NGT would be my numero uno junior pick right now at this 13-15 level. IMR is worth a shot as well, below 48.
<Kaiser Tracker: Alamos / National Gold>
That JK can really shot the shit can't he? Whew! But, at least in the end (after calling gold bulls in effect idiots)he rightly recommended the play. I think I have covered most of my own points, including the valuation disparity between AAS/NGT starting with my post 314 here and in the exchange that followed with Claude. I don't know enough about La Fortuna to judge if that should account for the difference. The fact that Millar heads AAS, no doubt deserves some premium valuation over NGT, but this looks far too wide. As far as JK's derisive hyperbole about how NGT is constituted by "gold bug amateurs", I'd say that even if the second deal with PDG and the AAS JV is all that Matter ever does here, I consider those the work of a pretty shrewd operative. And the baton has now been passed on the ground work anyway. I do agree with JK that Millar is looking for something that will be economic at today's POG.
On JK's more legitimate points, starting with the, "why did PDG walk question". PDG spent US$32 million here, and if Mulatos were a complete dud they would have walked after 5 million. But after POG collapsed, PDG's continued it's preconceived production model of a 15-20,000 tonnes/day heap leaching operation. This focused primarily on the no doubt considerable 1.5 g low recovery gold ($8-9 rock based on the 66% recovery, and probably requiring 325 or higher POG) that I would say is present not just at Mulatos, but all over Salamandra. Additionally this would have to be split 70/30 with another major, KN. So this meant that PDG had to go back to the huddle and draw up another play, besides fullback off tackle. Once they did that, the project was squeezed down below the "tooth fairy" under 190-200 all in costs, multi-million reserve threshold they operate under.
But, this is picture perfect for the adaptable AAS/NGT people, who can utilize a production model (including a small mill that AAS owns, these companies could be merged yet in time) that fits the smaller high grade portion and current POG, not the other way around. And by my evaluation, I just don't see the bar as set all that high in terms of the findings and improvements Millar can bring to this. In fact in terms of finding more high grade that could really boost it, I see the section 4225, the deeper feeder zone smoke, El Victor, and San Carlos targets as being absolutely mouth watering. A couple or all could hit. Longer term on the rest of this huge district, there was an exploration breakthrough (PIMA: infrared spectrometry) brought in by PDG's last manager that is the nexus of a new model that was developed. The JV will follow up on that as well.
Recoveries: Apparently the discussion about recoveries relates to the possibility that it could end up WORSE than the 66.2% PDG came up with? Feel free to smack me if I'm wrong, but to me it is counterintuitive to presume that Millar's theory about a smaller crush size than the 3/4" that PDG used in it's tests, would create a worse result? If I were a bettin' man looking for great odds, I would put my chips on an improvement actually, especially given that the EV of NGT is barely over US$ 1 million (JK fails to account for the fact that warrants exercised at 25-30, will require the payment of hard cash to NGT's treasury) at this point.
JK mentioned a point about NGT "infuriating its gold bug backers by optioning half the deposit on anti-goldbug terms". Well, I suppose most people who buy gold stocks today are gold bulls, I am. JK refers to Matter as a guy who would play to that kind of investor. I fail to see his point. Is he suggesting that NGT try to appeal to "anti-goldbugs: such as he? How many investors like that are out there? IMO Matter will and should reject such circular logic, and find "goldbugs" as NGT investors. ALL PM COMPANIES SHOULD DO LIKEWISE. These sort of snide remarks JK typically makes towards gold bulls gets tiresome, and I think does a disservice.
But, I'm also a realist about how constrained capital is for these projects. That's why the stocks are being given away. If capital were pouring into the sector we wouldn't even have this opportunity to buy NGT at 14 freecking cents. And secondly, Matter is a realist as well, and to me that's comforting, not infuriating. It was time to get a move on, and who could nickel and dime the other JV partner the most, misses the big picture. I would say as a result of this JV, the risk threshold for NGT has dropped considerably here, and the likelihood of success has really improved. This should attract investors, not scare them off. If there is a short term unrealistic "gold bug" jettison situation in NGT right now with some shareholders, the solution is straightforward: replace them at these great prices with people (including readers here I would suggest) who get it. One thing you can count on: Salamandra doesn't know or care who these sellers are.
JK seemed concerned about an event whereby POG traded at just over $300 on a nine month trailing basis, thus triggering the payment clause for a whopping $2.75 million (Cdn). Gosh, over 300 POG for nine whole months, if we could be so lucky! This is an example of the "hearing footsteps" mentality that develops after a long drawn bearish period, and to me simply illustrates how even a slight change in sentiment from observers like JK will trigger much higher prices. |
