Some media comment on yesterdays news.
Moving ahead slowly, slowly.
It will be a champagne day when we finally exit Uganda
As regards past experience of expectations not being met I dont think it is just Hummingbird.
Something that I have noticed with resource stocks over the years is that production and revenues often seem to come out lower and costs higher than you anticipate.
But we are in as good a place as we can be, looking forward to getting an update on progress with drilling.
Lol, this guy just gets better and better!
Fullboots, that is a complete mischaracterisation of what I have just said
The sulphide orebody may well be several hundred metres deep as claimed, I have no idea
The question is what is the average g/t you can legitimately apply to that mass of orebody
And whether the drill lengths in the Hannan report really do provide evidence to support that case – or otherwise
So far it looks to me that it will be less than the 6.7 g/t claimed, because in their calculations of the average g/t Hannam have excluded the sections that seem to be drilled through the orebody that gave much lower results
but I am going through all the drills in the report to see how the case for 6.7 g/t stacks up
Maybe you should calm down and wind your neck in a little bit, eh?
You appear to be a bit emotional, look at it this way
The first of the three intersections reported from HAD014 started at 465 metres and the last one ended at 872 metres
That is 407 metres of one drill that started and ended in the high grade sulphide zone
Looks like a pretty straight drill through the sulphide zone to me
Of which 65 metres made the cut, the rest being under 4 g/t
Now that is me done and will not disturb your trading for the week
Hey guys I am giving my honest opinion here, we owe each other no more and no less.
But I will be willing to retract / amend in the face of any reasoned argument to the contrary
Now don’t forget, when Hannam did their calculation of the mineral resource on page 17 they said the orebody vertical extent was 600 metres, and judged it to contain gold at an average grade of 6.7 g/t
Whereas we know from this one random sample drill, HAD014m only had 65 metres in 3 lengths showing grades above 4 g/t
So from 600 metres to 65 metres?
A little exaggeration there methinks maybe, just a little
Ok let’s look at drill HAD014 (just one example from several)
It first encountered gold at 450 metres and the deepest hit was at 891metres, 440 metres of drilling
Excluding the ‘no show’ lengths of drill the grade average was 2.74 g/t, this covered 319 metres
Now by further excluding the sections below 4g/t they have managed to bring the grade average up further to 6.54, by including only three high grade sections extending to 65 metres in total
And you are saying that this is because everything over 4 g/t from this one drill can be reliably considered to be in the sulphide zone, just like that!
And anything below 4 g/t should be considered breccia
It seems a rather lazy interpretation if you don’t mind my saying so
This remarkable drill dipped in and out of the sulphide zone, it must have been like a corkscrew
It may be that the simplest explanation is the most likely one, the low grade sections were excluded in order to bring up the g/t average to 6.7 g/t which was then applied to the entire resource
Well I hope you all enjoyed the great weekend
Now we had been having a useful discussion on the g/t grades in the Hannam report being inflated
I was not going to come back on this but there has been some misinformation posted and we do need to clear this up
Hannam say on page 16: “For our calculation, we used all the Havieron intercepts that grade above 4 g/t Au, which was an arbitrary cut-off we chose based on our understanding of West Australian underground gold mines at similar depths.”
Whatever their reasons it has absolutely nothing to do with excluding any particular areas, they simply excluded any and all drill sections that were below the cut-off point of 4 g/t. Big difference.
The effect is to inflate the average g/t rate which they then applied across the entire volume of high grade resource.
Heck you can even spot it by reading the drill reports on page 31!
For example HAD06 has had 3 intersections reported implying that the two gaps in between failed to make the cutoff. I can count 8 examples of these in the 31 drills intersections – and these are only the most obvious ones that we know about.
That 5 g/t true average grade is suddenly looking a lot more plausible
Sorry lads, but you will have to work harder than that with me!
Holly – thank you, appreciated. I won’t rain on people’s parade too often but let me answer the posts you suggest, and bow out for now.
TakingMyTime – Hannam did promote the likelihood of being bought out by NCM. There have been umpteen examples of (paid for) broker reports with valuations well above the then current SP but which never materialized.
Lebugue – NCM will have 70% of an asset that they paid little for right next to Telfer, and right of first refusal on other prospects in the area. They can be raking in the cash while continuing to explore. So already looking a great deal for them.
All the numbers I have used have been taken from the Hannam report with the exception of the bog standard concept of NCM requiring a decent IRR on their investment if they do buy Haveiron. A 15% return is not high.
Bebeto - H&P have just estimated the high grade resource that can be economically mined at 4.4m ozs, which according to their report translates to 3.15m saleable ozs over the next 13 years, a long way short of 10-20m ozs. That is considered the likely plan.
The MRE will probably be a very prudent and conservative piece of work when it comes out.
