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Hi bamps,
Here is the link for the NCM 9th Sep 2021 Exploration report:
https://www.newcrest.com/sites/default/files/2021-09/210909_Newcrest%20September%202021%20Interim%20Exploration%20Update.pdf
I'm just using this one as it's the most updated version and shows the cross section across a good few parts of the orebody.
Figures 15 and 16 show it nicely. You can see how figure 15 and 16 show a substantial pocket of cemented breccia at the top of the orebody. Most of the ore body at the very top is crackle, but that cemented breccia will definitely be mined IMO and is likely to have bigger boundaries by the time we get to mining it.
Also whilst I think I know what you mean in your posts when you say sulfides in the SE (the higher grade SE crescent), it's worth knowing that there are sulfides in the cemented breccia and crackle, so if talking about sulfides then it's best to refer to the target zone or location so people know which area of sulfides is being discussed (as you did just now).
I'm hoping they plan on mining the cemented breccia around the SE crescent. It's worth asking because I'm sure there's a considerable amount of gold in the adjacent breccia
Hi Malva
Where have you seen cemented breccia at the top, the only place can be round the sulphides in the SE and I have my doubts this will be retrieved with this current mining plan.
There is crackle breccia round the perimeter at low levels but not a lot
Hi bamps,
I don't think the crackle will be the last thing out of the mine, as from the base of the overall breccia pipe to the top of it (as of to date), there is a range of crackle and breccia, including the higher grade NW crescent/NW pod which is being considered for the bulk mine. Whilst they have a degree of flexibility with which drawbells to extract ore from, it will overall be a process of bottom to top extraction for the area planned. Because crackle and cemented are both present at the top of the ore body, we are likely to see cemented and crackle breccia being mined together at the end of the mine life.
Like you say, in a few years time the point regarding the crackle may make it very economical if the gold price rise outweighs any potential inflation in cost, so discussion at the moment on the matter isn't important at all. I reckon by the end of Havieron's mine life we will have other assets under production anyway, and the telfer processing plant will have many more sources of feed!
Hi Malva
As I’ve said before the crackle will be the last ore to come out of the mine.
Hardly any of us will ever see that far, the economics will be totally different by that time, gold may be a scarce commodity at that point making low grades acceptable to bulk mining.
Who knows what is going to happen.
With the crackle being the last out I’m sure they will still extract it to keep the plant running as long as possible similar to what they are doing at Telfer right now
Hi hydro,
I tip my hat to your acquaintance and bamps for what currently appears to be a reliable estimate of roughly 0.2g/t. I had said previously that I would be happy to accept a figure of 0.2g/t as being true for the crackle if confirmed by SD. Whilst it's only an estimate I am happy to maintain what I said and will gladly think of the crackle as having around that type of grade (I'm going with around 0.15-0.25 in my head, and I think it's a mistake for you to think it can only be 0.2g/t or above). I disagree with the idea that people can't argue about the economic viability of the crackle breccia without having no credibility, especially if it can only be argued to be 'marginally economical' like you describe it. If it were marginally economical, I don't think miners would be willing to invest massive amounts of cash (in the billions) to risk something like an unforeseen aspect of the costs or a small fluctuation in the commodity price suddenly making the operation uneconomical. That in and of itself would make the overall mine development uneconomical.
Whether you want to consider it as either doesn't actually matter because they're not looking at bulk mining and thinking "the gold from crackle breccia will underpin our bulk mine". It's the NW pod, northern breccia and eastern breccia which are all cemented and the true target of the potential to bulk mine if/when their boundaries are proven to be large enough. Whether it's 0.1g/t, 0.2g/t or 0.3g/t doesn't matter in the context of Havieron. Whilst it will all get mined and whilst the crackle will be likely to produce some gold/revenue, the processing pipeline will be optimised for the cemented breccia targets at the expense of the crackle. If it were a homogenous 0.2 g/t, few hundred million tonne crackle like your hypothetical then it could definitely be looked at more seriously. Although when you have something like Cadia being considered an incredibly cost effective bulk mining operation at around 0.5g/t, the question is then how something less than half the grade can then beat one of the best block caves in the world. I'm sure the vertical ore body would help with a lower capex but I seriously doubt that the economics are as black and white as you make it out to be. It's not a serious issue when the Havieron bulk mining operation will be designed for something else entirely and the economics of the crackle are redundant point, but it's always fun to speculate on the 'what ifs'. You see what SD says as meaning it's economical and I see what SD says as meaning the opposite, so we'll have to wait and see what is/isn't included as significant in the NSR. I'll be here for a number of years to come so am happy to set a date on the calendar until then.
Hi hydro, read my reply directly to you on the same thread you addressed me. You’ll find it there.
I really enjoy your input Starbright. Very informative thank you
Well I would accept the original£2.06 at the moment and be ecstatic. Holding long, I know we will get there in the end and our patience will be rewarded. I have found that nothing worth having arrives quickly or easily, and the reward will be savoured all the more for the patience. Perseverance produces endurance and endurance produces character (that’s from oldest, best selling book in the world). Not going to argue with that.
