$BCEKF : Bear Creek Mining — Independent Economic Analysis

Updated, 9 January 2020

Long-term Price Case$24/oz. Ag | $1.10/lb. Zn | $0.95/lb. Pb
Flagship ProjectCorani
Ownership100%
Mineral Reserves414,814,619 ozs. AgEq
Shares Outstanding103,157,064
Market Cap$212,503,552
Average Annual Production13,901,084 ozs. AgEq
Payable Product250,219,515 ozs. AgEq
LoM18 years
True All-in Costs (TAIC)$16.69/oz.
Gross Revenue$6,005,268,360
Treatment & Refining Charges($540,866,000)
Total Operating Costs ($2,630,922,000)
Operating Income$2,833,480,360
Taxes($429,932,000)
Total Capital Costs ($601,772,000)
Net Income$1,801,776,360
Net Profit Margin30%
Absolute Cost Structure (ACS)70%
True Value$17.47/sh.
Cash Flow Multiple10x
Average Net Annual Cash Flow$101,616,925
Future Market Cap$1,016,169,250
Future Market Cap Growth378%
Target$9.85/sh.

Notes: All Values in U.S. Dollars

$ALO : Alio Gold – Independent Economic Analysis

Updated, 8 January 2020

Long-Term Price Case$1,700/oz.
ProjectFlorida Canyon
Mineral Reserves1 Mozs.
Shares Outstanding84,700,000
Market Cap$65,219,000
Average Annual Production85,000 ozs.*
Recovery71%
LoM9.8 Years
Payable Product734,200 ozs.
True All-in Cost (TAIC) $1,283/oz.
Gross Revenue$1,248,140,000
Royalty($57,414,440)
Refining Charges($3,369,978)
Gross Income$1,187,355,582
Total Operating Costs($662,900,000)
Operating Profit$524,455,582
Income Taxes($136,358,451)
Total Capital Costs($81,900,000)
Net Income$306,197,131
Net Profit Margin25%
Absolute Cost Structure (ACS)75%
Total True Value$3.62/sh.
Cash Flow Multiple5x
Average Net Annual Cash Flow$35,445,000
Future Market Cap$177,225,000
Future Market Cap Growth172%
Target$2.72/sh.

Notes: All Values in U.S. Dollars

Alio Gold, with Mark Backens at the helm, has done more soul-searching than is common for a small producer. As a result, it has rapidly been transformed into an enterprise with few illusions and a no-nonsense mission.

At Fahy Capital Management, we typically invest in the deposit first and management second, but the reverse is true with Alio Gold. With this particular investment, we are primarily investors in Mark Backens, as he has made the hard choices required to bolster shareholder confidence.

From the bold sale of non-core assets and the negotiation of a smart financing package with Sprott to the recent lease agreement with Caterpillar and the swift development of a critical Phase II leach pad, Backens has attacked Florida Canyon with a laudable all-or-nothing attitude. He has spearheaded a right-sized capital spending program that is effecting material results for shareholders. He has transitioned San Francisco to residual leach, while pursuing a potential monetization of the mine. Meanwhile, spending at Ana Paula has been reduced to holding costs until the asset is monetized or a JV** is in place.

In closing, as we are confident that Alio Gold will boost production by up to 50% at Florida Canyon in 2020 and grow mineral inventory through brown field exploration, we have boosted our stake for the 3rd time in 24 months.

*For the time-being, we have included an approximately 12,500 ozs. of residual leach output from San Francisco in our valuation model. This will taper down over time.

**We think a JV is the ideal path forward for Ana Paula, an asset on which we have spent a lot of research hours, as well as one that we believe will prove of value to shareholders in the latter half of the decade.

Powerlifting Update

Over the last 12 months I have dropped 50 lbs. in order to conduct a strength-to-weight ratio ‘experiment’ (read: stay alive). My hope was to drop up to 50 lbs. while boosting the ratio.

215 lbs.165 lbs.
Bench Press1.121.30
Deadlift1.902.21
Squat1.841.88
AVERAGE1.331.78

Strength, interestingly, is now improving at a measurably higher rate in all lifts than was measured at the previous max body weight. More importantly, I am no longer suffering from sleep apnea and dreaming of the afterlife.

Overall Strength-to-Weight Ratio improvement:

34%

Experimental Animal

I also am experimenting with a daily 7g dose of diferuloylmethane, as I am of the opinion that it functions as a BAT proliferator, NF-B inhibitor and myostatin down-regulator, resulting in enhanced hypertrophy.

Q4 Silver Analysis

The long-term silver cycle is now up and we think the 16.60s are an ideal point at which to initiate a long position or add to a preexisting one. In fact, we have received our first hard buy signal since May. Consequently, we have increased our exposure to silver by taking stakes in Aurcana and Fortuna, while doubling our stakes in Avino and Endeavour Silver. Meanwhile, the size of our First Majestic, Bear Creek, and Hecla positions remain unchanged.


