The latest Investing Matters Podcast episode featuring financial educator and author Jared Dillian has been released. Listen here.
Hi SocialistB,
I think the bank syndicates will require some equity for additional debt but I like your main point for being more debt heavy and paying this down faster with excess cash flow. A 50% cash sweep on excess cash flow is already agreed on and this instinctually feels like a good option.
Thank you for your post.
While we wait for details of the divestment of telfer and havieron, there are a range of opinions on how this would be financed.
Shaun has previously expressed that there is an ideal balance of debt and equity. We have seen this in the financing of debt and equity for the 2 mtpa mine plan.
In this financing, the A$200m debt (facility A) was agreed with interest at an Australian BBSY benchmark plus a 3.50% margin. We also saw Wyloo's initial A$60m equity subscription with scope for a future potential A$60m equity raise through warrants.
At today's rates, the existing debt deal from the banking syndicate means roughly 4.37% BBSY + 3.5% margin = 7.87% interest on the A$200m debt facility.
Shaun likened financing to buying a house. In today's market, that means debt is not cheap. The general consensus is that interest rates will not return to the super low, super cheap debt days that have been enjoyed in recent memory. It is far more prudent in higher interest times to 'buy the farm' with more equity and less debt.
I believe a good deal for financing the 3 mtpa upgrade, telfer and 70% project ownership will mean we finance any divestment with the balance skewed more towards equity and less towards debt.
The recent rise in gold price is advantageous. Institutions will be giving more attention to upcoming development projects, so any bigger equity raise should hopefully attract more competition.
This may be more dilutive but to long term shareholders (or very new ones) this would offer the best upside for the overall project. I am keen to see what path Greatland choose to take.
Hi Bamps,
I am sure that we will meet properly at a future town hall. My main point in replying to the previous thread is that bulk mining is that Havieron will eventually use a bulk mining method. We do not want investors to be hearing the argument (such as grade and dilution) against other high quality tier 1 mines and using this same argument against a future havieron bulk mining method. I would be equally defending other tier 1 mines like Cadia and Red Chris for the same reason.
Bulk mining is what allows Cadia, Hemi and Red Chris to be tier 1 mines and will eventually do the same for Havieron. It would be wrong to lump all of them as tier 2 because of grades and dilution when cost per tonne is much lower. Other arguments fall aside when the bottom line is they are all high production and low cost per tonne. I am not arguing about Hemi (I have not stake in De Grey) and am arguing about what bulk mining allows companies to achieve. I am showing through Hemi why we can not consider these mines as lesser quality.
Hope that makes sense and we can talk more about it in the future.
Hi Bamps,
You say it is not possible for Hemi to achieve above 500,000ozpa past halfway but their DFS directly contradicts your comment.
Take a look at De Grey's DFS on page 14:
https://degreymining.com.au/wp-content/uploads/2023/09/20230928-DEG-ASX-DFS-Announcement-Executive-Summary-Combined-lodgement.pdf
The Hemi DFS shows a mine plan with most of its 12 year mine life above 500,000 ozpa. The life of mine average is already above 500,000ozpa. In the 12 year plan, the production rate drops for the last 2 years.
Their DFS is already outdated. They updated their resource estimate 5 months after the June 2023 resource estimate and can already extend the >500,000ozpa mine life by another 2 years.
You say they cannot extend the pit but they already say they can.
If you think the Hemi DFS is wrong and that they will not be able to sustain 500,000ozpa past halfway then our conversation can end squarely on that. I am confident their DFS is accurate.
Hi Bamps,
The higher OPVM in the upper portion of pits at Hemi is also the reason why it has a higher project NPV than Havieron.
All of these ounces are feasible and planned for the open pit. The 10,000 OPVM at havieron includes breccia which is not all included in the SLOS, so also tapers like at Hemi. Both assets can grow their OPVM at depth so they aren't different.
The higher OPVM nearer to surface at Hemi means less capital expenditure to access ore. Having lots of ounces at depth and less at surface would mean it would be more capital intensive.
6 open pits near surface is highly attractive compared to having one big pit.
Drilling to date at Hemi indicates 15 years life of mine at >500,000ozpa. All pits are open at depth and will easily increase the life of mine much further than 15 years. I am not sure why you say Hemi is short lived when there is nothing to suggest that. On top of the >500,000ozpa over 15 years and extension to resource at depth that would already increase life of mine, there are also lots of local discoveries which could push Hemi above 600,000ozpa and underground options which could be operated in tandem for even higher total production rate over multiple decades.
Similar to the Paterson, The Mallina basin is a high potential postcode likely to make more discoveries over this time and extend Hemi's lifespan.
There is nothing wrong with seeing other highly successful gold assets. De Grey has a $2.4bn market capitalisation and high government interest for these reasons. It does not have a high NPV for no reason. I know you may not agree with why it has such a high market capitalisation but that company has done well for itself. Havieron can also do very well for itself once it starts a bulk mining operation like at Cadia and Hemi.
Hi MH01,
I agree in a sense. The reason why I took time to take part in the existing conversation about Hemi and Havieron is because I disagree with determining quality by using comparisons of factors such as grade and dilution/waste rock. I am explaining why this is meaningless to compare these things because there is significant upside to GGP if it unlocks a bulk mining operation. I would not want investors here to use the same misconception to argue that a future bulk mining operation at havieron is less valuable when the opposite is true. Your question of what could turn 6p per share to 20p per share is answered with a future bulk mining method.
Bulk mining is lower cost per tonne which far outweighs any inefficiencies or differences in grade relative to selective mining. Selective mining is higher cost per tonne and is suitable for where higher grade ore can be efficiently mined.
Both methods can be capable of forming a tier 1 asset. In havieron's case, a tier 1 asset comes from a future bulk mining method. The current tier 2 status has benefited GGP because Newmont only want near term tier 1 prospects.
Hi Bamps,
Your description of De Grey needing to operate all pits simultaneously also explains why Hemi is capable and planning to achieve tier 1 gold production rates above 500,000ozpa (estimated up to 570,000ozpa). If you do a gold equivalent that accounts for copper at havieron, it is still smaller than Hemi. I do like the copper at havieron though.
The tonnage will get lower towards the end of the mine life- this is normal for any mine operation. Have a look at Havieron's production profile and you will see the same thing.
Hemi have disclosed the strip ratio. This is reported for any open pit operation. Hemi estimate a strop ratio of 6.7:1 and expressly designed to optimise cash flows. The waste rock will be used for ramps to maximise efficiency in removing ore and waste rock. Waste rock is well known to be higher in bulk mining methods compared to selective mining methods. It is comparing apples with oranges. The production rate, financial margins and NPV are near the top of the hierarchy of factors. Hemi has a massive NPV that reflects its quality as a tier 1 asset.
It would be silly to say cadia is a lower quality asset than havieron, for example, due to grade differences. Cadia is a clear high production and margin tier 1 asset. Cadia and hemi are bulk mining and the Havieron is selective mining. Lower efficiencies in bulk mining methods such as dilution are massively outweighed by the significantly lower cost per tonne and is why both fetch a higher NPV than havieron. Selective methods have to be more efficient because the cost of selective mining is so much higher per tonne. This is the basic principal between the bulk and selective that gives both different upsides and downsides that are meaningless to compare.
I have noticed a lot of posters who have switched from saying Telfer is running on fumes to now saying it has exciting additional ore to be found. I think reality is closer to somewhere between those extremes. Buying telfer and 70% havieron gives opportunity to optimise the low margins at telfer to stretch some value from its purchase. Leveraging the infrastructure for havieron then makes our project a great tier 2 starter mine. We can hopefully develop a tier 1 bulk mining method in the future that will generate an NPV closer to De Grey's tier 1 bulk mining project.
I am not sure we see eye to eye on this but enjoy our conversations as always.
Hi Bamps,
I agree that Havieron is much better than Hemi for us. However, Hemi is a much better asset. There is a reason for De Grey's higher market capitalisation of $2.2 bn even though they are wanting to start production in 2026.
Term sheets already offering up to $1.2 bn debt with government interest as well.
Equity raise already completed. Because of their market capitalisation, this dilution was nowhere near bigger than if GGP acquire telfer and 70% of Havieron.
Hemi has 25,000 OPVM. Multiple deposits is perfect for open pit due as they can optimise sequencing for maximum value. Havieron's vertical ore body is only good for block caving or SLC. It is more capital intensive to have a vertical ore body in SLOS. If GGP can start a bulk underground mining method then this shape will be helpful. You know I am hopeful about SLC and my investment depends on whether GGP can eventually achieve this or not. Hemi's high OPVM means less capital expenditure is needed to access each vertical meter.
Grades are great for open pit at Hemi. Grade and mining method are equally important. Per tonne cost of open pit is much lower than SLOS. This means difference in method means the difference in grade is negligable.
Lots of upside for the open pits and underground options. These underground operations can take place early and at the same time as the open pit for even higher value.
