Member Info for goldgnome

There is a lot that gets swept under the carpet in the gold industry, and Mining industry in general, Dare we think of WMC's marvellous follies in their move into Nth America.which cost them $0.5+b? plus repuational damage
But the industry buries its past, and does not learn, so in 2019 the Australian gold companies charged out of the starting stalls..so what has happened so far?
Northern Star August 2018 acquisition of Alaska’s Pogo mine cost $351 million…investors initially told that Pogo would immediately deliver about 260,000 ounces of gold a year. Spending on new fleet, exploration and a mill expansion at Pogo has largely offset earnings over the past three years and Pogo is unlikely to be a major cashflow contributor in the year ahead given spending at the site will top $70 million. Northern Star boss Stuart Tonkin (new) says a turning point will come in fiscal 2023 when the mine starts consistently delivering 300,000 ounces a year.
Newcrest March 2019 $US806.5 million ($1.15 billion) acquisition of British Columbia’s Red Chris. It was no surprise to see Red Chris be a net cash drain of about $US40 million in the two years since Newcrest bought it. Analysts have been happy with the exploration results to date and the dream of building a giant block cave at Red Chris remains alive.But doing so won’t be cheap; the Cadia caves cost $2 billion to build, suggesting Newcrest will need to spend billions more to achieve its vision for a mine that has already absorbed well over $1 billion of investment.
St Barbara’s May 2019 acquisition of Nova Scotia’s Atlantic Gold for $780 million. Promises made by St Barbara on the day it acquired Atlantic have also proved to be fools’ gold, most notably the pledge for its Nova Scotia hub to be producing 200,000 ounces by 2023. St Barbara now concedes barely half that volume will be produced in Nova Scotia in fiscal 2023 and even that diminished target is subject to government permits being obtained. The Fifteen Mile Stream project was scheduled to produce gold in 2021 but is now slated for June 2024, while a plan to have the Cochrane Hill project producing gold in 2023 has been pushed beyond 2025. St Barbara has spent about $845 million acquiring Nova Scotia gold assets over the past two years and yielded about $160 million of cash flow after capital, sustaining and exploration spending. Permitting in Nova Scotia in a sensitive watershed area will not happen quickly if at all…
Evolution Mining paid $US375 million ($550 million) for Ontario’s Red Lake in November 2019 and that spend in Ontario is now $895 million after neighbouring assets were bolted on. Capital spending at the site has been roughly equivalent to earnings over the past 18 months and with a further $500 million to be spent in the next three years, Red Lake may not be a cash-flow contributor for Evolution until fiscal 2025…
So CEY value?
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the gnome

The market used to make sense, but now there is a fair amount of novice money, which seems to "make the market", at least in Oz. Whether these are the young getting enthralled by making a quick buck, or the bored, all locked up and nothing much to amuse themselves, people trying to support a habit, or people who cannot get to the casino to play the pokies or they want somethig new to amuse themselves with. ... They read a social media post, jump in and by, or sell, whatever way the social media/influencers wants them to jump. There is enough material to keep a city full of psychologists on edge, trying to work out the ups and downs and competing forces in the market place. The crypto space is all this but on steroids. The crypto's have intrincisally no value, and you probably could create a new crypto token, backed by a plantation of banana leaves inside a lost weekend...some do.
I was taught to not invest in things I did not know about, or could get to know about, or had ruly markets (that is market with clear rules of trading), but those days are gone it appears, or never were here for many.
So yes, the market does not make a lot of sense, and there is good reason for this

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the gnome

Let me update you on the news in Australia.-> Melbourne, Sydney Adelaide all locked down and lockedin. West Australia has locked nearly everyone out, and a lady who has covid in southern Queensland has reportedly fled to Northern Queensland so we can expect Queensland to be locked down and the lady locked up? Seven people have been fined after police broke up a Sydney office party where an attendee was found passed out (not from covid, although there are further investigations going on?) on the floor, as NSW recorded 78 new COVID-19 infections. The premier of NSW commented that thank goodness most people were doing the right thing? The Universities (4th largest earner) have lost their earning capacity as all International students are locked out, and 15,000 staff have been locked out permanently from their positions in various Universities, and probably more to come. Our politicians are steadily insulting our largest customer (lets hope the Iron Ore price does not go down!), and blaming them for hacking, when the E Europeans appear to have taken the gold medal, closely followed by Russia?
So never a dull moment in the southern colony.

On the positive side, the weather in Cairns is fine, wind is light, water visibility is at least 10 meters on the barrier reef, and a Pikes Riesling is the best one can get (after the dive?) into your glass, as one sails into the sunset.

