Hi Jeff,
Thanks for your reply on the potential reserves. It appears that they need to keep searching!
On another topic, I was looking at the original news release for the SG acquisition:
crystallex.com
It's interesting that at the time, the POG was $295 and the 1998 cash cost was $245, allowing for $50 /oz in cash flow. If one multiplies the $50 / oz by the 420,000 oz of reserves stated, one comes up with $21 million: Pretty close to the $23 million KRY paid. (OK, I know that's obvious.)
Now by lowering the cost of production by $45 / oz, KRY has added value of $45 x 420,000 = $19 million to the mine (as long as the POG averages the $195 / oz it was at the time of the acquisition).
Another way of looking at it, in their earnings reports, they mention that approximately 40% of reserves (roughly 160,000 oz) are sold forward with a price floor of $310. By locking in cash flow of over $100 /oz, that comes to just over $16 million, equal to their SG acquisition loan. (The fact that the interest rate is 3% indicates that the loan is related to gold, as well.)
So, 160,000 oz sold forward covers the $16 million loan, which leaves 260,000 oz with cash cost of $200 / oz for which they paid $7 million.
Thanks again for your input,
John |
