With the higher gold price, many gold companies have been recalculating their reserves to reflect a higher gold price. A substantial number of those companies are now using US$1,000, including:
1) Etruscan Resources - Agbaou Project
2) B2Gold - Gramalote Project
3) Alexis Minerals - Lac Herbin Mine, located in the Val d'Or area, not far from our Lamaque Complex. Actually, they have used a US$1,050 gold price for Lac Herbin.
Etruscan recently updated their feasibility study for Agbaou. They increased the u/g price from US$850 to US$1,000, representing an 18% increase. They increase the pit price from US$750 to US$1,000, representing a 33% increase. It turned out that the combined (u/g and pit) increase in reserve ounces was 29%.
Century Mining's reserves are currently based on an US$800 gold price. Company wide (Lamaque and San Jan), the most recent 43-101 reports show Century with 1,321,287 reserve ounces.
US$800 vs US$900 = increase of 13%
US$800 vs US$1,000 = increase of 25%
The increase in gold price may not necessarily translate to the same increase in reserve ounces. It's very complex and there are many factors I'm sure. However, if it happens to turn out to be similar (like it did in the Etruscan case) then our updated reserve ounces might look something like this:
Using US$800 = 1,321,287 (currently)
Using US$900 = 1,486,448 (increase of 165,161 reserve ounces)
Using US$1,000 = 1,651,609 (increase of 330,322 reserve ounces)
As we know, everything for Century is severely discounted. However, in a non-discounted world the increase of 165,161 reserve ounces (@ US$100 per oz) would be worth C$17,100,000 and the 330,322 would be worth C$34,200,000.
Century should spend a tiny bit of that Lamaque restart cash to update the reserves to a higher gold price. It will help to make the project more appealing for financing purposes. It might also help to increase production, even in the first year. If Century is still going with the prepaid gold sales via the bank then I don't think they can use US$1,000 for the reserves. Banks are always more conservative and would likely not want to see that. However, Century should still be able to use a gold price anywhere between US$800 and US$1,000.
As a side note, (we now know for sure that) they are drilling the Bedard Dyke. If they drill it aggressively enough then we could be adding some Bedard Dyke ounces directly into reserves as well. There are 3 large high grade zones are various levels of the Bedard Dyke, although it's unclear if those zones will be drilled during the first phase of drilling.
3 comments:
Juha,
I gave 3 reasons (in comment section of last post) why the recently announced bridge equity financing it unlikely with Finskiy and Scola (especially being FT shares and being via Union). However, the deal is not closed yet and the close date is not for another 5 days. Anything is possible. This is a US$1,060 gold price environment. You made some excellent points in the post below (we should definitely keep them on the table as being possible):
"I suspect the russian guys have something to do with this 5,25M pp, because they still want more shares, because of the failure with Etruscan. So i would doubt they will go down from 100M shares+50M warrants, if that's the case. But that's just what i feel, it could be totally wrong ofcourse."
Nothing is set in stone until it is closed off. I like your thinking. If Finskiy and Scola want to maximize their equity position here with Century then they will want to find a way to get involved in the bridge equity also (it's a lost opportunity for them not to get involved). I still don't think it was them being considered for flow-through equity financing announced this past week. However, no reason why they can't get involved in the bridge equity financing before it closes in 5 days.
I think your ideas are excellent and we should keep them on the table. They make a lot of sense.
I have one additional thought.
I think the bridge financing announcement might be suggesting that the company is still focused on closing off the prepaid gold financing (with the bank) - at least at the time of the announcement (things can always change). I think this is what a portion of the bridge cash will be used for. In my view, if they were no longer dealing with the bank then they wouldn't have been a need for bridge financing. The C$1.1M FT financing (closed previously) would have been sufficient for basic drilling and Vulcan modeling work for another couple/few weeks until the major project financings are closed off.
Banks generally prefer to see clean balance sheets (especially from junior companies) before closing off project financings. Century is likely required to eliminate all of the smaller debts which have liens against company assets (this was likely the case with the Fortis financing, and would likely be the same with this new bank).
For example, PK's convertible debenture (eliminated a couple of months back) was one of the small debts, but there are still a few others. I think Century's goal is to close off the major equity financing simultaneously with the bank financing. They can't do that without accessing bridge financing sufficiently in advance (to eliminate the small debts).
They don't have to pay down the $10M net AP (net of payables and receivables) in advance because payables are unsecured liabilities, with no liens (they can do the pay down after the major financing closes). Also, the C$16.1M IQ debt will continue even after the major financings close so no cash is required for that, either in advance or afterwards (though, gaining agreement by IQ and getting legal paperwork done will have to be in advance - to switch the security as shared between IQ and the bank).
One could probably hypothesize a bit further:
Let's assume that Century is still focused on closing off the prepaid gold sales deal, as the bridge financing announcement is suggesting.
As stated previously also, the prepaid financing deal cannot be completed without the C$20M equity injection (it's a requirement of the prepaid financing deal, as stated by Peggy in the last conference call)
With the bridge equity financing announcement this week, it appears as if a party is interested in taking down at least C$5.25M of the remaining C$18.9M (be it Finskiy and Scola, a new party, or a combo of both).
It would be hard to imagine someone taking down C$5.25M of the financing (I can imagine a smaller amount, but not C$5.25M) without feeling good about the possibilities of Lamaque reopening at some point down the road, be it near-term or somewhat near-term. The current plans for reopening includes both the close off of remaining equity subscription and close off of the prepaid gold sales facility.
I guess we should have a better idea in 5 days, especially if the bridge equity deal closes.
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