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Gold/Mining/Energy : Precious and Base Metal Investing -- Ignore unavailable to you. Want to Upgrade?

To: tyc:> who wrote (2524)	3/19/2002 10:18:17 AM
From: Elizabeth Andrews	Read Replies (1) \| Respond to of 39344

Up to Feb 15-02 NGX was operating under the smelter contract that former RYO management negotiated. It has expired and been replaced with a new 2 year deal with Noranda. NGX has not announced the terms of the contract but you can bet it is much more favorable. I don't know where you got your estimate of 295,000 oz of gold for 2002. The information in the prospectus that I read is as follows. In 2002, the mine is forecast to mill 17.5 million tonnes of ore and produce 251,600 oz of gold and 79.2 million lbs of copper. The on site cash cost of an ounce of gold net of the copper credit is expected at $130. But, this is based on a gold price of $300 and a copper price of $0.95. The mine is expected to ship 130,000 tonnes of concentrate in 2002. It looks like they will be mining ore with lower gold and higher copper grades in 2002. The missing $24.2 million in 2001 relates to smelter charges. From what I can gather the mine shipped 126,000 tonnes of concentrate so the charge per tonne was about $194. Going forward, the charge per tonne is likely to be less maybe $160 or so and this will provide you leverage if metal prices rise, especially copper. In 2002, each tonne of concentrate is estimated to contain about 605 lbs of copper and 60 grams of gold valued at about $1000 per tonne at current prices. To calculate your leverage you multiple by the metal content per tonne of concentrate by current prices then deduct the smelter charge ($160?) and operating costs per tonne ($570). That gives you the cash flow per tonne of concentrate to the mine before interest, admin costs etc. That equals $270/tonne. Multiple that by the tonnes of concentrate produced (130,000) and you get the potential pre-tax pre admin cash flow to the mine or $35.1 million. Divide by the number of shares and presto your own forecast! The smelter charge does not vary. The leverage is in the price of metals as most other variables are very well known and predictable. The cash cost of gold for concentrate producers is mainly a function of the credits provided by the by-product metals. NGX has copper and some silver. If copper went to a buck a pound the cash cost of gold would be dramatically effected. At current prices it is about $167 before smelting charges and $212 per ounce after smelting. We know what they sold it for but that's different than what they received due to the smelting charge.