Thank-you Production05 for your continuing excellent contributions to the Blog. It is very much appreciated by me and I'm sure all readers of the blog.
I don't know how Century can say they expect to average 1200 - 1400 tpd in 2010, but only peak at 2,000 tpd in 2011. If we start in March at 200 tpd and finish in December at 2,000 tpd then that is an average of 1,100 tpd for the March to December period - assuming a steady rate of increase. Over the whole year, it is less than 1,000 tpd average.
If we exit 2010 at a production rate of 2,000 tpd, that is equivalent to over 100,000 oz/yr from Lamaque alone. San Juan should be at an annual rate of 20,000 oz/yr by then as well giving an annual production rate of 120,000 oz/yr by year-end. I don't see how we can still be capitalizing costs for the full year if commercial production is defined as 60% of rated capacity.
At a production rate of 120,000 oz/yr and a cash cost of say $550/oz, we would be generating annual cash flows (at $1100 gold) of $66,000,000. A 10x multiple would equate to a share price of about $1.65. 9 months is not long to wait for a quadrupling of the current share price if Century "walks the talk". A key to shorter term price appreciation may be the Analysts' Tour in May. I don't think pouring the first gold bar will be all that significant. We poured lots of gold bars from the Sigma Pit. The key for institutions will be cash flow and earnings.
I've added a new link to the right entitled "2010 Trading Summary" and provided a direct link to the April Corporate Presentation.
2 comments:
Good post Carib and it supports my view that this company is setting up very realistic goals(if not under promising) so that they can beat those expectations (over deliver) and re-establish their credibility with investors-especially the institutions.
All we have to do is keep watching them to make sure they deliver, and then watch the market find out about our great little company!
I think the 2,000 tpd per day is the max level for the current mine plan. It is very detailed. This represents a peak annual production of 100,000 - 110,000. Century`s longer term thinking is (although not a mine plan as yet) that they will have the opportunity to create a new mine plan once the shafts are refurished in about 3 or 4 years from now. Century believes that the new mine plan could allow for 150,000 ounces of annual production at that time (with ore transportation via the shafts).
I think Century is showing a peak of 2,000 tpd because they are following the details for the current mine plan.
Century will soon be launching a new underground exploration program at Lamaque. There is a good chance that this new program will move a lot of ounces (M&I and Inferred) into the P&P Reserve category. If tremendous success is realized early with the exploration efforts then we cannot rule out the possibility of Century building the new mine plan earlier than expected - say a year from now instead of 4 years from now.
Century will likely need to prove up some of the 1.7M Cross-over ounces and some of the .4M North Wall ounces in this upcoming drill program. This may provide them the flexibility to build the new mine plan without relying on the shafts. Though, they will still need to ensure that the declines are not too crowded with traffic. I think it might work if they have good production balance from all 3 declines.
The new mine plan will also need to ensure they can handle the tailing requirements.
Whenever the new mine plan is officially built, I think they will target the 150,000 ounce annual production level. However, as a side note, the historical peak performance level in the past was 200,000 ounces of annual production for Sigma-Lamaque (when Teck operated one side and Placer Dome operated the other side).
Just as a side note, I remember reading in one of the reports (either the Lamaque DD report or the 43-101 report) that the Lamaque facility maintains the flexibility to increase the high grade milling/crushing capabilities to beyond the 3,000 tpd limit (back to 4,000 or maybe even the old 5,000 level). Of course, we are a long ways from anything like that, but at least we also know that Lamaque is a long ways from its ceiling.
This type of milling flexibility is nice to have being that we are located in the heart of the Val dÒr campaign. Lamaque is the flagship mine in the camp. However, there is still room to take on joint venture partners. If Kalahari (to the south) wants to do a joint venture with us, where we earn a 51% controlling interest (and operating rights) on their property (via an earn in approach) by spending X number of exploration dollars over X number of years, to earn our 51% stake. In return, they don`t have to continue diluting their shares and they also gain the comfort of knowing that their ore will be processed next door (no worries to build their own expensive processing facility). They can just sit back, do nothing, and watch their share price increase as we advance the project with the CF from Lamaque.
Their is even milling room to take on Harricana/Copper Reef, with their advanced exploration property to the northwest. If they so choose, they could cut the exact joint venture deal (as I described for Kalahari) with us. It gives us the earn in opportunity for the 51% controlling stake and they get all of the benefits highlighted above.
Carib, not sure, but I think the link to the 2010 trade info might be broken. At least it doesn`t seem to work with me.
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