cedartree's Profile
cedartree's Posts
Great wrapup explorationguy.
End of an era. I didn't see this precise sale coming, only knew PDG wanted one, and that it was very unlikely PDG would get the financing to do it alone. I don't think this is an easy project and I think management did well in the face of that.
Thanks to everyone that has posted over the years. Hope to meet up on other boards.
cedar
Good to see you guys are still at it. Rico sent me a message - indeed I've been gone a long while. Family matters have taken all my time and energy (and then some) this year.
I did talk to Coach some months ago but I know he has his plate full.
The long intervals on Magino are its strongest suit. Best regards / cedar
Thanks for the clear analysis, explorationguy and h_rattle, and for spotting the non-compliance text in the NR.
I am unclear about the status of a PEA that is not 43-101 compliant. Here is a relevant article on the issue:
http://www.wardrop.com/Wardrop/en/Newsletter-Articles/Working-with-National-Instrument-43-101-Vol.-1.html
It appears to suggest that a PEA should be compliant. When I google, I find a hundred thousand hits for "NI 43-101 Compliant PEA", per
... but none, no hits, for the non-compliant version.
So about a non-compliant PEA, all I can say is I don't get it.
P.S. to knox - read the posts - you did not read thoroughly. I gave the chance of e.g. 3.25 million oz as a resource estimate as a 30% probability - i.e. less than half, and highly dependent on new in-fill drilling, choosing a very low cutoff grade, and extensive finds from sampling of previously unsampled core sections i.e. luck. Most likely it'll be near 2.25 million oz (my 70% guess), and I truly doubt anything less than 2 million. Explorationguy has been more thorough in his analysis and suggests in the 2 million+ range, and I would give his numbers the greatest credibility.
Remember Kodiak and Hi Hoe excavation? Smell reminds me of my neighbour's t-shirt. People around Powell River have some opinions on Chornobay ...
Good posts.
Indeed production cost is life-of-mine, and initial costs will be far higher - e.g. stripping of barren rock
True some miners don't need a FS - e.g. Extorre. You have to have very strong financing connections and those are not in evidence so far. I'm sure there will be dilution, even this year, as money is being spent and $9m was not a lot.
100% for sure they are planning for an underground mine at the bottom of the open pit. Rich resources down very deep where is doesn't pay to strip.
What? Does the presentation say the PEA may not be 43-101 compliant? I didn't even know that was legal. Can someone confirm, or h_rattle?
You wrote:
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A little late to this but just to add:
1. The production/cash cost per ounce is often a life-of-mine average figure with a higher initial cost.
2. Some miners are having success with the banks without a BFS e.g. Metanor have raised $20m based on their pre-feasibility study. Perhaps PDG can fund Magino without much more dilution.
3. The PEA may be more complex than a simple open pit mine - this point was said to me by either Brian or Perron (can't remember which one) and is repeated in the last NR i.e. "Underground mining may comprise a separate phase of mine life."
4. Will the revised resource estimate due this month be NI 43-101 compliant? I'm a little confused as the NR says the PEA is not an NI 43-101 assessment.
5. Brian talked about a new cut-off of 0.1 gpt being possible - I don't think they will use that as the headline but I wouldn't be surprised if it is in the tables. 3.25 m ozs sounds about right but so long as it is 1 m ozs M&I the total resource won't matter so much.
Good points gents. Indeed the two cost numbers per ounce of gold are separable Here is a good website that expresses the Net Present Value idea behind it:
http://www.avoidglasses.com/rau-chart-and-analysis/valuing-a-mining-company-using-net-present-value/
So there are:
a) a certain capital cost per ounce, to get the mine going and dug down to the first real paying ore, and
b) a production cost per ounce, $500 in the case of PDG as given to us, although truly that number is an output of a PEA / FS and not known exactly yet, and
c) on top of capital cost per ounce, and production cost per ounce, there is the discount rate (a dollar 5 years from now isn't worth the same as a dollar today), a risk rate, royalties permits and ongoing fees including cost of capital, and taxes.
So the PEA will delinate whether all those costs, per ounce, remain lower than the cost of an ounce of gold.
The capital cost you can base on your ounces. So e.g. if your total capital cost is just over $400 million, then the capital cost per ounce is about $150/ounce, on e.g. 2.75 m ounces.
At $1450 gold, an indication of profit is probably a slam dunk, but PEAs never use today's spot price, because it changes so much. More likely a price of e.g. $900/oz gold, at the very most.
After that, you have to figure the rate of return, how long it takes to get a return, and years of mine life. Let's say you put in $400m to build a mine, and net profits earn you $600m back. That's a 50% gain, but over what time period, and could you do better with another investment.
There are of course other factors such as overall risk - e.g. financial or permitting for a heap leach, and whether you could leverage to the upside other company resources with further exploration.
I am pulling all of those figures somewhat out of the air - real figures will be in the PEA and PFS / FS.
The same site I quoted, going one level up, has a nice description of the alternate calculation, Enterprise Value per ounce. In the case of PDG at 35 cents/share, if we guess 2.75 million ounces, and just less than $10m cash, EVO is about $20-$25/ounce, which is right at the benchmark "advanced exploration" stage typical-price-mark of $25/oz, whereas a small producer is often valued at $225/oz, but after a LOT more dilution or the equivalent to get the capital to get the mine going. So on the face of that, PDG might be just fairly valued.
Of course, all that should be adjusted for: mining in Canada as a positive, vs. difficult heap leach permit, a positive on infrastructure, a ? positive on other properties, maybe a negative on the deep steep hole to be made, possibly a neutral on the average grade, a positive on the new VP Exploration (a good guy), a positive on news and momentum, etc. etc. to your heart's content.
By the way, here's that mine life graph inline. We are in the long valley of 4,5,6:
