Linda reply9 Feb 2016 09:27
I asked Linda could she expound on : "In the planned economy of the Chinese mining sector the client is not the company but the state, hence studies tend to be overly conservative." and secondly the difference between our Reserves and Resource. She kindly replied and agreed for publication :
1. Dekel was trying to communicate that the Chinese economy is still a centrally planned economy. Effectively all companies, and not just mining companies, are associated with the state even if they are listed on foreign stock exchanges. The strategy executed by a company is always the one directed by the government, and for the benefit of the state, which may or may not be the same as the interest of the shareholders. Even if the client is an overseas company, the “real” client is always the Chinese state. For that reason forecasts are typically conservative as if they are not achieved the failure can have personal repercussions.
So what Dekel tried to communicate is that the habit of providing a conservative study is engrained within organisations like NERIN and they will always try to paint a conservative picture.
2. Resource is the amount of gold which has been demonstrated to be in a particular section of the deposit. Reserves however are the portion of the Resource which it has been proven can be extracted profitably under a certain set of conditions (gold price, fuel price etc.).
There is a strict definition of Reserves. For example a Resource in the inferred category cannot be included in the Reserve base. Therefore the Reserve will be mined from the larger Resource. As a Reserve is extracted it is usual to undertake further drilling to again increase the size of the Resource and begin again the whole process of establishing the Reserve within the Resource.
To quote Dekel “The Reserve base of Chaarat is relatively very large and of very high grade. This is a big deal!!”
As Dekel mentioned again in the video the decision to use a Chinese group to prepare the DFS had two objectives which have both been achieved:
1. To put a value on Chaarat by a qualified Chinese body.
2. To show that a reputable Chinese body confirms that the project is technologically viable.
I hope the above is helpful.
Kind regards
Linda Naylor
Finance Director
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Well that spells it out quite clearly that we really needed a Chinese DFS for the way forward and they were always going to be very conservative - "personal repercussions". I later asked her about possible director buying at this low sp level and she replied :
"The directors cannot buy shares as we are in a close period."
This, presumably, is because of the outstanding DFS soon to be ratified as Results are not expected until June, unless there is some other reason (!?!). I have asked her can she give the 'closed period' reason but, frankly, I think I'm p
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