I believe a little too much pessimism has creeped onto the board however it is always good to look at things objectively and with facts. Sageyrain brings up a good example why you can never compare two deposits and the insitu value per ounce they command. First no two ore deposits are the same and thus cannot be compared directly to each other. There are differences in grade, size, recoveries, ground conditions, taxation, labour, government regulations and accessibility. These things will all factor into the cost per ounce to produce. Thus deducting the companies desired profit margin and expected operating costs/ounce from the projected spot price of gold/ounce this will give the amount they are willing to pay per insitu ounce.
Facts are good. Indeed, no two deposits are exactly alike, that is why I presented a lower $/oz buyout example to contrast against the higher dollar values being thrown around here of late. Specifically the comparison to the buyout of Cumberland. Good to have a range. I think ARU will be closer to $100-150/oz buyout. Hoping you are right and it is considerably higher.
Now lets apply these facts to compare ARU to Hollister. First the grade and size of the deposit are not even close.
Correct, Hollister is much smaller and the grade is considerably higher, 31+ g/t. What is your estimate of the mineable grade for FDN? I am assuming at this point that most of it will be mined underground, using bulk mining techniques. It looks to me like it might average 3-4 g/t overall. Maybe a little higher.
ARU has an estimated 15,000,000 ounces open in all directions compared to 1,000,000.
Curious as to where you derive your ARU resource estimate. I keep a running cross-sectional resource estimate that I post to the board. I currently get about 10.6 m oz at FDN, and 11.1 with B/LP. I use a very rough, eyeball cut off of about
1.5 to 2 g/t. Am always glad to have new data points to add to the mix. I would have a very difficult time, if possible at all, coming up with 4 million additional ounces given present drill data. Not that the picture can't change pretty quick given new, significant intercepts.
The ground conditions are not simular at all.
From this statement I gather that you are directly familiar with mineralised- and wall-rock ground conditions at FDN as you present this as a fact. As no information has been released by ARU concerning potential ground conditions at FDN, I am assuming that you are privy to inside information.
ARU is in volcanics while Hollister is in sedimentary rock. Sedimentary rock is very difficult to mine in due to its weak nature. This type of ground condition requires very expensive time consuming ground support which cuts back on productivity thus increasing cost per ounce. Volcanics are relatively easy to mine through.
The statement that "volcanics are relatively easy to mine" may represent a "fact" at a very general rule-of-thumb level, but it certainly does not apply universally to all epithermal (relatively low-temp and generally close to surface) volcanic hosted deposits. Wallrocks in these systems are often moderately to intensely clay altered and/or sheared and faulted, creating difficult ground conditions. If one looks at enough of these types of deposit this is very evident.
Here is an example from the Ken Snyder mine, in N. Nevada, hosted by volcanic rocks-
"In the accident area, the clastic dyke was a pale green, generally friable rock composed of mostly angular fragments of lapilli tuff with occasional thin, disseminated calcite veins. Hand samples collected near the fall were easily broken with hand pressure......"
msha.gov
"Mine Safety and Health Administration (MSHA) - Metal and Nonmetal Mine Fatal Accident Investigation Report: 10/23/1999 - Fatality #44 - Fall of Roof/Back - Gold - NV - Dynatec Mining Corporation,.."
Friable means that the rock can be crushed in your hand. They also state that the rock can be broken by hand. This is unstable ground by any measure, in volcanic rocks. That's a fact.
Ecuador has virtually no taxation on mining, low labour costs and very little red tape compared to Nevada as well.
Could you elaborate on this? I have found that red tape in some developing parts of the world can be just as bad or worse than the U.S., and I include in this such things as problems with local jurisdictions, indigenous folks, labor activists, etc., etc. I find your "fact" in this case as a useless generalisation. Could you please elaborate on how much simpler Ecuador is to operate in than the U.S. or Canada?
There is a reason thus that Hollister commanded only 65 US per ounce and that is because it will be a high cost marginal mine.
If you want to make a comparision perhaps you should compare Goldcorps Red Lake Mine even though it falls far short of ARU in many area's. They have an aprox cash cost of 90 US per ounce.
I find the comparison to the Red Lake mine odd, unless you have access to inside info about ground stability at FDN. Red Lake is a mesothermal (relatively high temp. and deep) deposit in metamorphic rocks that, as a rule-of-thumb, present better ground conditions than epithermal volcanic hosted deposits. They rarely have significant amounts of strong clay alteration associated with them. Red lake is also much higher grade than FDN.
How do I know this, well simple, I am a Mining Engineer with 20 years in the industry.
Good, always good to have more experienced inputs.
This should answer any questions concerning what kind of premium ARU will command. It will be high.
Maybe, maybe not. Time will tell. I am hoping you are correct++. |
