5% discount rate is the norm for gold miners here and overseas. Don't know why when the base metal guys use 8 or 10% but it is a historical norm. Maybe the financial aspect of gold being 'money' rather than 'currency' and that it has always been seen as a hedge against inflation allowed a lower discount rate to be accepted?
Don't know anything about a lot of drill results pending. Unless drilling is showing the M1Sth high grade shoot has been faulted out or looks to be ending, or drilling has hit a new discovery, then any drilling at this stage is immaterial to the value proposition. A lot of drilling over 7 years has brought the resource to the point of a substantial reserve, DFS and NPV with upside from depths extensions regardless of any other exploration upside outside the two main pits. This is the time for management to focus on building the mine on time, on budget then ramping up the plant to nameplate capacity. Anybody hanging around for exploration drilling to drive the share price higher is probably here for the wrong reason. The reality is a relatively boring 2 year build and plant ramp up (and thus many would say a reason to sell and come back later a cheaper price when either something has gone wrong or punters are getting excited about profitable gold bars spewing forth from the mine).
Not sure what RH said to mislead, I am a relative newcomer. Surely the mine has been financed and the build is going ahead... that looks like "financiers throwing funds at the project" to me. What else did you expect? That banks would lend 95% debt to equity like the good old days buying 4x2 in Parramatta? RH always had to make one last, large capital raise for the equity component of the financing deal, which was always going to be discounted, which is why I waited until after this raise was out of the way. I could have missed the opportunity though if a takeover happened or new deposit was discovered before the final cap raise and you'd be laughing and I'd be playing elsewhere. Wasn't to be.
Sorry, suggestions this is being hyped beyond it's true value just doesn't stand up to even the tin foil hat brigades paranoid fears. This is a gold mine, not a new fangled lithuim mine, dodgy uranium mine or bitcoin mine. The DFS looks pretty straight forward to me: good metalurgy, simple CIP plant like they have used since the early 1980's, underground operation could be simpler orebody but no deal breaker, DFS should locked in firm prices on the EPC build contract. This gold mine looks a pretty simple deposit in traditional greenstone belt geology, the DFS numbers could have been cooked up but unlikely as the engineers who provide the DFS inputs are legally obliged to support the numbers provided or get sued when it turns out they were wrong without good reason. One of the reasons a DFS used to be called a BFS (bankable feasibility study) was because banks would not lend money to finance a mine without certainty the mine would get finished on budget and then work properly to repay the loan.
I'm prepared to believe the banks who stumped up $200M of risk debt looked over the DFS and were happy it was kosher. No evidence to the contrary what so ever.
Share prices in junior resource stocks go for wild rides, often both above and below fair value. The reasons are many, too many to list, and rarely is it anything to to with the management. Please take it from me that most resource junior managing directors are always complaining that their shares are under valued, manipulated by sophisticates for that next cheaper raising, good news is sold into and share price traction seems impossible to get. It is a frustrating business, and the only thing more frustrating for an MD than doing good value adding work, ticking the boxes but seeing the share price go backwards anyway is dealing with grizzling shareholders who think they are owed a price guarantee.
Not having a dig at you personally, just been around west perth and the resource game long enough to know how things go. Managing and investing in junior resources is a tough business, hard to make money and as someone posted today usually takes ball of steel and a good bit of luck. My advice, the simple explanation is usually correct. Burkina Faso has increased it's discount rate due to ongoing or increasing violence and it has come at a bad time immediately on top of the last cap raise discount. People want out and there is usually only one way out... sell down on market which pushes the share price down when the stocks liquidity doesn't match the position size being sold down. A falling share price hits nervous and short term traders stops which begets more selling which makes it look like something must really be wrong with the company, which shakes out other weak hands, more selling ... you get picture.
cheers
WAF Price at posting:
21.5¢ Sentiment: Buy Disclosure: Held
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