ibejack

Eldorado Gold: A Cost-Effective Way to Move into Gold

What you are trying to say is that the numbers are non-43-101 compliant. That is true. But all the drill results are verified by an independent 3rd party. In Goro's case it's ALchemix (Canada) who has contracts with plenty of well known miners. The Reids use a polgonal estimate which is a method employed by many of the big modern companies.

It's also been validated by Tocqueville's multi-million dollar invest in GORO as well as Hochschild Mining ltd. Both companies had their own team of geologists look at the numbers and property and subsequently bought big. I think Tocqueville owns 13% of GORO and Hochschild owns 24%. Not bad validation for a company that you implied as having SEC problems lol. Numerous other funds hold large stakes in the company as well but I have no proof that they had their geologists on site and checked the numbers.

If a start up mining company wants to go the 43-101 route then it's going to cost you about 8 years and 100 million shares and plenty of warrents to our banking friends :). Most start ups are forced to go this route because it's impossible to raise the money. The Reids however are very well known in mining circles as they operated US GOLD for some 30 years and are known in the mining circles. They were able to raise the money privately. So they will drill up the resource as they go and they are quite confident in the deposit. I believe the immense scope of the project is allready known but legally we cannot speculate until it's all proven. I believe it's going to be the most impressive junior miner seen in the last 10-15 years. Their last drill return was 904 grams gold over 2.5 meters. More of that and GORO will not be GORO much longer..a likely buyout.

So in conclusion I'll take Tocqueville, Hochschild, and the Reids 30 plus years on the mining scene over some blogger...your opinion may vary

Eldorado Gold: A Cost-Effective Way to Move into Gold

If you guys are obsessed with cash cost you check out Gold Resource Corp. This is what extreme high grade gold/silver can do for you. Will be in production this quarter with projected cash cost at 0 dollars, and in years 2 and 3 at negative. Here's how the do it:

Here's the latest metal prices:

Gold = $1,048
Silver = $17.67
Copper = $2.82
Lead = $1.01
Zinc = $0.92 (up sharply just recently)

3 meter mining width metal content for La Arista and Baja veins:

Gold = 6.45g/tonne
Silver = 578g/tonne
Copper = 0.54% = 11.90 lbs/tonne
Lead = 1.79% = 39.45 lbs/tonne
Zinc = 6.67% = 147.01 lbs/tonne

Amount of recoverable metal:

Gold = 6.45g X 0.94 = 6.06g/tonne
Silver = 578g X 0.90 = 520g/tonne
Copper = 11.90 lbs X 0.90 = 10.71 lbs.
Lead = 39.45 lbs X 0.90 = 35.50 lbs.
Zinc = 147.01 lbs. X 0.90 = 132.31 lbs.

Dollar value per tonne of recoverable metal at today's spot price:

Gold = 6.06 / 31.1 X $1,048 = $204.20
Silver = 520 / 31.1 X $17.67 = $295.45
Copper = 10.71 X $2.82 = $30.20
lead = 35.50 X $1.01 = $35.86
Zinc = 132.31 X $0.92 = $121.73

Total value of recoverable metal = $687.44 / tonne

Percent of total represented by precious metals = 72.7%

Notice that we have $121.73 of recoverable value in zinc per tonne. Since this metal is in the form of a concentrate, the refiner is likely to pay GRC about 90% of spot price, so let's reduce this further by 10%. So, on average, we wind up with $121.73 X 0.90 = $109.56 worth of zinc for every tonne of La Arista ore that's processed.

Jason, in the latest company presentation, states that it will cost GRC $98 to mine and mill a tonne of underground ore (this seems high to me, but I'll use it). Notice that $98 is well less than the $109.56 that GRC is going to receive for the zinc alone! This means that GRC will produce not only the gold and silver at zero cost, but the copper and lead too! I calculate this will add about $26.7 million a year in profit on just the base metals alone.

The total value of the recoverable precious metal content would be $204.20 + $295.45 = $499.65 per tonne of La Arista ore.

Total annual value of precious metal content = $499.65 X 1,150t/d X 328 = $188,467,980 (this is pure profit because the zinc has paid the cost of processing)

Adding in the profit on the base metals, the total would be $188,467,980 + $26,700,000 = $215,167,980

Assuming 50 million shares (fully diluted) that's about $4.30 per share in free cash flow.

Earnings would be about 2/3 of $4.30 = $2.87 per share.

Dividend would be 1/3 of $4.30 = $1.43 per share

Assuming a PE ratio of 20 (I actually think 20 is conservative) the share price would be $2.87 X 20 = $57 a share