Forecast

Silver is likely to open 2020 in price-neutral territory with a bullish bias. Silver should find substantial support at current levels and buying up to 17.97. A move through 17.97 opens the door to 19.41, 21.76, 23.10, and perhaps higher. A failure at current levels opens the door to 15.36, 13.91 and lower.

Orano-GosComGeology JV Gets a Name

“Nurlikum Mining”

Mineral exploration and mining is to commence next year in the Djengeldi region, Central Kyzylkum.*

Uzbek Uranium Resources

-*57,600 tU Indicated; 81,500 (Roll-front Sandstone-hosted) [Central Kyzylkum]

-32,900 tU (Black Shales — uneconomic)

Note: Navoi Mining & Metallurgical Combinat is currently the sole Uzbek producer.

$TGB : Taseko Mines — New Prosperity… What if?

Long-Term Price Cases$3/lb. Cu, $1,700/oz. Au, $24/oz. Ag
ProjectNew Prosperity
Ownership100%
M&I Resources12,836,666,667 CuEq lbs.
Average Annual Production247,911,111 lbs. CuEq
CuEq Recovery64%
Payable Copper3,648,000,000 lbs.
Payable Gold7,720,000 ozs.
Payable Silver19,800,000 ozs.
LoM33 Years
True All-in Costs (TAIC)$1.55/lb. CuEq
Gross Revenue$24,543,200,001
Total Operating Costs ($6,664,337,195)
Operating Profit (EBITDA)$17,878,862,806
Income Taxes($4,827,292,957)
Total Capital Costs($1,149,157,800)
Net Income$11,902,412,049
Net Profit Margin48%
Absolute Cost Structure (ACS)52%
MTQ Score (Higher is Better)0.9
Estimated Average Net Annual Cash Flow Contribution at the Long-term Price Cases$359,471,111

Notes: All Values in U.S. Dollars

An encouraging development at Taseko this week:

The Tŝilhqot’in Nation and Taseko have agreed to an outstanding litigation freeze, while the parties engage in what we hope proves a fruitful dialog aimed at the resolution of a decade-long conflict.

Were a resolution to be reached and development of the New Prosperity Project green-lighted, Taseko would be catapulted into the top ranks of North American mid-tiers.

New Prosperity is one of our favorite development-stage Projects and our economic analysis demonstrates why.

It’s time to pray!

Camarilla Points

When it comes to Camarilla* Points, the waters have been muddied. For starters, Camarilla Points have been around a lot longer than is suspected. They weren’t invented in 1989 by a bond trader named Nick Scott. Nick Scott was a fake name inspired by F. Scott Fitzgerald’s character Nick Carraway, a Yale-educated bond salesman in The Great Gatsby. Was F. Scott Fitzgerald aware of Camarilla Points? Probably not, but they certainly were being utilized by bond traders in 1925.

Why have the waters been muddied?

In their original form, Camarilla Points work — on stocks, bonds and commodities — and the equations of which the Points are composed possess an elegant simplicity. In 1989, or thereabouts, the Camarilla equations were leaked, or someone threatened to do so. Rather than put up a fight, the custodians of the equations neutered the math and managed their own leak. And that’s the almost unusable math you see today on message boards and packaged in popular stock charting software. There’s no indication that the original equations were ever in fact leaked. Even so, the custodians’ controlled leak ensured that an additional layer of secrecy was laid atop the equations.

Camarilla Points in the Present

There is evidence that so-called Camarilla Points in their native form are still utilized and profited from by descendants of the aforementioned custodians. But an attempt to use the math as it was leaked in 1989 ends more often than not in tears, which was the intention, as most folks peddling Camarilla on the web simply repackage the leaked equations, or add traditional pivots and multiple levels of support and resistance which further compromise what little residual utility remains.

I am of the opinion that the Points as originally computed have fallen into disuse as their predictions are perceived as too modest by today’s frothy standards and fickle heirs. It was a trusted tool of gentleman with a level of class and self-discipline that enabled them to make understated trades in the proud service of their legacy.

Final words…

I have long been fascinated with the equations known today as Camarilla Points, but to give a voice to that fascination is to once more put a stick in that still pool…

…and stir.


*When initially leaked, utilization of the term ‘Camarilla’ was deemed suitably obscure, as it referred to no Proconsul, Gray Eminence or prominent family in particular, but was sensational enough to send the curious on a wild goose chase in search of a shadowy cabal possessed of infinite wealth.

Uranium Priced in Gold

As of this writing, 1/2 g of gold will buy you 1 lb. of U308.

Here’s an edifying chart, compliments of PRICEDINGOLD.COM

Relative to its price in gold grams, spot U308 is revisiting decadal lows.