This sets out the likely plan for the next 14 years to 2033, which is to mine the high grade sulphide zone. Bear in mind that nothing else can be guaranteed right now as the lower grade breccia may not be economically viable at all at those depths.
Some of the main issues to be aware of are as follows:
They guesstimate the average grade of 6.7 g/t by excluding any drill results with grades of less than 4 g/t. Does this not inevitably inflate the result? This is like not counting all your shots at golf, only count the good ones!
Bear in mind the Copper is in the AISC calculation as a credit against production costs.
They guesstimate 4.4m ozs as a ‘mineral inventory’ but this translates to only 3.156m saleable ozs during the life of mine, 30% of which belongs to GGP - 946.800 ozs. It’s in the projections.
The difference seems to be waste and shrinkage, 15% losses for mine dilution, 10% for the recoverability factor and 5% for payability, Amazingly it all adds up to a 27% loss.
They used an optimistic price of gold, $1700 all the way through to 2033. A buyer will not use that, possibly the average over the last 3-5 years. Nobody wants to end up looking like the CEO of Occidental when buying Anadarko recently.
They use 3.65bn shares to calculate the value per individual share, not 4.2bn which is the consensus here.
In order to pay the target sp of 12.9p in an acquisition, Newcrest would have to pay almost $700 per saleable oz of gold, So how likely is that?
Instead they are going to use conservative assumptions and ask what is the maximum that we can afford to pay for 30% of this mine and still make a decent IRR on our investment – for our own shareholders?
Normally you might expect an IRR of 20-25% for a start up mine. 5% is a joke but say they drop it to 15% because of Telfer. So what is the maximum they can pay for GGPs 30% share of Haveiron and still make a 15% IRR?
By my calcs this works out at $264m or £216m which, when divided by 4.2bn shares equals 5.1p a share. The Aussie Govt will then swoop in and take 30% of that in capital gains tax. Well let us say there are some deductible expenses and they end up effectively paying say 20% on the sale price thus ending up with 4p a share.
But NCM do not need to pay anything and may stick with their 70%, in which case Gervaise needs to find a chunk of money for capex.
All these numbers are out there in the public domain so to speak, ballpark calculations. This is my opinion only and I am willing to retract/amend on a reasoned argument.
But if you think those figures are sobering, what happens if the MRE comes along with a not unreasonable 5% grade and mining 1.5mt per annum?
My problem with all this sort of thing is that whenever there has been mass PI hysteria whipped up over a hot stock on Aim it invariably ends badly for those who buy at inflated prices.
Think Rockhopper, GKP, Sound Energy and Sirius Minerals as examples.
No serious institutional buying must be considered a red flag here.
if we have excess cash then a dividend for me before any buybacks thank you.
At least it puts money in your pocket and will attract a certain kind of institutional investor, supporting the sp in that way whereas a buy back is just holding the door open for others to get out at a higher price.
Buyback shares may go into Treasury and remain sitting there like a bowl of sweets at a kids party, before management scoff the lot, so you still end up with the same number of shares.
There are numerous examples of companies whose share prices are much lower than levels that they were previously bought back at.
It seems very unlikely that they would truck resource material which is below the cut off grade of 0.2 g/t all the way to Telfer, 45 kms away.
At that grade it would take 155 tonnes to yield 31 grams of gold so using a ballpark estimate of $5 per tonne for transport costs it would cost $775 per oz! Given that they are only recovering 85% from Telfer that is probably nearer $900.
But NCM will go for the high grade stuff, in fact I reckon the economic cut off point will be over 1 g/t.
Telfer have just reported net mining costs (after deducting credits) of about $36 per tonne in Q1 2020. Adding on $5 transport costs makes $41 per tonne for Haveiron not including toll processing fees, or costs to build out the mine
Dividing by the assumed price of gold of $1,500 shows that they need to get .027 ozs of gold out of each tonne of resource just to break even.
Multiplying that by 31.1 to convert to grams shows that they need a g/t grade of 0.85 g/t. Allowing for a recovery rate of 85% gives 1 g/t.
As before all calculations are ballpark and my best guesstimates only.
CB – I am not including the cover etc in the calculations, I am actually excluding it!
Max – I have no qualifications or background in mining. No doubt these calculations are immensely complex in the mining industry but a rough sense check has its place in bulletin board debate among PIs and my guess is that I will not be a million miles out.
My calculations are simply based on taking a weighted average of the reported assay results from the 100 lengths of significant intercepts, taking care not to double count. Anyone can do this for themselves.
Schlemiel, targeting the high grades first makes perfect sense to me too, could not agree more.
This will probably be a brilliant result for NCM as they will have enough high grade resource to keep Telfer going for ten years with toll processing fees to boot.
