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Gold/Mining/Energy : Gold and Silver Juniors, Mid-tiers and Producers

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To: AuBug who wrote (59660)	5/24/2008 3:35:04 PM
From: E. Charters	Read Replies (3) of 78424

The problem is always the back in. If the back in does not have a clause which indicates it only triggers at a certain number of ounces then it is almost certain NEM will back in at over 2.5 million ozs, or at a higher grade, easy to mine say 2 million. At a 5% smelter NEM needs a good grade or cheaper mine and it also needs something that will pay back quick. At 3 million ounces the NSR is worth $150,000,000 to VIT. That is an earning of $10-15 million per year. It should still make their stock worth a few bucks, if there is no cap on it, but it is not exciting. VIT should not spend too much money on it to bring it too close to what NEM will think about taking over. I can't see NEM carrying VIT for 49% and waiting for VIT to raise the other monies. VIT could spend $8 million to find 3 million ounces only to lose it for $1.5 million. VIT can't go underground therefore, unless they are chasing less than 2 million ozs, or something NEM will not back into. Our company standard is we are willing to start with 300,000 ounces or less where capex is low or we can do custom milling. Dome will not now start for less than 2 million oz's, but in the mid 1980's their goal was to real 1 million ounces to start a mine. It can cost 200 dollars per metre in very difficult fractured ground or deep drilling. Average cost in Canada is about 100 dollars per metre to start but at depth it can go to 135 or better. Some deep holes of, say, 5,000 feet can cost 150 dollars a metre from the top down and get more expensive as you proceed, as you have to start with really big core and a big drill. These drills may cost 750K new all up. Crews who can handle this sort of difficult ground are hard to find. The near 6 year downturn in the late nineties meant there was a downturn in new crews being trained and many people left the business. EC<:-}

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