Upwards and onwards ( suppose it should be downwards and onwards)
Keep holding
ATB
Ruth
Appreciate the info both Baby and Star.
They use a model that looks at analysts free cashflow estimates and converts these to an SP using a discount rate derived from a risk-free rate and an equity risk premium. It incorporates a perpetual growth rate driven terminal value, based on UK long bonds.
The minor variations seen and commented upon here arise because of market-driven movements in these rates. It’s just a mechanistic computation.
The principal criticisms that might be levied at their approach are:
1. Their model is intrinsically suited to established business with stable cash flows, a very different situation to exploration companies. This also affects the appropriateness of the input rates they’ve chosen for the discounting, perpetuity and ERP components of their calculation.
2. Their isn’t enough data to support their approach. They have a 10 year + perpetuity model, but only have analyst sourced inputs for the first 3 years. They include unexplained/unsourced estimates for years 4-10. The perpetuity alone assumes that GGP will go on producing forever, and represents over 80% of the value they propose!
My opinion is that this approach doesn’t work for GGP, so I don’t regard the output as useful.
"I'd be interested to know what they've based the first figure on, and what has been factored in to amend it up to £2.35?"
Alas, LSE messages don't support HTML standards so I can't properl replicate the neat tables, but below is a direct copy/paste of all the figures that make up the Simply Wall St. valuation:
AIM:GGP Discounted Cash Flow Data SourcesData Point Source Value
Valuation Model 2 Stage Free Cash Flow to Equity
Levered Free Cash Flow Average of 3 Analyst Estimates (S&P Global) See below
Discount Rate (Cost of Equity) See below 6.1%
Perpetual Growth Rate 5-Year Average of GB Long-Term Govt Bond Rate 0.9%
An important part of a discounted cash flow is the discount rate, below we explain how it has been calculated.
Calculation of Discount Rate/ Cost of Equity for AIM:GGPData Point Calculation/ Source Result
Risk-Free Rate 5-Year Average of GB Long-Term Govt Bond Rate 0.9%
Equity Risk Premium S&P Global 4.9%
Metals and Mining Unlevered Beta Simply Wall St/ S&P Global 1.09
Re-levered Beta = 0.33 + [(0.66 * Unlevered beta) * (1 + (1 - tax rate) (Debt/Market Equity))]
= 0.33 + [(0.66 * 1.092) * (1 + (1 - 19.0%) (0.05%))] 1.062
Levered Beta Levered Beta limited to 0.8 to 2.0
(practical range for a stable firm) 1.062
Discount Rate/ Cost of Equity = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)
= 0.90% + (1.062 * 4.89%) 6.09%
Discounted Cash Flow Calculation for AIM:GGP using 2 Stage Free Cash Flow to Equity
The calculations below outline how an intrinsic value for Greatland Gold is arrived at by discounting future cash flows to their present value using the 2 stage method. We use analyst's estimates of cash flows going forward 10 years for the 1st stage, the 2nd stage assumes the company grows at a stable rate into perpetuity.
AIM:GGP DCF 1st Stage: Next 10 years cash flow forecast Levered FCF (GBP, Millions) Source Present Value
Discounted (@ 6.09%)
2022 -40.4 Analyst x3 -38.08
2023 -64.9 Analyst x3 -57.66
2024 -15.17 Analyst x3 -12.7
2025 141 Analyst x1 111.29
2026 231.02 Est @ 63.84% 171.87
2027 334.89 Est @ 44.96% 234.83
2028 441.19 Est @ 31.74% 291.6
2029 540.41 Est @ 22.49% 336.67
2030 626.95 Est @ 16.01% 368.14
2031 698.92 Est @ 11.48% 386.83
Present value of next 10 years cash flows £1,792
AIM:GGP DCF 2nd Stage: Terminal Value Calculation Result
Terminal Value FCF2031 × (1 + g) ÷ (Discount Rate – g)
= £698.915 x (1 + 0.90%) ÷ (6.09% - 0.90% ) £13,577.47
Present Value of Terminal Value = Terminal Value ÷ (1 + r)10
£13,577 ÷ (1 + 6.09%)10 £7,514.73
AIM:GGP Total Equity Value Calculation Result
Total Equity Value = Present value of next 10 years cash flows + Terminal Value
= £1,792 + £7,515 £9,306.73
Equity Value per Share
(GBP) = Total value / Shares Outstanding
= £9,307 / 3,965 £2.35
AIM:GGP Discount to Share Price Calculation Result
Value per share (GBP) From above. £2.35
Current discount Discount to share price of £0.18
= (£2.35 - £0.18) / £2.35
Just had a look, it was £2.06.
I'd be interested to know what they've based the first figure on, and what has been factored in to amend it up to £2.35?
I think from memory it was £2.06
Was it not £2.12 last week!?!
Changed to a wopping £2.35 per share - BLOOMING HECK :)