P.S. I have been amused even more (compared to the politicians and medical experts-none of whom have worked in private businesses which they insist on locking up) by the events in the crypto space. Talk about a rooting tooting show, and flabbergastery. Michael Saylor has taken evangelism up another level or 5, despite having conflicts of interests in what he preaches to the peasants and what he owns, which would land in him in jail in Australia (without any Rum). Who needs Hollywood?
Only economists and politicians could argue that there wont be inflation and bubbles galore with all of the money printing the Central Banks have been doing, not to mention our mates in the "normal" banks...want to buy a plot of land?

Simply breathless, but then this is now recognised as symptom, and hence I could have to go into quarantine, so must catch my breath and keep my head down!

good luck, and good night from the southern colony
REMEMBER A Pikes Riesling a day keeps covid at bay

the gnome

Evolution Mining will invest a billion dollars over the next two years in a bid to halt a four-year decline in output and grow gold production by at least 30 per cent. [it has tried exploration and MandA]

The growth strategy will include the $380 million expansion of the Cowal mine in NSW, where an underground mine will be built beneath the existing open pit so long as final government approvals can be obtained.{and of course that it makes money, meets investment hudles etc, but lets move on]

The new strategy was announced on the day Evolution revealed it produced 680,788 ounces of gold in fiscal 2021; about 20 per cent less than the company produced in fiscal 2017 and the fourth consecutive year of lower gold production [gulp?].

Strategy of course has somewhat of an ambiguous meaning in the goldindustry The gold industry is not famous for its strategies, but it does continue to try, somtimes real hard...

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the gnome

Let us be fair, if not brutal. Democracy does not elect smart people. just those popular (for one reason or another). The biggest revelation of the covid shenanikans, is just how self centred, utterly incompetent and arrogant are our elected few.
Chief Health Ministers aside, who have had protected careers, in government, NGO' amd academia their entire life. It is hard for a mere mortal to see an end to the fiasco.

good night and good luck

the gnome

I have commented previously on the growth (and growth) of private equity, and their ability and appetite to buy very large key assetts. Here is one int he US doing the smaller stuff...and buying from the nickel discard pile, but paying A$15-A$100m
https://www.blackmountainmetals.com/news/
Going more upmarket, going after Nnickel, cobalt etc but just setting up shop.
Two of the biggest names in Australian mining have thrown their weight behind a star-studded special purpose acquisition company (SPAC) in the United States (not the easiest jurisdiction for mining companies, as some of the laws are still nineteenth century) under a plans to acquire copper and battery minerals assets.

Former Northern Star Resources talisman Bill Beament and former Fortescue Metals chief executive Nev Power have joined Glencore director Patrice Merrin in “Metals Acquisition Corp”; a SPAC that filed its prospectus with the United States Securities Exchange Commission (SEC) this week.
SPACs are listed shell companies with no business activity that raise money with the sole purpose of making future acquisitions and Metals Acquisition Corp hopes to raise up to $US287.5 million ahead of a likely listing on the New York Stock Exchange.

and of course the usual suspects ...

Heavyweights Robert Friedland and Sir Mick Davis have topped the list of investors getting involved in SPACs as a way of buying mining and energy assets.

I expect to see alot more of this happening as some of the ocmpanies are very undervalued, and have been for sometime.

So if an assett (including company) remains undervalued, it is reasonable to expect a knock on the door. They are paying premiums more than the standard 30% (if the assett is good enough)

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the gnome

We have been fed a lot of manure in Oz( forever instant karma) (and I suspect the manure has been spread a lot further?), and its a continuing trend. Talk about all doing well (University sector [4th biggest export earner] in disarray, corruption, wokes and spokes, and Missing in action foreign students. We have ex Foregin Minister picking up a lazy $800k pa, for consulting work, whilst not an employee nor a lobbyist (whats left), but lets not ask too many quesitons, the fashion set is bootifool? We have a Nation within which the peoples of different states need a visa to vist another state, and some states have turned back residenced people returning to their homes. unless there is a death in the family?
We have talk of everyone being vaccinated, but the government makes the decisions about which vaccine, because of contracts which are paid by the tax payers, but are so sensitive they cannot be released to the tax payers. A bit like buying something which you do not have the right to know what you have paid for. And of course you have no choice?

Such a funny old world?

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the gnome

Well done RedS, I think there are some other body parts that do get washed a lot, but I wont go there.

There does seem a shortage of grey matter on the planet right now, and I believe this is more of an issue than climate change!

