Originally posted by Phoenix11
Turnaround into a rising gold price!!!We can see that the company still has issues and quiet frankly once again it looks like staff shortages and not enough equipment on site point to NRW again!! It's no wonder they happy to extend credit for the next 12 months they just haven't delivered.Yes the geological assumptions made by the previous MD and team have proved to be overly optimistic and now current management trying to make the best fist of it.The bigger picture is all the capex has been spent and it seems the Plant and Mill are fantastic and can run well above design capacity. The mining has been the issue and not getting fresh ore to the plant and having to supplement tonnage with lower grade stock piles (70-30) in January. Once again new equipment is being delivered to site(new 100t excuvator to free up the 250t machine to get onto the major waste movements) and staffing levels back up to full strength for February.Financing is not an issue as its currently funded and operationally small profit or loss in last quarter.Where to from here.They have hired ANOTHER senior person from Evolution Mining ( Richard Hay) which I think is very positive as they will have seen all sorts of operations in the EVN portfolio, they wont have joined GCY unless they see the HUGE UPSIDE in getting the operations right.They see an operation that in 12 months time will have solved the current issues, they will be into the main part of the ore body and costs will start to fall as stripping ration falls dramatically. Costs should settle at about $1100. So at todays Gold price of approx A$ 1820. They should be starting to make $70m on a 2020 forecast, even if that is to high they will be still be making MORE than the Current Market Cap!!! Brokers estimates are $25-35m net profit , cashflow of $45-60m. 2020 so currently trading on 2x and 1.3 x cashflowDon’t think they industry players will not be looking!!! Why wouldn’t they, come in with cheap bid and then take the glory of the cash generation.!! Think any potential new CEO will be just waiting for the perfect moment to get onboard and get this thing motoring. What an opportunity for somebody.With the major shareholders Colonial and LIM as well as managements friends still supportive they should be able to see off the first bid.What other 100 000 producer has a market cap this low? think they all about 5x higher or more!!PATIENCE IS A VIRTUE
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.
