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Urban racer . I have always thought that the 5% is so that GH can do one of many things:
1. It values the other 25% and gives great visibility to corporate worth.
2. It allows him to pay for his 25% of mine development or
3. It gives him cash to do a lot of 100% drilling or
4. It gives him cash to do other corporate moves like acquiring more acreage or return cash to sh. Or
5. Something else!
If there was no gold at Hav., the values of the copper alone would almost justify a mine. Many copper miners are working with considerably lower values than those that current drilling are showing.
Hi Paddy,
Thanks as always for your fantastic posts.
With regard to your 15:51 today, could I discuss a point please.
As a starter:
‘’(Additional Farm-in) within a period of 12 months from the date following satisfaction of the Stage 4 Commitment (Additional Period), Newcrest shall have an option exercisable by written notice to the Company for it or its related body corporate nominee to acquire an additional 5% Farm-in Interest at fair market value.’’
As the months have gone by, I have come back to this additional 5 per cent feature of the agreement many times. At the time of the farm-in, I took the view that this final 5 per cent option available to Newcrest had been made available as part of the excellent relationship allied to the business interests of both parties. I also considered that the agreement had been reached after a period of intense negotiations based on information available at the time.
Now, I accept that perhaps the full extent of Hav was not known then but equally I believe that CB probably had an idea of the potential of the discovery as no doubt would his counterpart at NC after wading through the available Ggp data and initial drill results. The fact that NC entered the agreement with the commitment they made means that they knew this was going to be big.
The thing is Paddy would the agreement not have contained further proviso’s at that stage which would more easily have allowed NC to take 100 per cent of Hav if the circumstances warranted. It seems clear to me that Ggp wanted badly to retain a portion of their discovery and it also seemed that NC were ok in agreeing to that. Equally, I have always argued against any form of hostile move by NC and also believe an acquisition is unlikely.
In conclusion therefore, whilst I accept that business agreements can be fluid and I would never be so naive as to suggest that NC would never make an offer for 100 percent of Hav, I do think that any refusal of such an offer would not necessarily lead to a strain on the relationship as they seem to be on v good terms. I honestly believe that Ggp will do a ‘Hav repeat’ at some stage (hopefully sooner rather than later) and that NC will want to do business with GH again.
Just me thoughts Paddy.
Kind regards. UR
Classic Spy pmsl
Spymaster, the copper is per ton...not per ounce.
Yes - makes total sense.
I suppose Newcrest have to balance up a royalty payment with a lowball MRE or a massive premium to the MRE figure to somehow cover the future size of the ore-body,
I'm sure GH will be all over it like a rash - I'm very happy that he is in the negotiating chair.
ATB - Paddy
Thanks Paddy, can’t see any down side, Love it. Stay safe everyone and have as good a W/end as poss. NHS respect to you all.
Potentially very valuable, particularly if uncapped. Not sure Newcrest would be keen but you never know!
Normally 2% and lasts inperpetuity... Can be sold on to 3rd parties eg agnico eagle
It's a legacy build in to any m&a to cover unknown/known sales royalties.
Net Smelter Return (NSR) is the net revenue that the owner of a mining property receives from the sale of the mine's metal/non metal products less transportation and refining costs. As a royalty it refers to the fraction of net smelter return that a mine operator is obligated to pay the owner of the royalty agreement.
Thanks Grizzle - I'm gonna show my ignorance now and ask what is an NSR?
have you not seen the price of copper...its worth a lot. $4750. much more than gold.
Large numbers indeed Paddy. With that potential profit and given our 30%, why does Numis only value 5.5m at 6p, it seems too little?
Definitely mate - GH reckons the Copper in the high grade zones is worth up to 0.8 g/t Au. This would in theory cover the AISC costs leaving the Gold as pure profit.
Good analysis Paddy. Not sure we will get the option to consider incomes from production. If NCM are aiming for production in 2-3 years then they will want to clear the decks ASAP as will GH as we would become liable for our 30% capex during build stage... So Imo its going to be soon after MRE and a negotiation to consolidate further Stage payments from NCM as the critical build path doesn't allow for the previously agreed Stage milestones... GH would be wise to negotiate an NSR as the MRE may not be possible beyond 10m oz at this stage....
Paddy. Is the Copper worth anything!!!
Hi Jerry - yes you are correct - it should say $500 million. I'm not sure if those processing costs are included in the AISC - I will have to re-check in the yearly reports.
Paddy...on the basis of your figures if GGP stay in a JV on 30 or 25% what does that make GGPs stake worth. It's not as simple as 30or 25% of surely. Do GGP have to contribute to CAPEX or OPEx and I believe Telfer operates as an independent
company within the NC group charginging processing fees. Do GGP contribute separately towards Telfer.
Paddy, does telfer produce gold ingots? I thought it was concentrate and dorre? So there is another stage in the processing, plus transport to that place plus transport to Perth mint. These might not be big costs though. Plus your 500,000 should be 500 million, right? Though that does appear to be right in calc.
Hi CB,
I've always advocated us holding onto our 25% for the future as I can see our 25% share of the profits being probably more per year than our current market cap but I fear that Newcrest may not want a junior partner when they eventually come to develop Havieron.
That brings us to how do they fairly value Havieron after MRE if they do want to pounce at that point - IDK is the answer to that but I'm sure that if it does happen it would be a "friendly" offer and as such it would need to be a decent one if GH and the BOD were going to recommend it to the shareholders.
Alternatively Newcrest could carry on through stages 3 & 4 and then we would have a much clearer view of the actual size and scope of Havieron. I guess it all depends on the initial offer than NCM come up with - if they come up with and offer that is subsequently rejected then it might place some strains on the relationship.
One thing for sure is it's going to be an interesting 6 months one way or the other.
ATB - Paddy
Sorry about poor text, I'm rushing on my phone. Regards
Good afternoon Paddy nice to chat, thanks for all your research. I feel ggp would vd better staying on there own that gave other resources. Sone in here say takeover us on the boards but I cannot see how they could come up with a true value of H avieron. What are your thoughts.
WOW just bl00dy WOW
OK so let’s try work out what Havieron may be worth to Newcrest
Let’s use the Numis conservative estimate of 5.5 Moz and assume Newcrest own 100%
We know Newcrest is treating head grade at Telfer now of 0.7 g/t and breaking even or making a small profit and their AISC is roughly $1,200.
Let’s say NCM are going to produce 500,000 oz per year from Havieron for the next 11 years and the average grade is “only” 2.5 g/t.
So, they would only need to process 0.28 times the amount of ore to produce the same amount of gold they get from 0.7 g/t so let’s be conservative again and say the AISC would halve to $600.
Now let’s build in a $500 Million Capex cost for the mine and road development and add another $50 per ounce to the AISC to cover transport costs. (I’ve been told $10 an ounce would cover it)
OK so (500,000 x 11 x $650) + $500,000 = $4,075,000,000
Now work out your profit from the selling price – let’s assume over the next 11 years the average gold price is $1,500 / ounce 500,000 x 11 x $1,500 = $8,250,000,000
So, Newcrest could easily make over $4,000,000,000 on Havieron on these very conservative estimates.
Newcrest produce gold at Cadia for an AISC of $142 @ only 1.19 g/t
Now look at what size deposit do we actually have, what will the actual average grade (including CU) be, what will the AISC be, what will the actual Capex and transport costs be and lastly how high will the gold price be over the next 20 years.
IMO - Newcrest will be making multiples of the $4 Billion
GLA - Paddy