Love the stuff coming out about Greensill, and why would anyone read fiction these days?
https://www.abc.net.au/news/2021-07-12/lex-greensill-capital-investigation-four-corners/100279294
What a crashing business model?
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the gnome

Yes, its a fair bet that IR people are a waste of space. A company I am involved in, signed up for a large fee, to use IR people as the CEO was locked un in a covid inspried arrangement, courtesy of Boris and his men and women. Net result nothing. Lots of well meaning words, a few foto ops, some social media presence. SP did nothing...

There is so much BS around ...

Hugely over rated.

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the gnome

One of the questions being asked, givn the market valuation of a company, versus its real value, is whether it makes any sense to be a public company. The argument in Australia has exploded with the lodge of a takeover bid of the Public Sydney Airport, by a private infrastructure consortium. The enormous scale of the private funds is such that they can make a $22b bid at a 43% premium to market, and not miss a stride. If one of these funds decided to take a look at gold as an asset class must have, then guess what will happen.

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the gnome

Businesses around the world are beginning to spend the vast sums of money borrowed through the pandemic, triggering a surge in takeovers and capital spending that will push corporate indebtedness to record levels, according to fund manager Janus Henderson.

Companies rushed to the capital markets last year to fortify their balance sheets through the downturn, tapping rock-bottom interest rates in a burst of borrowing that pushed total corporate debt to a new peak of $US13.5 trillion ($18.01 trillion) in 2020.

Now, companies are turning from raising money to putting it to work as economies like the US and Australia rebound stronger than expected.

The global spending wave will push net debt – the total amount borrowed, less cash – from $US8.3 trillion last year up to a record $US8.9 trillion by the end of the year, according to the top end of forecasts from the asset manager released on Wednesday.

“Last year was very much about survival,” said Jay Sivapalan, the Melbourne-based head of Australian fixed interest for Janus Henderson. “The corporate bond market was used by companies to bring forward a lot of borrowing.”


Now, against the backdrop of robust global economic growth, companies are looking to spend their pandemic debt “war chest” on mergers and acquisitions, dividends, share repurchases and capital expenditure, known as capex, he said.

The race is on to acquire quality assets ... I expect the gold industry, which is notorious at this, to go for it...so watch out for bid for CEY. Premiums being paid in other industries are way above 30%...

good luck
the Gnome

CONTINUED...Tthe third largest copper deposit and the largest uranium deposit in the world! and obviously not too shabby on the gold side !!!

There is a lot more but I wont bore you. BUT....discovered in 1975, started mining in the 1980's and still has not recovered its cost of discovery, development and otherwise cost of capital! This is a very salient story, not too well understood by the Analysts of the world.
If you think mining deep low grade orebodies is easy talk to Rio about their debacle in Mongolia. Latest of s tring of disaterous announcments...Jan 2021...
"In a fresh setback for Rio's problem-plagued project, the Mongolian government this week warned the Anglo-Australian miner it was dissatisfied with the progress of the Oyu Tolgoi underground mine expansion and was now considering revoking its 2015 mine development and financing plan unless economic returns were improved."
https://www.smh.com.au/business/companies/rio-tinto-s-8b-mongolia-mine-expansion-plan-under-threat-20210112-p56tfe.html

More aout the Olympic Dam Story below....

http://www.australasianscience.com.au/article/issue-september-2011/olympic-dam-story.html

I would not be assuming that finding and developing deeper orebodies is going to be at the same rate and cost as finding them at the surface.
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the Gnome

Thanks Mr T.

