Nordesmic I sold out of OGC ealier this year with a small profit...

Nordesmic

I sold out of OGC ealier this year with a small profit because after they released their forecast for 2018 with the high capex/exploration spend I realised that I did not really understand this company, and I still do not. I meant to do more analysis but have been slow getting going. Here is a link to what I posted explaining why I was getting out

https://hotcopper.com.au/threads/an....3995503/page-4?post_id=30762175#.WxS8yIq-nQA

I am not concerned about their debt, its easily manageable given cashflow.

It is their ongoing capex spend that has mewondering when they will become a milk cow like the other 350k+ producers (SBM, RRL, EVN, NST). Note that:

1. Lots more capex for Haile and Dipidio into 2019;
2. Capex for Waihi to build new mines - not sure what the cost is - and its only a 100k pa producer - not sure what the ongoing AISC will be in the future
3. Macreas only has ore for another 2, or perhaps 3 years. They have to relocate the plant 70k near their proposed new mine. That will require a lot of govnut approvals and capex. Plus they will not be producing for how long - 1 year, 2 years, maybe 3 years - and lose 200k ounces per annum. It is already a higher cost operation and we have no idea what the AISC and annual production might be when production starts up (assuming it does).

Another factor to consider is that the annual report (I think) indicates that 60% of net revenue (ie net of outlays) from Dipidio will be paid to the Philippines govt (they have not to date, but I believe their tax holidiay is about to end - so what will their AISC be (and ounces produced) once the underground mine is fully operational and they are paying - again I dunno, if you have found the answers to this I would I appreciate letting us know

So they way I see it they will likely produce 300k ounces per year on an ongoing basis from Haile and Waihi, perhaps another gross 150k from Dipidio (less 60% that belongs to the govt, so a net 60k to OGC), and Macreas is a mystery to me post 2020. On that basis OGC's $2b market cap looks a bit pricey. But so does SBM, which is powering ahead.

Like you I am still interested in OGC, but I fear it could be a laggard and only run on hopium when the gold price runs - but I could be wrong as I have been many other times. However I may buy back some shares because I live on hopium.

loki