Good Update, Wish Capital Costs Could Stay Lower

silverax

The updated PEA for Magino came in with a significant increase in annual gold production, slightly lower operating cost and a substantial escalation of capital cost. Therefore a higher NPV of $413 million (at 7.5% pre-tax NPV and $1000 gold) compared to the April version of $289 million. Capital costs came back substantially higher due to inclusion of more accurate figures for infrastructure and “indirect” costs (we’ll have to see what those are) that added about $100 million to increase the initial capital from $240 million (a very reasonable number for an almost 200,000 oz per annum production profile) to about $400 million. The increase is larger than we’d like — and could go higher still during feasibility — and is the primary reason for having a bigger production profile. On the other hand, the production is a bit front-loaded with 350,000 ounces in the first year and that makes a big impact — a payback in under 2 years (using $1200 base gold price).

Other than the potential fast payback, one of the more attractive features is the operating cost at under $500, which is actually lower than the prior PEA. As we’ve said before, Prodigy should probably be a $2 stock on the basis of Magino alone once the environmental and permitting hurdles have been surmounted (assuming no significant share dilution). Given the project location (south-central Ontario) and attractiveness of the production profile, we would expect the project to be of interest to mid-tier gold producers such as Osisko, Aurizon, Agnico, etc. and perhaps even a major or two. Unfortunately some of the up-and-comers are struggling themselves (Agnico, Lake Shore Gold, San Gold) and so may not be in the best position to take on new projects but this one could be just compelling enough.

http://www.tfmetalsreport.com/forum/672/eric-os-favorite-gold-miners?page=35