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4/5/18

I am having a serious issue with Sandstorm Gold (SAND) (SSL.to) this week

How can a 43-101 compliant resource like this one for Hod Maden...


...as revealed on Friday evening by 30% owner Sandstorm Gold (SAND) (SSL.to), be all-but forgotten by the market in just three days? Seriously, what's a miner gotta do these days, announce they've found a lost cache of a hundred thousand Bitcoin on one of its old hard-drives?


And not just forgotten and back to neutral, SAND is actually negative for the week. This is gnat's memory-span stuff, I mean look at that table it's 12g AuEq at a two gram cut-off! Or in the words used to describe the numbers in The IKN Weekly on Sunday...

Using metals prices of U$1,250/oz gold and U$3.00/lb copper, the 43-101 ignores other credit metals (assumes them non-payable) and gets us to a global M+I resource of 11.545m tonnes at 12.1 g/t AuEq and if you do the math, that’s just shy of 4.5m oz AuEq.



This is certain to form the basis of the upcoming Pre-Feasibility Study (no inferred allowed in a PFS) and with a 12.1g average using a 2g/t gold cut-off, even though we don’t know what the economic study is going to give us we do know that SAND (30%) and its partner, the Turkish mining company Lidya Madencilik (70%) is going to have one humdinger of an underground mine project on their hands. I’m going to wait with the rest of you for the PFS to come out before committing but for sure I’ve been playing with numbers so here are a couple of simple lines to get us in the mood:



  • On just this M+I resource (not forgetting there is masses of exploration upside potential at Hot Maden, a 2,500 tonne per day underground mine operation would have enough rock for 13 years of operation.


  • At 12.1g/t AuEq and 85% recoveries, that would represent production of nearly 300,000 oz AuEq per year.


  • As the 43-101 technical report gives us a 2g/t AuEq cut off and U$1,300/oz gold price, we can assume they’re working on a per-tonne cut-off of U$83.60. As I like rounding up and being conservative, let’s call that a $90/tonne cost cut-off.


  • 300,000 oz gold at U$1,300/oz is U$390m.


  • $90/tonne X 360 days X 2,500 tonnes per day is a cost of U$81m


  • Now that’s what I call margin.


Of course there are a whole bunch of other things to take into account and gross margin is not bottom line profits. But needless to say, I’m looking forward to the PFS now.