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Datacheck, I now see how the £10m p.a figure has been acquired from the high level projection stated in the June 2019 RNS. The "in house projected attributable revenue" figure calculated by Galileo comes with no assumptions behind the calculation, other than it was based on the zinc metal price at the time, which was just over $2500 per tonne. From this assumption they are assuming they will be paid $1250 per tonne of the expected contained zinc metal in the ore, presumably by Jubilee. Jubilee will of course not only have to take account of their own processing costs and desired profit margin to bring the zinc ore to a high quality zinc concentrate , but also the subsequent transport costs to the smelter and then the smelting costs. I believe the latter in June 2019 were about 15% of the metal price, so let us assume Jubilee were assumed to receive 85% of the contained zinc metal price in the concentrate( i.e $2125 per tonne). This would mean they were assumed to be receiving $2125-$1250 = $875 per tonne of expected contained zinc metal for their processing work.
What might be the projected monthly revenue figure be at today's metal price of say $2000 per tonne? For simplicity I shall assume that Jubilee's and the smelter's costs are not linked to the zinc price, so only Galileo will be exposed to zinc price volatility. Galileo would now receive $2000-$875-$375=$750 per tonne of expected contained metal, which is annual projected revenue of $9m. Knock off the projected annual $2mAISC for Galileo's mining and transport costs, and we are left with $7m or approx.£ 5.2m p.a., half of what was projected 11months ago. Still good though, but only half as good as many on this board seem to be assuming! The expected average metal grade expected from the drilling at Star Zinc to date appears to be close on 20%, so let 's hope that materialises. Equally of course zinc prices may go up significantly and back to $2500. Who knows? But I must admit the projected revenue stream of £10m p.a. does seem to be a best case scenario today, with plenty of potential downside particularly in the average grade expectation.
The very good part is the fact that 30k tonnes of ore per month was processed. Are the break downs and spare parts issues behind them now? The very bad part is the grade, which will impact on the recovery rate as well as increasing the cash cost per ounce. Apparently expected, so can I assume the amount if capital being spent to resolve the problem was expected as well? Good job the gold price is high!
Datacheck the other query I have is the £10m p.a figure that keeps getting quoted. No idea what zinc price that assumes and whether it properly takes account of the likely Jubilee processing costs to get to the zinc concentrate stage. What I have read seems to me as it is just the zinc metal price less some mining and transport costs. The £10mp.a figure of earnings to Galileo after all costs properly taken into account at a zinc price of $2000a tonne seems just miles too good to be true. Any help on where I can verify this, other than Colin’s in the head calculations, would be appreciated.
Colin Bird always tells a good story, and is always optimistic. He is usually well out on his time lines when promoting his companies.I am not saying there is not potentially excellent value here, but realisation may take longer than many think. CB is rightly holding out for a better deal for the phosphates so it includes decent recognition of the rare earth minerals, so it may be a while before we hear more on this. As far as the zinc projects are concerned it is unlikely Star Zinc will be generating any revenue until early next year. Just a small matter of a small scale mining licence to secure and then for Jubilee to build and commission its zinc processing circuit, which it appears not to be in a big hurry to do so at such low zinc prices. And the other zinc project still also requires the regulatory authorities to agree a transfer of the Kabwe large scale mining licence from BMR without any sting in the tail like picking up some of the clean up liabilities of the Old Kabwe mine on the property. As usual CB glossed over these potential difficulties.
I have a similar understanding re the relative high cost of acid in the processing of the zinc ore. It is difficult to believe at a current zinc price of around $2000 per tonne, that just processing low grade tailings would be viable, even with Jubilees expected efficiencies in the circuit and the fact that they make their own acid. Colin Bird hinted at this in an interview with his Galileo hat on about 13 months ago. Hence his confidence about Jubilee wanting the high grade Star Zinc ore.And at that time the zinc metal price was a lot higher than at present. With the regulatory issues still outstanding plus the current zinc price, it is no wonder there appears to be little urgency to finish off the zinc circuit. The COVID borders issue regarding delivery of parts could have come at an opportune time. It will not then appear to the Zambian authorities that Jubilee is unnecessarily dragging their feet!
Valid reasons have been given for delay of zinc circuit at Sable. The biggest ones though, which are all regulatory have not.
1. Galileo has not yet secured a small scale mining licence for Star Zinc, nor approval for transferring the existing exploratory licence from BMR. Jubilee needs the high grade ore to make the processing of its low grade tailings ore viable.
2. Galileo has not yet got approval to transfer the existing large scale mining licence, excluding the small scale mining licence covering the Kabwe tailings, from BMR. This needs to happen so Jubilee can gain control of the small scale licence from BMR.Once they do they then need it extended from its current expiry date which is in about 4 months time.
3. Jubilee will also need environmental approval for the way they wish to mine the Kabwe tailings and process them at Sable. There is of course a big issue re the lead content.
Matters seem to be slowly moving forward but spending a lot more capital on the zinc circuit but even more so on the tailing environmental mining issue without these approvals is highly risky.
If there is any thought of buying out Cora, why did Hummingbird not take part in the recent Cora placing and protect their existing share in that company? I imagine Hummingbird would want to see a bankable feasibility study, available perhaps towards the end of this year, before seriously starting any discussions about how they might have some form of commercial interest. Their location, own experience in developing their own mine, and what appear to be good government relations could be very important advantages. But developing the on site and satellite prospects they already have, so as to increase the life of their own mine will surely take priority.
