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Lumina Gold: A Look At The Updated Preliminary Economic Assessment

Jun. 11, 2020 1:47 AM ETLumina Gold Corp. (LMGDF), LUM:CA11 Comments
Taylor Dart profile picture
Taylor Dart


  • Lumina Gold released its Preliminary Economic Assessment this week for its Cangrejos Project, and the project envisions a large open-pit mine with 360,000 ounces of gold production per year.
  • While the updated PEA has added to the mine life substantially from the 2018 PEA, the initial capex has also increased significantly.
  • Clearly, Lumina's Cangrejos Project is one of the largest undeveloped gold projects in the world following the recent PEA, but projects of this size often struggle to find financing.
  • Based on the recent study, I see much better opportunities elsewhere in the sector, as I have more faith in projects that require less than $500 million to move into production.

It's been a busy start to the year for the development-stage gold miners as several names rush to get out economic studies to showcase their projects at the best possible metals prices. Lumina Gold (OTCQX:LMGDF) is the most recent name to release an economic study, and the updated Preliminary Economic Assessment has added to the mine life at Cangrejos and envisions an annual gold production profile of over 350,000 ounces. However, while the higher After-Tax NPV (5%) and increased mine life are impressive, this is offset by significantly higher upfront costs to put Cangrejos into production. Based on the higher initial capital expenditures that will make it more challenging to get Cangrejos into production, I don't see this Preliminary Economic Assessment as a considerable improvement. Therefore, while I see the stock as a speculative buy below C$0.63, I believe there are better opportunities out there in the gold-developer space.

(Source: Company Website)

Lumina Gold released an updated Preliminary Economic Assessment [PEA] this week for its Cangrejos Project in Ecuador, with significant improvements in key areas of the project. These enhancements were thanks to a higher gold (GLD) price, and a much larger resource, with 11.4 million ounces of gold expected to be mined vs. the 7.5 million ounce estimate in the June 2018 PEA. The updated PEA envisions a large-scale open-pit operation with a 25-year mine life, average annual gold-equivalent production of 366,000 ounces, and all-in sustaining costs [AISC] of $772/oz. While these are impressive figures, the elephant in the room is the upfront cost to get Cangrejos into production, with this figure jumping by 20% to US$1.0 billion, making it one of the most expensive projects to build in the world. Let's take a closer look at the updated PEA below:

(Source: Company News Release)

As we can see

This article was written by

Taylor Dart profile picture
"A bull market is when you check your stocks every day to see how much they went up. A bear market is when you don't bother to look anymore."- John Hammerslough - Disclosure: I am not a financial advisor. All articles are my opinion - they are not suggestions to buy or sell any securities. Perform your own due diligence and consult a financial professional before trading or investing.

Analyst’s Disclosure: I am/we are long GLD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: Taylor Dart is not a Registered Investment Advisor or Financial Planner. This writing is for informational purposes only. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Taylor Dart expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

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