GOZ.V
FD NOS is only 82.2m now. Some warrants expired.
Management realizes they overpromised on many fronts. Hence the 48k is a very cautious first step with more to come. "Further staged expansions will be evaluated upon completion of this phase." The credit crisis made cash flow the top priority, especially as áfter the electricity and ventilationshaft were paid they were REALLY short on cash, and gold was going down.
I believe this made them postpone the expansions they now are doing AND the completion of the feasibility study. The test mining they are in fact still doing must be completed for the feasibility to be completed. And the Long hole stoping didn't all that well in all areas of the mine, so they are now using Cut and fill in some areas (for thin veins) and Pillar in some (central tunnel), and long hole stopes in some (for wider veins).
There are two components to cash costs; mining and hauling the tonnage, and the Milling. The underground tonnage is more expensive per tonne, but the grade is better, if you use a good method for the rock and vein structures.
There is a very good chance that an exploration program on the property and the adjacent Rönnberget could yield a higher grade shallow pit. This would seriously bring down costs per tonnne and oz. I think this will be needed for the 75k to be realized. Just running more underground and open pit COULD be enough for 75k, though. They have only been running a single shift, 7 days a week, underground. With more faces they can increase this, according to the new plan. More open pit will also help.
I think we're in for a great ride with this horse. My numbers are 48k for the full year, ending at 50k+. So the FY fiscal 2009e is 48k x (900-300) / 82.2 mln shares = 0.20 CAD per share.
So if PoG stays at 900, I believe the multiple will increase from 2 as; commercial production is declared, cash costs will be reported and cash is hoarded, production numbers grow towards 50k. By year end, without dividend the cash alone will be 20 cents. At that point I can easily see the stock at 1+ CAD.
For 2010 at 58k we could be looking at 0.33 CAD of cash flow (the per oz cost will decrease with production). In which case a 1+ CAD stock will still look and be cheap enough to hang on to. Especially if Gold keeps going up.
1200 gold at 58k would yield a cash flow of .57 cad a share which at a 5 multiple would be 2.80 SP of which .70 a share will be cash in the bank.
Hold on guys! Nice and easy does it.
stockhouse.com
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To hit 50k ozs/year they only require an average grade of around 1.6-1.7 g/t from open pit and ug. That should surely be achievable given historic grades from the open pit. Using the historical grades from the 10 year period 1988-1997 the lowest annualized grade achieved was 2.1 g/t and averaged around 2.6g/t. If these could be repeated (bearing in mind that they processed over 1million tonnes at 90% recovery you are looking at 64k ozs to 79k ozs.
I for one hope that management is now merely wary of overpromising as Swede says.
stockhouse.com
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I especially liked several not-really-highlighted parts of the NR:
- the focus on Bjorkdahl ... it is really a focus BACK to Bjorkdahl ... is emphasized throughout. The Norrliden and Vallberget polymetallic deposits were kind of a diversion taken while base metal prices looked reasonable. But now that the economics of those properties are lousy, I appreciated the expansion
and exploration plans.
- those of us who have studied the Bjorkdahl mineralized footprint know with little doubt that it is several times larger than the past 43-101 report has 'stamped'. Thus I like the seeming continuation of exploration drilling. I especially enjoyed the phrase ... "This work has confirmed the extension of the gold-bearing quartz veins and the potential to expand the ore-body in all directions". My guess is that the upcoming drilling campaign will focus more on the south-wall open pit deposits than extending the footprint further to the northeast. Just my guess. (kinda similar to your Ronnberget thoughts Swede)
- what is there not to like about the fact that the expansion will be "funded entirely from cash flow." Should be music to all GOZian ears!!
- finally given the potential dramatic changeover of run-of-mine tonnages ... i.e. a greatly reduced reliance on the stockpiled 'rubble' as I term it ... I would like to believe that management's goal of a 20% increase in production is conservative. Yes, quite naturally everything in that production estimate revolves around the grade of the mill furnish, but considering the tremendous potential decrease in rubble use, you would think we stand a good chance of averaging 2 g/t instead of the 1.1 or so that was calculated in Nov. and Dec. of last year? That is considerably above 20%!
As the sage Swannmex is prone to say ... "now we need the management and the staff to execute". I would certainly like production to be consistently > 50K per year come June-July. >60K would really make me ...
stockhouse.com
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