93.5% recovery rates at Hemi.
The region has produced enough discoveries that De Grey are looking at building second regional hub and create even more value.
Hemi has an IRR of 36% post-tax.
Project NPV is $2.9bn post tax. This is why De Grey has a higher market capitalisation. All of the factors comparing Havieron and Hemi feed into this final number. Hemi is worth much more presently and will be worth much more as time progresses.
Open pits are all open at depth meaning mine life is bound to be much higher. Newest resource estimate at Eagle pit alone takes Hemi to 14 years right now. New drilling and open depths at all pits means this is likely to be a 20 year operation conservatively. This is for a >500,000ozpa profile compared to Havieron's 350,000ozpa. Hemi is an outstanding tier 1 asset for this reason. I would rather GGP discovered Havieron because now Newmont doesn't want it. Newmont would have wanted a tier 1 Hemi-scale asset and we would have never had 70% sold back to us.
Both assets will create mid-tier companies with regional hegemony. Both assets are good for their shareholders.
Hi Credit Limit,
The Grant Samuel booklet is a good source for independent estimates on Telfer and Havieron.
The closure cost estimate for Telfer's operations and Havieron's eventual mine closure was US$312m.
Your estimate of $750m for Telfer alone is far out.
The present valuation of a combined Telfer and 70% interest in Havieron included the US$312m closure costs. This valuation ranged from $650m to $950m.
This valuation did not include the latest resource upgrade from Greatland and subsequently matched by Newmont. This would likely increase the project value further.
My opinion on the cheapest value would be the independent 5% valuation upscaled to 70%, minus the estimated closure costs of both telfer and havieron. This would subtract the Havieron closure costs twice so shows how low the figure would (unrealistically) be. This would be $840m - $312m = $528m.
The lowest end of valuation range of $650m to $950m makes sense when comparing with the more unrealistic $528m.
Even though the $650m to $950m range was before the recent Greatland and Newmont resource updates, Newmont may want to sell its divestitures fast. If they sell before a DFS then this will keep the price closer to the $650m end. I anticipate that the resource upgrade will have some positive effect on value. For this reason I predict ca. $750m.
A normal 50% break between debt and equity would make both ends of financing achievable. It is up to the experienced Greatland Gold management team to prove they can procure a financing pathway that ultimately benefits us. The revaluation after DFS should make this easy for them. My hope is a quick disposal for this reason.
Hi MH01,
Have a look at the Grant Samuel booklet for a breakdown of most recent estimates of a combined Telfer/Hav. There are 2 basic scenarios and each one has a range. The first scenario was for the PFS numbers. The second scenario included a plan of 3mtpa and the 2022 MRE. This scenario ranged from $650m to $950m. This included telfer liabilities. The 2024 resource may change this. The valuation also noted the lower value due to lack of DFS. It appears Newmont want to sell quick and cheap. This would suggest a number around $750m. I would be surprised if it were as low as $500m but thrilled if it happens.
Hi Majorsuccess,
I would disagree. Newmont kept Red Chris and is in a joint venture with a small company. The sale was called by some over a year ago. The reasons are clear to those people.
There are a combination of assets being sold for under $2bn. This means Telfer and Havieron sold together are likely around $750m. A 50% equity raise for that approximate sale price plus additional capital expenditure requirements made to facilitate debt would require over 100% dilution. The market cap of the company owning all of havieron would negate this dilution and be partly accretive. The share price would improve more if the equity is raised at a premium.
The added of a purchase depends on if the Greatland Gold team can create a good deal for shareholders. They have been paid lots for their experience in this so I am hopeful they can deliver a net gain and not a net loss.
Hi Doozer
Titanium is extracted from ore by a simple reduction reaction. This reaction is actually much less nuanced than extracting gold. But, it is a slow reaction and requires lots of energy for reacting at high temperatures. The cost of using other reagents also adds to the cost. Titanium is relatively expensive compared to many metals. The higher price for titanium is because processing is more labour and capital-intensive than most metals. This should not affect your view on the titanium industry. A smaller company will find it easier to develop a titanium project because processing is less complex. It might be more capital-intensive but the spot price for titanium reflects the higher processing costs.
Titanium is more abundant than gold. This is why it is cheaper than precious metals.
Hello Bamps,
I hope you are well. There are excellent recovery rates at Havieron. It helps a lot that the focus is on processing only two metals and flotation with CIL. Lower recovery rates will come from processing more metals as a general rule of thumb.
