Something to consider................ .......................... .........................
Long ago, I was a fan of SFEG, Sante Fe Gold. Picked that one up after a review of a list of juniors that Sandstorm Resources had invested in. I liked the grade on the project, but could not find much about the Management.
In doing my DD I was always frustrated that while producing, SFEG never reported "cash costs." In fact with the convoluted gold payments that it owed Sandstorm and other debts it was nearly impossible to tell EXACTLY how much gold these guys were making. Things weren't reported the way most Gold companies do in their SEC filings. I called down to the company at one point and talked to the CFO - he was unable to tell me why they didn't report "cash costs." I also spoke to the Corporate attorney, the CEO's son, at one point and he seemed to be unwilling to talk specifics without authority from Pierce Carson (his Dad).
At that point I should have seen that as a RED FLAG and jumped out of the investment. But hey! Paid some "tuition" in the school of life with that one.
But now there is news out of SFEG! The BOD dumped the Prez & CEO, Pierce Carson, in June. What is unusual to see in the PR was the phrase "for cause". I note in a subsequent PR or presentation, SFEG mentions "mismanagement" as the reason for past problems. Again, pretty harsh.
But the interesting news is that SFEG just did a strategic share swap with Carnac Resources. Now Carnac is a name that has been on the watch list for a long while since it is a child of Bradford Cooke. Cooke if you will recall is the dude who bought up some old tinker toy-sized silver mines and created the 13 for 13 favorite Endeavour Silver (EXK).
Now Bradford Cooke is the Chmn of SFEG. He has brought with him a team of experienced mine builders and operators. Their goal is to restart the Summit Mine and the Lordsburg Mill. This looks to be the exact same thing that he did with EXK - buy a shuttered silver & gold mine that under performed, figure out how to run it efficiently, start generating some CF & profits and use that as a basis for growth.
Now if you brought me a project that was presented as a "mine to build/growth" I'd take a long look at it with a jaundiced eye. Have seen many companies start with that business model only to implode and take investors with them. VERY FEW that start with that model actually make it. So I guess that risk exists here. What intrigues is the fact that SFEG now has a "been there, done that" management team. There are many similarities with the EXK story. Additionally, SFEG is already using contacts/resources developed by EXK.
So what is the rest of the story? SFEG is looking to restart the Summit Mine and reach a rate of 30,000 opy. Average reserve grade is 4.0 gpt of Gold and 9.7 OUNCES per ton (301.67 gpt) of silver. That works out to a Gold Equivalent head grade of 8.8 gpt! (63 Au:Ag ratio). Mine life is 5 years on existing 2P Reserves, with enough resources, if converted, to extend that to 7 years. Of course, like the EXK model, there is exploration potential at the mine.
In addition, SFEG owns the Ortiz Project that has a PEA as of June 2013. That PEA reports a 9 year life, annual production of 100,000 opy, Ops cost of $684/ oz , an IRR of 25.5% and a NPV of 215MM. The project is being currently permitted and should be fully permitted in 2015 - just about the time that the Summitt Mine is hitting its stride.
The key however to this restart is Cooke's ability to raise $22MM for restart costs. So there is am opportunity for a few individuals, with some cash to burn: SFEG will be issuing 8% gold bonds due in 2018 and which are redeemable in cash or gold ETF. I like the fact that SFEG thinks it can pay off the Bonds in 4 years!
So do your own DD on this one. Throw eggs here. all fwiw. |