My notes

1. There is a well known trend for discoveries to be of lower grade. Given equal amount of gold ounces, this implies that new deposits will need to be larger volumetrically [this is good for the exploration under cover, as bigger deposits are easier to find than small -albeit high grade ones], which in turn requires more drilling in terms of drill density, and if the deposits are under corver, then each hole will have to drill deeper to define the ore body. Hence it is logical that new discoveries will be far more costly.
2. Given new discoveries will be under cover, that is having little to no surface expression, finding them is going to have a lower probability of success. The industry has appalling discovery rates when the orebodies have some form of surface expression, when this is taken away? I will leave it to your imagination what will happen - in short, exploration will take longer, cost more and have a lower probability of any sort of financial return.
3. If we look at one of the key examples of the above 2 points, the discovery of Olympic Dam, which is an IOCG deposit with no geology or geochemistry expression at the surface, but rather a geophysical expression, it took a very well credenitalled Mining Company (WMC Resources) 10 holes to find the deposit. Here finding means they had a high degree of confidence they had a major mineral deposit (certainly no resources, as the deposit had a foot print of about 7 kms by 4 kms and depth extent still not known). Depth to top of the deposit was 300 meters...so every hole had to be drilled through 300 meters of crud. One of the reasons they thought they were onto something was a gravity anomaly was coincident withthe mineralisation intersected by the "discovery hole". In the hole the mineralisation was denser than the surrounding rock. One calculate the excess mass to cause the positive gravity anomaly and the calculation derived a figure of 10 billion tons.
4. Following the example of Olympic Dam through, drilling started on 400m by 400 m centers and holes down to depths of 800 to 1000 m. Problems correlating between drill holes again! Had to close down to 200 meters. Problems again correlating. Pick a small area where mineralisation was higher grade more consistently. Sink a 500 meter exploratory shaft (think $$$). Make a horizontal exploratory drive (think $$$). Bulk sample, and met test. New shock! Although they had encountered small intersectionsof high grade gold, they did not calculate a gold resource, as nothing correlated between holes [hint all holes were vertical, clue gold was contained in vertical structures]. The bulk sample of the exploratory drive ran of the order of 150 meters + of 6+ gpt Au! There was a high grade gold mineralisation in the vast low grade copper, uranium, REE deposit! WITH TIME AND UNDERGROUND DEVELOPMENT, IT TURNS OUT OLYMPIC DAM CONTAINS 40+ MILLION OUNCES OF GOLD!...now the third largest copper depos

The 1 m and no effect on SP could be sale between related parties?

Thanks Don

The shareholders of CEY have invested, via the board, about $100m in the Batie Project in Burkina Faso. There has been very little information released to share holders on this, and one would suspect that part of this investment would have been directed at resource expansion. Part of course, was for the Doropo Project which came with the Ampella acquisition, but what about the prime target? Given the geographic and geological proximity, CEY has a foothold on 7 million ounces resource, and should have a good handle on cotrnol of mineralisationint his area. What does gold potential of the area look like? What new targets can be derived, what new ground can be acquired?

Given that divestment is now the preferred option for Burkina Faso, because of a PFS or alike, which has not been released to the funding shareholders, it would be interesting to know what we are selling. Of course the market (one would not hope friends of past "players") will determine the value, but it is a good policy, to build sustainable trust and a sustainable company to let the shareholders know what is going on.

To continue the policies of the past "management" with regard to this asset is not a good look in my view.

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the Gnome

Off topic, but on topic for some on this forum. The aging (developed) world and what does it mean.
Well-known geopolitical strategist and author Peter Zeihan joins FS Insider to build on the topic of rapidly slowing population growth and why this is a pretty big deal. Peter says one of the major problems is that economic models and the financial system as a whole is predicated on constant growth. So what happens when populations start to see a sudden decline in the ratio of young to old?
https://www.financialsense.com/podcast/19990/peter-zeihan-why-world-about-radically-change

Will do. Thanks for this information. Recapping, Martin Horgan is employed by the shareholders of the company. Its good business sense to listen to the owners of the business, a minor detail which is missed by many in the mining industry. Some of the CEO's tend to operate under the assunmtion that they have been appointed by a "higher power".

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the gnome

HORGAN COULD NOT CONSIDER M AND A USING SCRIPT WHEN THE SHARE PRICE OF CEY IS BELOW WHAT IS FAIR AND REASONABLE VALUE FOR A TIER ONE ASSET PLUS DEVELOPMENT DIVERSIFICATION OPTIONALITIES.

TASK 1 FOR HORGAN IS TO GET THE CEY SP UP (STAGE 1 OF SP GROWTH), AND THEN THE WORLD MIGHT BE HIS OYSTER (STAGE 2 ETC)?

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THE GNOME

Lot of money to be made in those countries. In regard to the Artisinals, the best thing is to give them gainful employment and respect, where they get a wage every day...we used to pay them to explore (actually still do in Mali!)...because thats how most of the gold deposits in West Africa (of not Africa) have been found. Its not by the expat fly in fly out with their degrees and exorbitant fees...feet on the ground with pans and now plus metal detectors.

Yes, the MandA is runnning withthe RoxGold takeover, predictably. Interesting the background on the Fronteer gold aquistion by Newmont...what a duster that was for Newmont, but thats the nature of the gold industry. Remarkably few green fields discoveries, forces MandA, hostile or not, and I do expect a knock on the door, or more likely they are happening right now in the CEY Office. I have hear Newmont has sidelined a lot of its exploration, globally.

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the Gnome