redback...reserve ann due soon.

  1. 1,816 Posts.
    The reserve ann and the BFS finding on the financials of a stand alone operation at Chirano will be announced soon.

    Preliminary estimates uptill now have placed the capital outlay of processing 2mtpa of ore on a stand alone basis at US$36M.

    RSG have calculated Chirano's NPV pre capital costs(discount rate 8%, est US$300/oz gold, US$200 cash cost per oz, 140,000 oz production p.a, 7.5 project life) at US$73M, and post capital costs at approx US$35M (my estimate).

    The key valriables in their calculations are the discount rate used (too low, imho) and the estimated POG over the project period.

    If we apply a US$400/oz gold price for the duration of the project, we get a NPV pre capital costs of approx US$145M, and US$105M post capital costs.

    (Notice how Chirano's est. high production costs at US$200 lead to very high leverage to the price of gold.)

    RBK currently have approx 100M shares outstanding at 36c a piece...and some options as them an approx market cap of A$40M, or approx US$23M.

    Assuming my assumption are validated by the BFS (soon to be released), we're staring at significant future upside in RBK's share price.


    - My back of the envelope calculations incorporate the discount rate used in RSG's model ie. an 8% discount rate. Using a more appropriate rate of say 10 or 11% would reduce the DCF valuation by approx 20%.

    - I have assumed a stand alone operation. The numbers are much more favourable if RBK uses Resolute's near by Obotan or Ashanti's near by Bibiani facilities.

    - Other key assumptions such as the proven reserves, cost of production , etc are yet to be confirmed via the BFS (soon to be released)

    ....RBK's share price has risen in recent days in expectations of a favourable contitions in the release of the BFS findings.
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