<<Claude, you have not got the point yet have you? I'm not recommending that people put money in to spec stocks. >>
Indeed... but you suggest publicly that the stock is overvalued and should be short without giving any specific reason.
<<I don't see any evidence offered by you to support the reason to own any stock you have recommended.>>
Well..another proof that you haven't study this thing in detail... cause the reasons to own are obvious.
<< It's not for me to provide the reason to own anything. >>
I agree... but don't you think you should provide the reasons why you say BAY is overvalued and should be short...
<<You have to do this and in my view you have failed.>>
Well I can repeat again, for your benefit.
BAY has a market cap of US$21 millions and has develop a unique silver deposit suitable to heap leaching and that contains a geological resource of 120 millions ounces of silver. Within this resource, a mineable resource of 100 millions has been identified. In other words, BAY stock is selling for $0.21 per mineable ounces. These numbers will grow as the deposit is opened in 3 directions and there is at least one other major zone on the property which has similar characteristics as the main zone.
The average ton of material has a silver content of $11. At a rate of 15,000 tons per day, the mining and processing costs would average $3.40 per ton. This cost evaluation is based on several other installations in Southwest US and Mexico (Rand, San Francisco, La Colorado and Morris)
Average recovery rate are not yet confirmed, but they will be in the 60%-70% range. Mini-column and bottle roll tests on chips or fines from the RC drilling program were between 70%-74% (chips) and 89-97% (fines) on the high grade stuff. They were between 58%-64% for chips on the low grade materials and same as the high grade for the fines. These numbers compare very well with the 58% average recovery rate obtained by the profitable Rochester mine owned by Coeur D'alene.
It is important to note that the grade at Alamo Dorado is 23% higher than it is at Rochester. As well, Rochester has argentite mineralization which is a sulfides that doesn't leach well. Some ore remain as long as 5 years on the pads before the leach cycle is completed. At Alamo Dorado, the ore contains a lot of chlorargyrite, a soft silver oxide that has very fast kinetics.
But the most important factor that makes Alamo Dorado unique and gives it compelling economics, is the continuity and distribution of the grades. In short there is a high grade starter pit of 4.2 millions tons that contains 20 millions ounces and that is near surface. This will be mined in the early years in large part.
I am sure you know the discounting mechanism of future cash flows... Well Alamo Dorado mining plan is such that it will produce as much as 9.5 millions ounces of silver equivalent in the first 2 years. This will drop to an an average of 5 millions ounces per year in the last 5 years. IOW, they get the cash very early in this operation... so early that one scenario has a payback period of 1 year.
Base on other operations in the region, BAY has estimated CAPEX at US$30M plus or minus 10%.
A model made on these numbers gives a NPV of $7.50 for this deposit at 70% recovery rates and $5.25 silver. The NPV is a little below $5 for 60% recoveries. At this low recovery level, the IRR is still above 30%.
Even if there are still some unknowns, I like these odds. I bought the stocks at $0.50 and $1.02 and still own it. I have sold very little cause I think the potential is for a minimum double once/if the recovery rates are confirmed at above 65% average. The potential is for another 300% gains if they make a similar discovery on the south zone.
Eliz, I can only tell you that this makes a good case for BAY stock. Will it happen like we would like...Don't know. Buying a speulative mining company is not exactly as predictable as buying a T-bill. But we are in for more thn 5% a year, so we accept the risks.
I will now be more than happy to read you on why BAY is overvalued and should be sold. May be there are things I am missing.
P.S. I will understand if you don't answer. |
