Firering Strategic Minerals: From explorer to producer. Watch the video here.
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35000 oz mined
50% to KAT = 17500 Oz
Profit margin $900
Profit 17500*$900 = $15,750,000
Convert to Stg @1.3FX = £12.1m
35 year life of mine should command a PE of 10.
£121m/184,355,462
SP = 65.7p
Gold highest it’s been in 7 years.
A word of caution for anyone new to the stock regarding Sonic's figures:
The 35k oz pa only comes after they ramp up to 500k tpm processing, which is expected "within two years", meaning that the SP target is what we can expect in 2022.
If you're coming in new and looking for a 25-bag within the next six months, you'll be sorely disappointed when you only get a ten-bag because they're only processing 250k tpm this year.
In all seriousness though, of my three holdings, this is the one I have most confidence in and I'm glad to be in at the moment. I expect the AISC to be higher than the $664/oz for the first year at least, because they'll only be processing half of the target figure so they won't have the full benefit of economies of scale. To pull a figure out of the air, let's say $800/oz until they ramp up.
First year:
8750 oz to KAT
AISC = $800/oz
Profit margin with Au at $1600 = $800/oz
Profit = 8750*800 = $7,000,000
USD/GBP @1.3 = £5,384,615
£5,384,615 / 184,355,462
SP = 29.2p
Still a ten bag from current buy price at 2.8.
Back of fag packet calcs on initial targeted production.
250,000 tpm @ 0.3g/t = 75,000g or around 2,411oz. So annualised nearly 29,000 oz.
And when production expected to increase to 500k tpm, that’d indicate annualised production towards 58,000oz. Obviously missing something here but curious why targeted figures so low in comparison with average grading
That's a good question and one I'd love to know the answer to.
I can only speculate, but I see three possibilities:
1) An overabundance of caution. They've already shown that they'll be taking a cautious approach with the forecasted gold price at $1300, perhaps they're being cautious with the production forecast too.
2) Misinterpretation. By my calculation (0.3*500,000)=150kg=5291oz pm = 63,492oz pa. That's not far off double the estimate 35koz. The wording of the RNS states "the Project is targeted to produce approximately 35,000 ounces of gold per annum". All of us have interpreted that to mean 35koz = 100% annual production, but there's a(n extremely slim) possibility that they meant to say 35k net to KAT. In that case, happy days.
3) Efficiency. This is the most probable explanation. The process isn't going to be 100% efficient and capable of extracting all 0.3g/t from the raw material. It could be that the process can only extract roughly half of it given current technology, therefore the end result is only 35koz pa instead of 63koz pa.
If this is the case, which I believe it will be, there's an interesting prospect as technology advances over the next 35 years. Perhaps by that time, could the tailings be reprocessed again with newer technology that will be able to extract even more gold from it?
Kai
Surprised this isn’t trading higher considering gold is at a 7 year high
I think you may have used normal oz for the conversion from kg rather than Troy oz. Brings the numbers down a bit - but not much. I just divided production by 31.1 (grams in each Troy oz.)
A few weeks ago I did come across feasibility studies carried out by DRD Gold (before sold to Blyvoor) which indicated slightly higher grades were expected (0.34g/t from memory) but unsure if these have been re-done by Blyvoor.
Efficiency probably the likely factor I’d expect.
I believe Blyvoor are actually using a new methodology for production on these tailings - which is part of the reason why costs are so low. To do with 2 stage explosions which mean back filling of waste reduced substantially.
You're right, that's my mistake, I did use normal oz instead of troy.
Correction- before DRD sold their 74% stake in Blyvoor. And now realise that the new extraction methodology is probably for the underground mining rather than surface tailings. Need to read up a bit more!
Currently hold 1.85m shares so beginning to to take much more interest here! In any case, should be good year ahead. Looking forward to finance confirmation.
Lol, you own around 11x the number of shares I'm holding here and you're only beginning to take more interest :D
I dread to think how much interest I'd have here if I was in as deep as you are
All held in SIPP so quite happy to sit on them (can’t touch funds for another 12 years at least!).
I’d have liked to have taken a slice off the table after the recent rise (in at 1p), but too attached to idea of holding exactly 1% of Katoro :) (for now at least).
All done with no further dilution??? Be very careful with such calcs as someone came up with £2.28 for KIBO and it is currently 0.5p
First year:
8750 oz to KAT
AISC = $800/oz
Profit margin with Au at $1600 = $800/oz
Profit = 8750*800 = $7,000,000
USD/GBP @1.3 = £5,384,615
£5,384,615 / 184,355,462
SP = 29.2p
Still a ten bag from current buy price at 2.8.
bcl, yes, dilution is a risk; been stung by that one multiple times over in TOM.
So let's take an extremely dilutive assumption: 150%
Current shares in issue: 184,355,462
After 150% dilution: 460,888,655
Pre dilution: £5,384,615 / 184,355,462 = 29.2p
Post dilution: £5,384,615 / 460,888,655 = 11.6p
Heck, you could go to 300% dilution and still get a bag and change from today's price
5,384,615 / 737,421,848 = 7.3p
(Caveat: P/E assumed at 10).
Quite bizarre that we’re working out value on an opportunity that didn’t exist 2 months ago.
