The Mining Play

MDMN - 2016-03-28 Weekly Discussion


#68

http://www.miningweekly.com/article/exploration-forum-cancelled-in-chile-as-copper-price-fall-bites-2016-03-23


#69

Agreed. I follow AISC and Total Cost calculations on a variety of companies. I have shown example spreadsheets calculating theoretical / potential profits here before. It’s a pretty simple spreadsheet. But it’s also rather speculative since there are so many unknowns.

Here the capital startup and overall operation costs less the trucking and remote mill fees should be much lower than an average AISC cost. On the other hand there will be some type of significant trucking & remote mill processing expense.

I’ve seen your ENAMI “40% tax” remarks. I am no expert on that topic but I would make these remarks:

  1. a flat “40%” doesn’t makes much sense if you compare the work required per oz when you process a truck of 20 g/t material and a truck of highly concentrated material. There has to be a distinction or else it would simply be robbery.

  2. “40%” of sales is not how LDMC calculated their expense when they supposedly investigated trucking ore to ENAMI. So either they were way off base or they had access to another fee structure

  3. ENAMI will probably not be the only choice available, IMO.

So yes this is the wild card that makes calculating profit right now impossible at least for me, and thus I didn’t. But if grades hold up above 20 g/t my suspicion is we’ll be ok. If not, then no one anywhere in Chile could afford to send ore to ENAMI and they would stop the service.


#70

As a side note, and don’t want to “hog” the board with my posts, but in doing some DD, I came across what appears to be a very reputable Chilean Investment Bank, located in Santiago, with substantial experience in mining, M&A, project financing, etc. Looking at their deals, case studies and bio’s, they seem well qualified and in fact received a little less than $20MM non-recourse loan from a Chile Gov’t organization to provide funding for mining operations.

Hindsight is always 20/20, but these guys could of helped MDMN out many moons ago.

And not to open a sore subject, but if a fairness opinion were warranted, they would imminently qualified.

http://www.assetchile.com/


#71

I could be misinterpeting the tax rate, but see the 3rd paragraph under “Mission”

http://www.enami.cl/english-overview/english-overview.html


#72

The end of the month is almost upon on us. Holding my breath till we hear something definitive.

Note: Nice to see about a million on the buy side on L2 with no real sellers visible yet on the sell side.


#73

Good reference. And I agree it raises the question. If you take it just bald face as 40% of the gross revenue of sales of metals, no matter what was done to extract the metals, then why concentrate? (other than the traffic argument I made). Just bring in the lowest grade stuff ENAMI accepts and make them do the work of concentration / extraction.

Even if that’s the case, imo the worst case, 40% of $1250 is $500. So depending on your other costs you could still be at or below industry AISC costs depending on the grade which would govern how many shovel fulls of ore it takes (thus local extraction costs) to dig up an OZ. @ 20 g/t that’s 0.64 Oz per tonne. At a couple of tonnes per cubic yard, it adds up quickly.

My comment would be: If Auryn was not highly convinced that short term blast and carry mining or blast, concentrate, and carry mining is going to be quite profitable they would not be acting as they are. There would be no purpose.

My only real addition to that obvious statement is that in the next 12 to 18 mos they are not going to need $100M or even $50M, or maybe even $25M for exploration and initial capital expense because they are not going to start sophisticated facility construction in April. This is going to be small ball for a while. So there is opportunity for excess profit, at least IMO. I can not come up with a reason that convinces me it is impossible.

After 12 mos or 18 mos there are many more variables so I have little comment except to say it is possible that if we reach the stage of moving from small ball to something bigger like a local leach facility, then capital expenses could eat up most of profits for a year or two and any dividends that do occur early on could actually stop for a while. Ultimately, I am just saying that capital expenses are not always the same. They will come in phases. And when expenses go up in a big way profits will go down in a big way. And I think on that we agree.

Finally, it seems some of this argument comes from an apparent reaction against a current Lesism re. dividends coming already in July. With the above I have no interest in becoming a defender of that rumor.

Over and out


#74

Since they took down the BOD of Auryn from there website I wonder who is still behind this deal and if it has changed, especially since JJ refused to sell his shares. It could be the same people. different people or a combination of the two.


#75

Caren and Fortuna are not likely typical of worldwide production and AISC cost figures.
While there is as yet no PEA from AURYN, which is time consuming and costly, I found the following project with a cutoff grade of only 0.36 g/t quite interesting:

Paramount Gold Nevada’s New Preliminary Economic Assessment For Its Sleeper Gold Project In Nevada Demonstrates A Low Capex, Low Cost Of Production Opportunity
At $1250 gold and $16 silver, Base case PREDICTS: Average ANNUAL gold production of 102,000 ounces; cash costs of $529 per gold equivalent ounce; rapid payback of capital; and irr of 25%
http://www.paramountnevada.com/paramount-gold-nevadas-new-preliminary-economic-assessment-for-its-sleeper-gold-project-in-nevada-demonstrates-a-low-capex-low-cost-of-production-opportunity/


#76

Oh I did not see the CDCH contract., but CDCH could have been done differently since they could have simply purchased all of CDCH-Chile since they are buying all the assets of CDCH-Chile. I guess they could do the same for MDMN-Chile, but I thought MDMN-Chile still had a few other assets besides ADL. that Auryn is not buying.


#77

It is this guy/family and I think one other group of Peruvians. (There is a Major(not Volcan) lurking somewhere in the background waiting to emerge when exploration results warrant.)

http://aurynblog.com/pdac-trip-part-1-maurizio-cordova/

I think the Letts are now only involved via their current share holdings.


#78

That is what I thought!


#79

A million shares just traded (I think a buy) and we barely move. How about one day of honest trading…


#80

Here’s a smaller example than that 30,000 tpd / $175M cap ex:

Not to advertise or promote Hecla, but I like what they are doing with these smaller higher grade opportunities during the down cycle:

They have decided to do another smallish project that is on the claims of one of their main producing mines (Casa Berardi):

They are opening up what they call the EMCP open pit which will cost them $19M this year, $20M over the next 4 years or so for $39M total. It will produce 3,100 tpd of ore per day, 10% of the Paramount example for 5.5 years, or about 30,000 Oz of Au / yr starting in 2017. I think it is around 6 g/t, pretty high for an open pit, but maybe something similar to what could be done at Fortuna and/or the two MDMN claims involving the Merlin veins.


#81

This post was flagged by the community and is temporarily hidden.


#82

This post was flagged by the community and is temporarily hidden.


#83

It is an example of our future. Why would it need to be posted some where else???


#84

Is it “Mondayish” yet, or just another “Next Week”???

orgold


#85

Good find, CHG … and that’s an underground mine that is expected to have a cash cost of only $700 per ounce (after by-product credits). May be applicable example to the LDM vein(s) sometime in the future. The early open pit on the high grade veins could do quite a bit better near term, and eventually (longer term), those larger, lower assay, near surface gold anomalies on the ADL will be profitable after heap leach methods are employed for quite a few years while the porphyry system is defined through extensive drilling. Just looking at the larger picture for AURYN’s exploration rather than how quick I can dump my shares as a few here would apparently like to do. Everyone should have an exit strategy that fits their own personal financial needs and expectations. As for the mention of a future SHM, it will be useless without actual shareholder voting participation through online proxy voting with Broadridge.
(ditto on the two examples mentioned … neither are intended as endorsements or recommendations for the companies mentioned … just examples)


#86

Would love to see those terms we’ve been hearing about…


#88

If a new purchase agreement has been reached already I don’t see why they will have to wait till Mid late April when it’s notarized to release news