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Gold/Mining/Energy : Gold and Silver Juniors, Mid-tiers and Producers

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From: LoneClone8/12/2022 1:44:43 PM
4 Recommendations

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Anchan
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Terry Maloney

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SSL, KRR, costs of gold production

Sanstorm Gold Royalties aka SSL released their usual bare bones preliminary results last month. Now we get more details, to wit, Au sales of 19276 oz at a cash cost of $275/oz. This resulted in a 'cash operating margin' of $1595/oz, leading to record revenue of $36M and net income of $39.7M, so their business model is performing well in the current environment.

But it will take a while to evaluate all the transformative transactions announced during this quarter, including the conversion of their Hot Maden interest into streams and shares in newly formed Horizon Copper; the takeover of Nomad Royalties; the purchase of the Basecore royalties; and the creation of Sandbox Royalties Meanwhile, they maintained 2002 guidance of 80-85 oz AuEq, rising to 155k oz AuEq in 2025, assuming all the transactions complete.

Message 33959404

Karora Resources aka KRR released two PRs. First up are the Q2 financial results. We already knew Q2 marked a KRR production record of 30652 oz Au from their Australian operations, but now we learn that they also mined record tonnages and decreased costs by 15%. In spite of this, due to the increased costs of labour and materials plus the money they are spending on development, they recorded a small loss in the quarter. In spite of these expenditures, their cash stash increased to $114M thanks to a PP. As the development is completed, particularly the second decline at Beta Hunt, and production increases over the next few quarters, they will return to profit unless the PoG craters.

Message 33959439

The second PR released by KRR concerned the release of a PEA for the ramp up of nickel production at Beta Hunt, which I am mentioning here because they plan to treat the nickel as a byproduct allowing them to lower the costs of the their gold production. The company has recently discovered much more extensive nickel mineralization, and based on this the PEA forecasts 8 years of production starting next year totaling 9435t of Ni, a considerable increase from the 450-550t expected to be produced this year. Capex is projected to be low, less than $20M and the IRR, albeit they only report it pre-tax, is over 100%.

Given that there is a very strong probability that ongoing exploration will find more nickel, and that producing the nickel will be low cost, nickel production promises to make a substantial contribution to the overall economics of Beta Hunt.

Message 33959473

I also read interesting report from BMO arguing that cost concerns are currently overinflated in the gold industry. They cite three main reasons: cost inflation is currently peaking and will ease from here on; $USD strength is ameliorating its effects; and future margin compression from cost increases is already being priced in.

They make a good argument; I sure hope they are right.
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