However, the JV with Blyvoor could well unlock the value in Haneti which genuinely has the potential to dwarf this tailings project.
Fair enough. just over 2 years ago (I do not know how long it will be to actual KAT production) KIBO had 150 million shares in issue. It now has 1.25 billion plus committed warrants of another 640 million so, in effect, 1.9 billion or over 12 times as many. The most recent placing also had the effect of allowing the BOD to accumulate a lot of shares and warrants at the lowest possible SP. I dont think they have yet had that opportunity with KAT, just a thought.
Well they seemed to have missed the boat BCL .... could have done that at any time in last 12 months down at 0.4p
To answer the earlier query I raised regarding recovery - now found:
‘The project will seek to use proven mining and processing technologies, whereby the JV partners believe recoveries of 56% to 60% are achievable, based on feasibility studies and test work completed to date by Minxcon, with additional confirmatory test work planned to optimise the financial projections and conceptual designs for the processing plant.’
(So about 40% of gold content not actually recoverable)
That would imply they need to raise cash. The last working capital fundraise £100k granted warrants primarily to POW / KIBO. Should all warrants be exercised, the Company would receive an additional £275,000 in cash inflow which would provide a significant cash runway for the Company. (This would have been the time to self-award?). WE also have 700,000 shares in LVG .
The Blyvoor opportunity is funded until project finance can be secured:
Pursuant to the Agreement, Katoro is to provide a ZAR15.0 million loan (approximately £790,000) to the JV ('the Katoro Loan Facility'), which will fund ongoing development work on the Project. To fund the Katoro Loan Facility, Katoro has raised £397,000 in the form of a CLN on terms set out below, which will fund the Initial Tranche of the Katoro Loan Facility. Katoro has also put in place a facility with Sanderson Capital Partners Ltd ('Sanderson') under which the Company may require Sanderson to subscribe for up to £400,000 in the form of a convertible loan note on terms that, if drawn down, will be no more favourable to Sanderson than the terms on which investors have participated in the CLN, and which, together with unallocated proceeds of the CLN, the directors of Katoro ('the Board') expect will fund the Additional Tranches if necessary/required.
Haneti funding
The Company continues to explore all funding options for the advancement of Haneti, which may include further join ventures or farm-ins; and the recent feedback received at the Mining Indaba conference in Cape Town, South Africa in early February 2020, included considerable interest in large scale nickel exploration projects, from mid-tier and Tier 1 mining companies, and demonstrated to the Board the strategic value of Haneti.
Tanzanian Gold - the plan is currently to divest (additional source of income)
Katoro Gold plc (AIM:KAT), the Tanzanian focussed gold and nickel exploration and development company, is pleased to announce that it has agreed a term sheet ('the Term Sheet') with Lake Victoria Gold Limited ('LVG' or the 'Purchaser') covering the disposal of 100% of the Company's wholly owned subsidiary, Reef Miners Limited, which owns the Imweru gold project ('Imweru' or the 'Project') and the Lubando gold project in northern Tanzania to LVG for a total staged cash consideration of up to US$1.0 million and a 1.5% Net Smelter Royalty ('NSR') ('the Proposed Disposal').
I never rule it out and a placing at a premium wouldn't necessarily be a bad thing to secure progress.
My knowledge of KIBO can be summarised in two sentences:
- It's headed up by LC
- KIBO has a 55% (ish?) stake in Katoro
So I can't really comment too much on what's going on there. I hope you didn't get stung by it though.
As for Katoro, while a placing is possible and I'd be an idiot to rule it out entirely, I don't expect it to be anywhere near as bad as the situation you described at KIBO if it was to happen.
My reasoning:
- They've already secured to tranches of CLNs to fund the initial stages of the project when they could have gone down the placing route just as easily. Obviously we don't know the terms of those CLNs at this point in time and there could be some element of dilution
- LC has explicitly stated that he expects to receive debt funding for the project with no dilution at the Katoro level. (I take that as he knows people won't want to trust him after KIBO and will need reassurance he won't be diluting existing shareholders down to insignificance).
- How much will it cost to get the processing plant fully up and running?
The RNS states the following:
" The initial production capacity that is targeted as the first phase of the production ramp-up must be capable of processing at least 120,000tpm of material from the Tailings, which the Board estimates will cost approximately US$11.0 million ('the Initial Project Funding'). The Board anticipates that the Initial Project Funding will likely be in the form of debt funding secured at the JV level."
So roughly £8.5m.
Combined with debt funding, even if they had to raise any funds through a placing, I can't imagine the initial funding would be extremely dilutive.
Slightly more concerning is the $30m total capex required to get to 500k tpm, but that's probably beyond my investment horizon.
SirG - This is LC led. Have you not learned anything from KIBO?
Yes buy at the bottom ... bought here at 0.8p
Different company / sector
CS is also the chairman of KIBO and hes doing OK at EUA (eventually)
They’ll get financing for this easy. Such a low risk project with no mining. They’ll be falling over themselves for it . And Graham Briggs will know the right South Africans to ask imo !
He wont have a job if they cant get finance and I doubt he would have taken the position if he had any indication that KAT couldn't get finance. We all forget as well KIBO owns half the shares of this company.