For example, Aitik (Cu-Au-Ag) recovers 90% copper, 58% gold and 75% silver. Those 3 metals are commonly recoverable together at good rates. This mine has good grades for all 3. The lower recovery rates to get gold and silver become worthwhile.
You may enjoy reading about Carnaby Resources (Cu-Au) with copper recoveries of 92-99% and gold recoveries of 82-95%.
Hi Bamps,
I am glad you enjoyed it and were in good company. Thank you for clarifying. The copper/bismuth and your information on pyrrhotite creates an exciting picture for the Rio Tinto Joint Venture. I eagerly await its results.
Hi Bamps,
Hope you enjoyed the town hall. Did Shaun say Rio found pyrrhotite previously or was this on a different document? The best I saw on the GGP RNS was "Of particular interest is the Decka target (see Figure 2), a magnetic anomaly which also sits on the same gravity gradient as Havieron and has a coincident late time airborne electromagnetic anomaly interpreted as a bedrock conductor, indicating the potential presence of pyrrhotite as distinct from the less conductive but magnetic magnetite."
Hi Bamps,
There is absolutely no mention of block caving the EB in the PFS and there are no timelines set on a block cave or SLC in any GGP or Newcrest RNS. In the PFS the only reference to this is that "initial assessment of future development options with further resource growth in the northern and eastern breccia including evaluation of a lower cost bulk mining method"
There is nothing referring to mining the EB in tandem with SLOS in 2028 on the PFS. The only comment made is about bulk mining.
Your comments that Shaun says "caving" when he says in tandem with SLOS could mean Sub-level Caving (SLC) or block caving. In interviews he always uses the phrase "caving" and is ambiguous language, so again it would be worth direct clarification and this ought to be in a more formalised manner (interview or email).
Because of the distance of commute taking too long for my other commitments, I cannot attend the town hall meetings (as much as I would want to meet with Shaun Day and other investors).
I would ask that you take another look at the PFS because only the broker notes have given an arbitrary start date to a potential block cave and they are not privy to Newcrest's knowledge and plans for Havieron.
Hi Bamps,
Your conversation with Shaun Day directly referring to block caving the EB in tandem with SLOS surprises me. I would want to hear about how they intend on mitigating the ground disturbance from block caving the EB in tandem with SLOS. If you are at a future town hall and are able to unpick this question then I would be grateful.
Hi Thedoors,
This would not be the first time that someone has taken offence on behalf of Bamps. To help with understanding, I am not saying that Bamps does not understand the difference. I am saying that Shaun Day has referred to bulk mining in tandem with SLOS in interviews and that it could refer to either block cave or SLC. I have set out my reasons for why I think so. Bamps may choose to also take offence but I would imagine that it is clear that I am saying there is a question mark on this subject, that he thinks one way and that I think another way.
If you choose to not engage with reading the thread out of taking offence then I wish you good luck
To clarify, bulk mining can refer to either block caving or SLC. When Shaun Day talks about bulk mining options alongside SLOS, I suspect he means SLC with SLOS. Block caving would not be suitable near the south east sulfide crescent. The compact ore body means that a SLOS would be within range of disturbance if ore was drawn from the bottom of the ore body and that it where it would be best placed if there was no SLOS.
Newcrest had previously mentioned three stages of operation where they would look to SLOS the south east sulfide crescent, potentially SLC other higher grade portions and then block cave the lower grade material afterwards.
A direct question to Shaun Day on what method he specifically means when he says bulk mining (as he does in his interviews) instead of more vague interpretation would clarify this question mark
Hi Bamps,
Shaun Day has intimated in interviews at the idea of bulk mining in tandem with SLOS. However, this mustn't be confused with block caving. Bulk mining refers to a less selective mining method and relies more on tonnage instead and less on grade (cadia and red chris are examples of this). SLC is a bulk mining method that can operate simultaneously with SLOS.
As you are a regular town hall attender, and as you haven't heard him directly address this question, it would be worth directly asking Shaun if a block cave could run at the same time as the SLOS. I would be surprised to hear him say yes. The only circumstance where I could see this happening is if they tried to block cave the north west pod as it is much shallower than the EB. I do not see this as a preferable option because it would not include all the northern breccia material. While I have not yet attended a town hall, if his comments are similar to interview then I suspect you have interpreted him saying bulk mining and thought of block caving.
A better way (in my opinion) of explaining why to stick to higher grade material for the SLOS would be to say that it is more challenging to extract ore of a wide range of grades, instead of comparing with entirely different style of operations at red chris or cadia. Although, again, this is irrelevant when discussing the context of what companies and institutions value. Ultimately they only care about revenue.