Good point Bald Eagle. My first concern is will the milling be reliable enough? That was the really big problem last year. They should have got all the spare parts they needed to support basic maintenance to resolve standard breakdowns of machinery at the beginning of this year. They have easily enough ROM ore with the stockpile you mentioned to support a minimum of 30 tonnes of ROM ore per month through the mill without any further equipment being delivered. Let's see if that can just be done in H1 to take advantage of the high gold price and favourable currency macros.
The very large CAPEX is for the huge production increase in the long term and should not even be a factor until 3 years time. Provided nothing major operationally occurs ( an extended shutdown for COVID), they should be able to fund all the improvements required over the next 3 years. They will now need to deliver consistently over the next 3 years to have any chance of attracting large funding for the medium to long term so as to achieve the holy grail of 100,000 ozs p.a. But lets just focus on the much shorter time horizon and keep our fingers crossed that by year end they are up to the target 45000t of ore mined, having significantly improved the dilution and milling issues through proper investment in 2020.
I hope you are right nonegsplease, but concern about South Africa trying to release COVID restrictions too early, and in recent days a weakening rhodium price, might also have something to do with the SP fall. Thank goodness this company has a large cash buffer. Implats are openly talking about a prolonged period of disruptions ( to at least the end of 2020).
Excellent results as expected, but the presentation has comprehensively covered the actions being taken, and their financial implications, as a result of COVID 19. They are targeting to have a stronger balance sheet at year end than at end of March. Amazing. Fabulous management team and they have cut their own pay by 25% as a share of the austerity measures being taken to preserve cash. They believe the low oil prices will be with us at least until year end and possibly longer and are planning accordingly. Net cash position expected to be improved on whilst hedge in place, but things will get a lot tougher from end of September when the hedge ceases.
Cash preservation and meeting existing liabilities is the name of the game at present. What will Maari cost now plus the loan repayments to meet. Perhaps find out more tomorrow. Surprised and reassured company still looking to pay dividend. Be even more surprised if any acquisition occurs in next 3 to 6 months. Biggest risk to Jadestone at present is ability of hedgers to keep paying up through to end of September. If they can then Jadestone should be in a strong position to close in on next target acquisition.
Very solid indeed. All project work on schedule. Sets up the next 6/7 months nicely for the major seasonal construction work that needs to take place. As expected additional COVID prevention costs will be incurred for the changes needed to shifts and additional quarantine procedures pre shift changes. Much lower fuel costs to come through to offset. Lets hope supply chains remain resilient so everything can be put in place for Kekura development going into 2021.
Money hawk, I am somewhat on the same wavelength as you on today's news from Galileo. I posted the following on that board.
"Perhaps someone can explain to me what is so new in the announcement today. This arrangement was first hinted at in an RNS of 13 September 2018. In the RNS of 24th June 2019 the acquisition was complete, whatever that meant. And now today an agreement has been reached. So does that mean the legal paperwork has taken nearly ten months to complete. Wow, things have moved along at a snail's pace! What am I missing as the whole thing is still requiring the Zambian authorities permission".
I cannot believe Galileo are going for Ka****u before Star Zinc? They will need the hoped for profits from Star Zinc to get that project moving forward.
Colin has a habit of grossly over selling things and glossing over the detail. Every project has great potential until the detail starts to emerge, so lets hope the zinc projects will deliver. I am afraid I am a little bit more cautious based on a lot of Colin's past experiences. I thought the small scale mining licence application for Star Zinc was submitted a while ago, or was it? Has it just been submitted now this little piece of legal work ( overlooked perhaps, so why did it take 10 months?)has been completed to get to a confirmed position. Where I would agree is that a good step forward has been taken, so I hope for all shareholders the Star Zinc mining licence and this confirmed arrangement can be approved together by the Zambian authorities within the next 3 months. Then perhaps mining can begin at Star Zinc by the end of the 3rdQ 2020. If this confirmed step does what it appears to do, of course JLP will be right behind it. They want to ensure renewal of the Kabwe small scale tailings mining licence later this year, removing BMR's involvement and any potential complications arising with the large scale Kabwe licence. Ideally Jubilee would want the small scale Kabwe licence under their control before starting the processing of the Kabwe tailings, towards the end of Q2 2020. With JLP behind Galileo's now "confirmed" position they will probably provide more effective lobbying power.
Perhaps someone can explain to me what is so new in the announcement today. This arrangement was first hinted at in an RNS of 13 September 2018. In the RNS of 24th June 2019 the acquisition was complete, whatever that meant. And now today an agreement has been reached. So does that mean the legal paperwork has taken nearly ten months to complete. Wow, things have moved along at a snail's pace! What am I missing as the whole thing is still requiring the Zambian aurhorities permission.
In Europe and America will anyone buy a new car in the next few months? Will there be any car manufacturers producing new cars in a few weeks time? So where does that leave PGM prices in the short term? If the rhodium price weakens significantly even Jubilee may be struggling in the short term to make any positive operational earnings. As of today, company share valuations using usual financial metrics are virtually irrelevant. The key issue is can a business survive until normal life returns.