RE: Cornford at MI23 Feb 2024 18:31
It was that basic strategic mistake stemming from Mather’s ambition that has been playing out up to now, with a series of management clear-outs including Mather, and a share price too low to maintain spending on the 10-12 other exploration projects he was pursuing, and, more seriously, even to maintain development on Cascabel
Now, following a long needed merger with key Cascabel shareholder Cornerstone, the latter’s management has taken over, although hadn’t yet been able to lighten the gloom.
Since the 2019 feasibility study, Solg has been bending to shareholder demands for a more easily funded plan, if not for a sale of its various projects, so now it has come up with a new Cascabel study for a cut-down plan showing an initial capital cost of only $1.6bn, still (at a higher $1,750/oz gold price) showing a 24% rate of return, but over a mine life half the much-too-long 55 years of the previous plan. At what are fairly conservative copper and gold price assumptions, and with scope to expand production from other nearby resources, Cascabel looks a much more feasible proposition, with a far better chance that some bidder or funder will come along.
But the shares are still depressed – not only through uncertainty how any funding will affect value for shareholders, but also because Solg has spent most of its remaining cash on the new study, so that investors worry about another fund raise (which the company has said might have to be) to keep the company running.
What happens next I don’t know. But maybe things can’t go on like this? Even if funded now, it will take ten years before Cascabel is making the $450m annual cash profit the feasibility study estimates for the first 5 years in production, before doubling over the next five – at the conservative $1,750/oz gold price it assumes, and $3.85/lb for copper. The current $2,000 gold price would add nearly 20% to those economic returns.
But meanwhile could be the sale of one or more of the other projects (to help fund Cascabel – a step Mather was refusing to take) among which Porvenir in southern Equador has already found over 7Moz of gold equivalent (mostly in copper) – a substantial find in its own right
So what lesson for Greatland Gold and its 30% owned Havieron project? It has now been confirmed by Newmont that it will be divesting its 70% Havieron stake, which – with substantial cost to develop (that Newmont seemingly thinks not worthwhile) looks to be much too big a mouthful for GGP to swallow on its own. It means, like Cascabel’s effect on Solgold’s shares, that investors will worry about the effect on GGP’s share price of whatever large new partners might demand to come aboard and help fund Newmont’s 70% Havieron stake. Its why it’s still wise to stand back and watch GGP -instead of assuming that its large project means a large profit for its small shareholders.
end
https://masterinvestor.co.uk/commodities/february-mining-update/?mc_cid=18
Sign In
Follow the stocks
