Since most zinc mines were not profitable at 60 cent zinc prices, it stands to reason that a projected zinc price of $0.85 should make 25 cent cash operating profit per lb. for a producer. In MMG's case this amounts to 1.22 billion overall in the two manto deposits. That would be 81 million dollars profit per year for 15 years. Or 40.5 million dollars after taxes. This would be from a 4000 ton per day mill. Cost to build that in general could be about 35 million. Cost for the mining equipment would be about 15 million. Cost for the water reclamation and tailings pond would be about 20 million. Payback on that at zero profit would be 11 months. Thereafter the profit margin should be as above. With 70 million shares out, given strict financing from equity, this would mean fair price of 7.5 times earnings per shares of 57 cents, or 4.28 per share.
This is highly dependent on total smelter and extraction costs being about 60 cents a lb. This is conjectural. It may be bad news if this level cannot be met vis a vis zinc alone. Skorpion costs are about 25 cents cash, with a slightly differing product. Total costs with smelter, and capex I am not sure on.
The flotation solvent extraction process that Skorpion pioneered should make the cost equation somewhat different.
Now silver would add to this equation, but I cannot see where the grades of the silver areas, tonnages or the extraction methods are indicated. Silver I take it, would mean mining and concentrating a whole different ore body, and extra milling capacity. The total metal value is less, but at 100 plus dollars open pit silver, there appears to be a possibility of a profit. Flotation of silver worked well at Cobalt, Ontario, reducing costs in the modern extraction era post 1970. The silver equation at Cobalt in mines that produced underground at between 30 to 60 ounces per ton was obviated by union labour demands, and work to rule. One by one the mines closed because development miners could not cross union lines, and UMW workers wanted way too much per foot to develop themselves, without the time saving skills of the contractors. The same spectre of lack of ability to mine and develop at reasonable costs faced Dome, and faces Campbell Chib, and Falco in Timmins.
The whole picture at MMG needs the silver equation to be comfortable as has been pointed out, but it needs some kind of number pic to add sizzle to the stock.
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