I don’t often share my thoughts about uranium, but I did so recently in an email to @uraniuminsider. I will reproduce them here, with a couple of minor elaborations. As usual, this is just my opinion.

Undercutting remains the rule of the day, due to broad adherence to the ‘Open Society’/closed economic model (latter day thalassocratic) that operates under the guise of ‘increasing proliferation resistance’ in political theater parlance, but in actuality aims chiefly to annihilate smaller producers (primary & secondary). A side effect is an abandonment of market price discipline — a sacrifice considered an acceptable cost of the non-proliferation cover story.

‘Open Society’ (read: Closed & Rapine) adherents would have the casual spectator assume the strategy is aimed at a boogeyman, like Iran, Pakistan or North Korea, but is in fact squarely directed at nation states that have historically proliferated (prospered) under high-price regimes: U.S., U.K., France, Japan (quietly), and Israel.

I assume a general shift of the balance of power eastward into effective geographic nebulosity was the primary objective, by way of a return to predatory, super-scale, centrifugal hegemony in perpetuity, in spite of, and often in service of, a low-price regime in an undisciplined market. Consequently, as profit is of secondary importance to the latter day thalassocratic merchant class with supplemental income sufficient to offset the thinnest of operating margins, the prospects for primary producers is dimmer now than at any time in the past half century.*

In addition, it is my assumption that secondary supplies are deeper than is commonly assumed. I also am of the opinion that gray munitions and HEU stockpiles have been cannibalized by enrichers, and this under-the-table supply has contributed to a protracted low-price regime. There is no way to accurately calculate the size of the gray market, but I think it is safe to assume that it is quite large. Additionally, M.A.D. is passé and headline numbers of nuclear weapons stockpiles only need to live in tables and graphs in the media, not in actuality.

So an undisclosed stockpile of weapons-grade HEU (some possibly repatriated) slated for downblending at Y-12 and elsewhere has to be worked through before we experience a contraction in the secondary market and a renewed interest by financiers in the primary market, and then only in regions where human capital may be exploited cheaply.


I used the word ‘rapine’ above, as our thalassocratic overlords are first and foremost merchants with a penchant for fluid inventory that is the outcome of endeavors with exceptionally low capital intensity: they are pirates. Much like the Phoenicians of yesteryear, today’s merchants operate by way of advanced legerdemain and crypsis, rather than through primary productive enterprise, which necessarily requires that labor is interacted with — their worst nightmare.

So we must wait for a catalyst, which in this context is likely an unforeseen crisis driven by an exotic economic force multiplier — something large enough to waylay the Phoenicians for a handful of quarters, raising the cost of fraud.

*Which is why I am a buyer.

The dialog with my buddy @uraniuminsider has continued and it has afforded me an opportunity to expound a bit more.

On Iran and Sanction Waivers

I never put much stock in Fordow, as it had a tiny array of centrifuges. I tend to interpret elimination of waivers as a green-light to take additional enrichment capacity underground at Natanz, which enables Iran to function as a de facto black enrichment subsidiary of Russia, China, the U.S., Israel, and others. And one might venture to say that Iran is a chief source of EUP continually hitting spot.

On Iran, generally speaking…

Iran, in my book, has a very special place on the Grand Chessboard, extending back to the Komnene house, and our present political actors today and in the past have had simple instructions: never pierce the veil. Or to riff on a line of intelligence asset Arthur C. Clarke: “All of these worlds are yours, except ‘Iran.’” I don’t mean to suggest that only Iran falls under a unique exclusion policy, but that of those regional entities that fall under such an umbrella, Iran is of particular importance.

On Catalysts

I don’t expect a catalyst to originate in Iran. But the Komnene Empire has its own enemies, and they certainly could script and foment a ‘situation’ designed to place pressure on Komnene interests; a situation with the capacity to uncap competitive productive enterprise until the conclusion of what would prove an internecine conflict.

Final Thoughts

We investors are always caught in the middle of these age-old conflicts. Our present conflict is a protracted one, and as in the past, financial weapons have been deployed after a spectacular fashion hitherto unheard of. Hence, internecine conflict: no one will emerge unscathed from the aftermath of this hubris; the winner will be the side less injured than the other.

So I envision a short interruption (if not complete cessation) of gray market activity accompanying a general market crash and a concomitant resumption of commodities-specific primary production, to our benefit, but certainly not in a long-term, sustainable way.

I see precious few business leaders other than Borshoff taking advantage of the downturn to refine their business models and mine plans in a way that will leverage a sudden resumption of demand. Plans remain too complex relative to envisioned scale. The winner will develop a very large mine rapidly, utilizing off-the-shelf technology. I think Borshoff will prove capable of doing this at 300ppm.