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Gold/Mining/Energy : Twin Mining (formerly Twin-Gold) -- Ignore unavailable to you. Want to Upgrade?

To: VAUGHN who wrote (207)	2/6/2002 8:57:42 AM
From: WillP	Read Replies (1) \| Respond to of 613

A few comments: Ekati mines small (2 hectare) pipes in the middle of nowhere for which trucked shipping costs are significant and stripping ratios are high, certainly much higher than those TWG would experience mining the 500 metre Freightrain or Cargo 5 pipes. Using the Mackenzie Valley Environmental Impact Review Board - Report of Environmental Assessment on the Proposed Development of Sable, Pigeon and Beartooth Kimberlite Pipes - February 7, 2001 Ekati has a production rate is 18,000 tonnes per day or 14,208,000 tonnes per year. Ekati’s EA also indicates they mined in their remote location at an operating cost in 1999 of $88,000,000. Therefore their operating cost was approximately $13.39 per tonne on these small pipes in this isolated location. Ekati is still running at about 9,000 TPD, or at least it was. To confirm this, consider that in 2000, they produced 2.6 million carats from a pipe with a grade of about one carat per tonne. Make it three million tonnes per year. Dia Met's share of expenses that year was $54-million for operating costs and $16-million for depreciation, etc. Dia Met owned 29 per cent of Ekati, so the full operating costs and depreciation were $240-million. That works out to $80 per tonne, or about $50 (U.S.) per tonne. Considering the size of Freightrain and its lower stripping ratio, I will suggest that it could be mined at approximately twice the rate of Ekati or 28,000,000 tonnes per year. Umm, OK, in theory. My concern is the geometry of Freightrain, which seems not to be a classic carrot-shaped pipe, or at least it has lots of country rock rafted within it. That could alter things, if so. As TWG has the advantage of lower stripping ratios, larger pipes and deepwater port bulk supply, I will suggest operating costs to be approximately 2/3’s of Ekati’s for the same volume... That could well be a reasonable estimate. If the market extrapolates Freightrain & Cargo 1 grades to say .225 carrats per tonne and a “run of mine” parcel comes back valued averaging say $150 per carrat then initial JI ore values might be projected at say $33.75 per tonne. Not terribly exciting on the face of it but subtracting the $8.40 per tonne operating cost and we arrive at a net ore value of $25.35 per tonne. Well, my figures are considerably more pessimistic, due to the revised numbers above. They do get a bit better when you factor in the fact that revenues are in $US dollars and costs are in Canadian. So lets hope that Herman is in fact soliciting three independent parcel valuations before releasing Lakefield's results. That's routine with larger samples, so I hope so as well. Some of the Diavik samples were valued by six or more diamantaires, I think. There still is the question of whether they will recover enough diamonds for a proper valuation, however. A 300-tonne sample would produce only 60 carats, even at a grade of 0.2 carat per tonne, and only half that at 0.1 carat per tonne. You might consider revising your post, after you check the veracity of my numbers. A quick rethink tells me that I should have separated out the depreciation from opcosts. Depletion, etc. would be lower at JI, due to what I hope would be larger tonnages and lower capital costs. Once that was re-jigged, then you could apply your 2/3 formula to the operating costs. Derbuch suggested, and I thought it reasonable, that operating costs might be about $40, although I can't recall the exact number. It's probably buried in a TWG Street Wire somewhere. Regards, WillP