Anyway I understand that they will divide the entire area up into blocks, estimate average grades for each block and calculate the gold in place that way.
Then they might just target the high grade blocks that can be economically mined and trucked to Telfer.
Which would leave a lot of gold in the ground because it cannot be economically extracted, as the economic cut off point will surely have to be a lot higher than 0.2 g/t.
But if 70% of the 162m tones of potential resource does not meet the cut off point, this leaves us with 48.6m tonnes of viable resource material which so far seems to have weighted average grades of 2.40 g/t.
This yields 3.375m ozs of gold using a recovery rate of 90%, or 1m ozs net to GGP.
Ok that is a very rough ballpark estimate and could very well be wrong too, but would like to see a reasoned argument against it.
And of course this mine might yet turn out to be much bigger than currently thought, but that is not known at this stage.
There have been some significant intercepts with tremendous grades reported but the weighted average grade over all the drill lengths that penetrated the resource area is somewhat less fantastic than you might assume.
Calculating the metres of each significant intercept by the g/t reported to get gram-metres and adding them all up.
So taking the data from the 50 drills with 99 intercepts reported, and allowing for the angled nature of the drilling, each drill has had to penetrate the cover of 428m plus on average allowing (let’s say) another 200m before getting to the payzone, because of coming at it from an angle.
So over 31K metres of drilling went through a dead zone and an estimated 25K metres through the target resource area
Of this 25K we had 7.6K metres of significant intercepts reported leaving 17.5K metres deemed insignificant and not reported – 70%
If you just look at the significant intercepts alone the weighted average grade reported so far is 2.4 g/t – including the copper.
But allowing for the 17.5K metres of drilling that failed to make the cutoff point brings down the weighted average over the entire resource area (165m tonnes?) to 0.74 g/t
At least these are what my workings are telling me.
To come back to you on your query, using the Q1 report from Telfer as a sense check I don’t see anything wrong with your method, but you are using a Cu grade of 0.6% which seems pretty high doesn't it?
Telfer were getting 0.17% copper in Q1.
Coming back to the theory that the better grades at Haveiron will bring down the AISC at Telfer,
A very good point because there have been several interceptions with very good grades reported
But surely it is the overall average grade that counts, unless NCM can locate and selectively mine the higher grade material, but then the volume of resource material - and probably gold ozs - comes down.
So a key question is what is the eventual average grade from Telfer likely to be?
With over 50 drills there is a lot of data to work with.
Taking the length-weight of the significant intercepts from the 52 reported drills multiplied by the g/t, and adding on the Au equivalent for the copper gives an average of 2.41 g/t for all the reported significant intersections to date – 7,541 metres of them.
But that is the good stuff, what about the sections they did not report? If you exclude the 420m of cover per drill, it still leaves 26,850 metres of drilling which data has not been reported.
NCM used a cut off point below which they do not report the grades. On page 17 of the exploration report (under drill hole data) they say that they count anything above 0.2g/t provided there is at least 20m of it.
That seems to imply that the unreported sections from these drills can contain at maximum on average 0.2 g/t of gold – because otherwise they would have reported it.
Then we have 7,541 metres X an average of 2.41 g/t and 26,850 metres X an average of 0.2 g/t.
That works out at about 0.685 g/t on average overall
Not a million miles away from what Telfer are processing at the moment?
Can anyone find a flaw in this because I cannot?
Ok maybe they will hit some super grades or Haveiron will turn out to be another Witwatersrand but it seems a long shot.
Corradus, I cannot say how the chap at investment journey did his workings but what I am finding is that using the rule of thumb multiplier of 1.38 to go from % Copper to AU equivalent in grams does not seem to work any more.
I put this down to the spectacular rise in the gold price over the last 18 months, relative to copper so it takes more copper to equal an equivalent amount in gold.
A ratio of 1:1 seems to fit better these days taking gold at $1600/oz and copper at about $5,061 / tonne but obviously this changes every day
So a grade of 1% copper on a 1,000 tonne resource gives 10 tonnes of copper, value approximately $50,610
The Au equivalent of 1g/t of gold, gives 1000 grams, divide by 31.1 gives 32ozs gold, at $1600/oz value $51,557
At least that is how I see it.
The NCM operational report for Q1 is packed with information, these guys are a class act.
From what I am reading on page 12 of the report the AISC for Telfer for the 9 months to March 2020 was US$1,308 after deducting by product credits of $243.
So if we include the gold equivalent of the copper in estimates for Haveiron production we have to add back the credits in which case the Telfer AISC would have been $1551 per oz as a rough guide.
For Haverion then add on transport costs, plus whatever mark-up NCM will charge GGP for the use of Telfer assets.
Surely an AISC of $1600+ per oz is very likely.
Before any economies of scale but not including initial build out costs for the mine.