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over 13 years ago

A Glaring Omission

One thing that stands out in the final update the the PEA in 2009 is the apparent lack of any development beyond four years of production. Prior to the issuance of the Positive Economic Analysis the following schedule was posted.

source: Plan-Production_Sept10-web-.jpg

http://www.goldenbandresources.com/html/projects/production/index.cfm

It was posted just as they were taking out the open pit on Roy Lloyd. So the mining operation is about six months in advance of the actual processing, taking out about 3X the operating requirement for the mill. In the 2008 PEA, they stated that a 1250 tonne stope would be taken out every day, if I remember correctly. (25X25mX2m) This would mean that some sizeable stockpiles of ore would be built up. They could also be far beyond the point announced in the news releases.

supersize: http://www.flickr.com/photos/11747277@N07/5765268646/sizes/l/in/photostream/

Note that this mine plan, pg. 95 actually reduces the stope size from the previous PEA by a very significant amount.

But the mill supposedly only processes 350 tonnes per day. So we have no way of knowing, comparing stoping schedules from both PEAs, exactly what the grade is and where the ore is coming from, or even how they are arriving at good grade controls.

But the Final PEA from 2009 has the following Operating Cost Summary, which gives us a clue. Terms are in $US, but I would say that the $CDN gold price is much more important here:

operating cost summary, p.163

Source: Final PEA, 2009

Notice that no development is required after the second year. This is directly at odds with the posted production schedule on the Golden Band website. The PEA does not account in any way for resource expansion. This is a glaring omission in the PEA. How are they possibly announcing commercial production without expanding the mine?

The PEA from 2009 is a good reflection of the startup costs this year, where the biggest costs were borne through share dilution. However, if the company were to rely on cash flow from the mine operating at a rate of 700tpd, then you would have to add ~$100 - $130/oz. CDN for each mine. So if they propose to eventually operate five mines, then development costs could be as much as $650/oz. CDN, in addition to operating costs.

Some would be spent right away, but the rest would have to be set aside. I assume the company would be half-way intelligent and place that cash in PHY.U.TO. You want exposure to bullion, not currency should a massive deflationary event occur and currency devaluations are in order.

This would leave approximately $400/oz. CDN free cash flow, or $28m. per year(assuming a $1500/oz CDN gold price, and fully diluted float.) The company could easily announce a .005¢ or 1/2¢ per share special dividend per month without impairing any growth plans. Each $600/oz. CDN rise in the average gold price for the year could conceivably add 1¢/share to a monthly special dividend, without affecting any growth plans.

1. The trouble is we have no way of knowing what the grade controls are like or what the head grade at the mill is. This is a fact that has been obscured or kept secret.

2. If they are processing the EP zone, then isn't the mill supposed to operating @700tpd? Are we only going to find this out six months later? Or was the mill already upgraded and this is priviledged information?

3. They are supposed to have constructed an assay lab. They should have had drill results within a week. This was several months ago.

4. And, what about the Mallard Tailings Impoundment Area? Or is this priviledged information as well? Not that its in the public record.

Gold Price $CDN