The elephant in the room that there appears to be little commentary on is the grade of ore.
The quarterly contains as usual the resource grades these include Golden Wings at 1.6 g/t Sly Fox at 1.5 g/t and the bulk of the ore from Gilbeys at 1.3g/t.
One would expect/hope that the reserve grade would be a little higher then or at least match the resource.
The head grade for July to Dec averaged 0.82 g/t. And in Jan GCY state that it is sitting on 0.58 g/t.
This is a massive problem talking something like 50% less gold then as stated in resource. So is it a mining problem that is adding waste to the ore or was the grade incorrectly estimated in the original drilling, or both?
We are at the beginning of what was an original seven year mine life that means mining near the surface not 100m down or 200m down they are near the surface. Near the surface is where you have the most drilling and the lowest mining costs. Yet there is this massive discrepancy between stated resource grades and mill feed. So how as you go deeper where there is less ore definition drilling and higher mining costs are things supposed to improve?
Sadly we are told that the two highest grade ore sources will shortly be complete that is Sly Fox and Golden Wings. So that won't help.
And the mine can't keep up with the mill.
The fact that the mine can't keep up with the mill is no surprise given that GCY chose to build a plant that has twice the throughput capacity of the original Dalgaranga processing plant.
These guys have a mine that to date has not delivered the grade, a mill that is arguably too big, and increasing debt. Now they have debt to repay to their mining contractor. Why would any gold mining company want to be in debt to their mining contractor? I perceive a massive conflict of interest here. NRW get paid to be the miner that is their earnings come from moving dirt as fast and efficiently as they can. Whereas GCY want to minimise their mining costs and maximise gold production.
Unless they can get the head grade above 1 g/t they will disappear in a sea of debt.
