Member Info for Daisan

Yes, very undervalued compared to peers. As I pointed out last week, the value comparison to AAU is stark. AAZ has more gold, owns 100%, has lower cash costs and is producing at a rate of 70k oz pa. AAZ should be multiples higher in terms of EV and MC. I think that initial reaction today was probably more associated with the confirmation of the production shortfall in July/August. Thus is disappointing but not unexpected given the discussion recently. Needless to say it has knocked a similar amount off the MC as revenue lost which has probably created a good entry point considering the issue has been resolved. As usual, it all depends on the outlook for the gold price but with cash costs less than $600/oz this will survive irrespective of a pull back in the gold price which was the fear in the market at the start of the year.

The market seems to be continuing to judge the poor grades indicated in the drills. Likely to drift further until we get a better understanding of the next steps here. The company needs to be decisive. Based on the comments made by the CEO, there seems little point in expending vast resources on the area of Chadine that they are currently targeting. They would be better off targeting the other areas in the vicinity that they have earmarked for drilling or focus on Gokcanica where there is the potential for a gold target.

Yet more buying today! A veritable stream of buying. I suspect that it won't be long before it ticks up again at this rate.

Sorry Troajan. We were talking about two different things. I was talking about price. The price of gold is currently 68 times higher than silver. That is not up for discussion as it is just a fact (see kitco.com).

It is irrelevant. The relevant thing from that post is the gold grade. And the ratio of gold to silver in the earth's crust is generally considered to be about 1 to 15 which is why the prices were set historically in the way they were. The key point is whether the grades are commercial. From the initial drilling they aren't. They may do follow up drilling but the CEO's words were so downbeat that I doubt it.

Troajan, All I can tell you is based on my experience of investing in precious metal miners for many years. I have never seen a commercial silver mine with such low grades. I think that it is very likely that they will can any further exploration on this or go for another zone of mineralisation. Again I would point you to the words of the CEO. Do they sound like they are the words of someone that is thrilled about the results? They didn't even say in the RNS that they were 'pleased to announce' which is a sure sign of bad news!

Troajan, Re-read your posts and if I understand it, you are talking about a ratio in the drill result itself. There is no 'normal' for this. It varies from drill to drill and ore body to ore body. It is also completely irrelevant. The key factors are the grade and tonnage. For silver you really would like higher than 100g/t (which equates to about 1.5g/t AU at current market prices). 80-100g/t is a marginal operation but if the tonnage was exceptionally large then OK. Most mines I have seen have been over 100g/t silver.

Indeed. But it looks like the 500k sell late on is what was holding the price back. We'll see what happens tomorrow.

You do realise that they are talking about g/t not oz/t and that the silver price is nearly $20/oz?

The gold to silver price ratio is traditionally about 40 to 1. Recently it has been over 80. Now it is 68 to 1. The best it has ever been is 15 to 1. Go to kitco and see for yourself. No idea where you have got 3 to 1 from. It's never been anywhere near that since time began

The ratio is currently 1 to 68 by the way.

Ah. I see where you are going wrong. Your ratio is way out. Look at the price per ounce. Admittedly this is at a relatively high level at the moment but even at best the ratio has never been better than 1 to 15. The average is in the mid-40s and more recently it has been more like 1 to 80. So, I repeat. The grades are awful.

No they aren't. They are awful. Not even the equivalent of 1g/t au. Never seen grades that low being commercial. And the CEO's comments confirm how bad they are.

Seriously Troajan? Are we reading the same RNS? They are silver grades, not gold, and those grades are not commercial. But you don't have to believe me. The CEO himself says: "Unfortunately grades drilled were not an improvement on former drilling grades and little gold was intercepted. In addition, a new understanding of the geology indicates that mineralisation is dipping at a flatter angle than previously understood and the mineralisation appears to be cut off at depth and down-dip by two large low-angle thrust faults. As a result, based on current knowledge and geological interpretation, the mineralising system is closed off and has limited potential to be increased. Ground conditions surrounding the mineralisation were poor and this, coupled with inconsistent grades of mineralisation, is expected to make mechanised underground mining challenging" Not exactly positive is it?

Sorry, that looks a bit too aggressive! I was looking for more from this but these things are always a punt. This company is just plain unlucky I am afraid!

No, they are awful grades and I would say probably mark the end of this programme. Only one hole, SDD-002, had anything interesting and that is pretty deep. Understandably the market is disappointed.

More buying today and a tick up.

AAU and AAZ are not only very similar in terms of EPIC codes but also in terms of market capitalisation. But when you look at what they have in terms of resources and production (or potential production in AAU's case) they are not even close. Nothing against AAU (it is into gold which is the right place to be) but AAZ should have a far higher market capitalisation. I suspect that AAU is not massively overvalued so for me that suggests that AAZ is significantly undervalued.

There is a new presentation on the company website to coincide with the resource upgrade at Ilunga. A very interesting read. I particularly like the way in which they are focusing on having a rolling 7+ year life of mine. Considering that the base case mine plan did not include the upgrades to the resources and that the mine was winding down from 2020 onwards, I think that this is quite telling. So, we have a high grade resource around New Luika of around 1m oz with a base case mine production of 84k pa. Given the nature of the resource (central high grade with satellite low grade deposits), I would suggest that there is sufficient here to keep the mine going for over the targeted 7 years already. In fact, I think that there may well be enough to go for here to increase production to around 100k pa subject to the plant processing capacity. This is further supported by the fact that the area just seems to keep rewarding exploration (note that the main high grade zones are open at depth and the recent drilling at Askari is only mentioned in passing in the presentation). Add to this a high grade open pit opportunity at Singida which has the potential to easily provide 50k oz pa (probably more given the resource size) and you can see that Shanta have a viable path to becoming their stated aim of a mid-tier producer. Exciting times.

That is indeed the $64 question. Interesting to see some more buying recently although not enough to shift the price. But does go to show that there is an expectation in the market. Should there be a positive announcement (asset purchase or, heaven forbid, a capital return) it is likely that the price will spike sharply higher.