'm pretty sure it is) and the improving production results in Q1 extend into Q2 and going forward, then we are quite likely well on our way to returning to 2020 and 2021 annual EPS numbers that if resumed will send VGCX shares back to the $20 level, especially with many of the significant capital costs now behind us.
Since this post is already long, I'll create a part 2 with comments about some of the more important points in the research report that I found interesting.
The above is my opinion only, so please do your own due diligence!