Key Gold Indicator Still Mired in Bear Country

The Grasberg-Saville Gold Rating (GSGR) spent its 10th week in bearish territory below 50 with little indication of respite (Actual Reading = 40).

The Grasberg-Saville Weekly Gold Rating measures the following fundamental drivers:

  1. Treasury Inflation-Protected Securities (TIPS)
  2. KBW Bank Index Inverse Change Ratio
  3. 30-Year/Dollar Ratio
  4. 30s/5s Yield Curve Change Ratio

$TGB : Florence Copper Project Low Level Analysis

Long-Term Price Case$3/lb. Cu
ProjectFlorence Copper Project
Ownership100%
Estimated Indicated Resources2.8B lbs.
Average Annual Production96.8M lbs.
Recovery99.9%
Payable Product2,517,480,000 lbs.
LoM26 Years
True All-in Costs (TAIC)$1.98/lb.
Gross Revenue$7,552,440,000
State Royalty (~5%)($377,622,000)
Net Revenue$7,174,818,000
Total Operating Costs ($2,265,732,000)
EBITDA$4,909,086,000
Income Taxes (Effective Rate 24%)($1,178,180,640)
Conoco Inc. Net Returns Royalty (~3%)($147,272,580)
BHP Copper Inc. Royalty (2.5%)($93,272,634)
Total Capital Costs($917,000,000)
Net Income$2,573,360,144
Net Profit Margin34%
Absolute Cost Structure (ACS)66%
MTQ Score (Higher is Better)0.5
Estimated Average Net Annual Cash Flow Contribution at the Long-term Price Case$98,736,000

The Florence Copper Project will be profitable at today’s Cu price and will prove a veritable cash cow at the long-term price case and above.

Our estimated Total All-in Costs (TAIC) of $1.98/lb. is stellar and will result in a healthy Net Profit Margin of 34%.

Florence is a well-timed Project with a bright future that will generate the cash required to self-fund the advancement of Yellowhead, Aley and Harmony.

Fahy Capital Management initiated a stake in Taseko Mines on 12 November 2019.

$MUX : Los Azules Low Level Analysis

Long-Term Price Case$4/lb. Cu, $1,700/oz. Au, $24/oz. Ag
ProjectLos Azules
Ownership100%
Estimated Indicated Resources11,256,700,000 CuEq lbs.
Average Annual Production276.9M lbs.
Recovery91%
Payable Product10,243,597,000 CuEq lbs. Cu (4.6 Mt CuEq)
LoM37 Years
True All-in Costs (TAIC)$2.92/lb.
Gross Revenue$40,974,388,000
Treatment Charge($394,945,445)
Refining Charge($870,705,745)
Royalty($1,229,231,640)
Net Revenue$38,479,505,170
Total Operating Costs ($15,160,523,560)
EBITDA$23,318,981,610
Income Taxes($8,161,643,564)
Total Capital Costs($4,072,000,000)
Net Income$11,085,338,046
Net Profit Margin27%
Absolute Cost Structure (ACS)73%
MTQ Score (Higher is Better)0.4
Estimated Average Net Annual Cash Flow Contribution at the Long-term Price Cases$299,052,000

Los Azules is a good Project at $4/lb. Cu and higher, with manageable True All-in Costs of $2.92/lb.

$SBGL : Sibanye-Stillwater Updated High Level Analysis

5 November 2019 Updated Global Reserve Model
Discounted Global Gold Reserve Value *$3,704,036,400
Discounted Global 4PE Reserve Value **$16,582,170,000
Discounted Global 4PE Reserve Value, Lonmin ***$6,798,330,000
Discounted Global Copper Resource Value ****$7,589,744,040
Discounted Global Uranium Resource Value *****$286,861,500
Aggregate Net Global Reserve Value$34,961,141,940
Estimated Reserve Lifespan
PGM32.5 Years
AU13 Years
2020 Estimated Net Income$1,165,371,398
2020 Estimated Market Cap$11,653,713,980
2020 Projected Market Cap Growth133%
FCM Target Price$17.45/sh.

Notes: All Values in U.S. Dollars

*Rustenburg, Kroondal, Mimosa, Rustenburg Tailings, Stillwater, East Boulder

**Beatrix, Cooke, Driefontein, Kloof, WRTRP, DRDGOLD, SA

***Marikana, Tailings

****Altar, Marathon, Rio Grande

*****Beatrix, WRTRP

Key Gold Indicator Remains in Bearish Territory

The Grasberg-Saville Gold Rating (GSGR) spent its 8th week in bearish territory below 50. Nevertheless, the gold price remained fairly firm, which we perceive as generally bullish.

The GSGR bottomed out in the week of 9 September and has since made a higher low (10/21). This indicates a slight improvement in referenced fundamentals.*

*The Grasberg-Saville Weekly Gold Rating measures the following fundamental drivers:

  1. Treasury Inflation-Protected Securities (TIPS)
  2. KBW Bank Index Inverse Change Ratio
  3. 30-Year/Dollar Ratio
  4. 30s/5s Yield Curve Change Ratio

Bill Banning Uranium Mining Near Grand Canyon Moves to Senate

If the Grand Canyon Centennial Protection Act becomes law, approximately 1 million acres of federal land will be closed to uranium mining permanently.

That being said, were the bill or a companion bill to pass the Senate, it would not be signed by Trump (or any sitting President), as it was never destined to become law. What is more, the future of the Grand Canyon’s mineral wealth is above Trump’s paygrade. Consequently, he’ll be asked to shred the bill like a good soldier and the federal lands in question will remain optionable by mining interests in the decades to come.

Early Q4 Updates

  1. $IMPUY — We exited Impala Platinum Holdings at our target of $7 for a return of 150%.
  2. $FCUUF — We doubled our stake in Fission Uranium on 22 October.
  3. $AAU — We took advantage of the Ixtaca permitting suspension to aggressively purchase shares on sale at $0.50 on 30 October.
  4. $GUYFF — We took advantage of the Halloween guidance scare to double our stake in Guyana Goldfields.
  5. $TGB — We like Taseko’s pipeline, especially the Florence Copper Project. We also like the way copper is behaving generally. We started to build a stake on 12 November.

“[Copper is] more strategic than cobalt, more strategic than lithium. You can’t replace copper on conductivity. It is a modern metal.”

Mark Bristow

$BKIRF : Black Iron Inc. — Independent Economic Analysis

Long-Term Price Case$97.19/dmt
Flagship ProjectShymanivske
Ownership100%
Shares Outstanding186,300,000
Market Cap$11,178,000
Average Annual Production7,065,000 dmt
Recovery98%
Payable Product141.3M dmt
LoM20 Years
True All-in Costs (TAIC)$56.26/dmt.
Gross Revenue$13,732,947,000
Ukrainian Federal Government Royalties($863,300,000)
Net Revenue$1,286,9647,000
Total Operating Costs ($4,446,200,000)
Operating Cash Flow (EBITDA)$8,423,447,000
Income Taxes($1,516,220,460)
Total Capital Costs($1,124,200,000)
Net Income$5,783,026,540
Net Profit Margin42%
Absolute Cost Structure (ACS)58%
MTQ Score (Higher is Better)0.7
True Value$31.04/sh.
True Value Discount (TVD)100%
Cash Flow Multiple5x
Net Annual Cash Flow$289,151,327
Future Market Cap$1,445,756,635
Future Market Cap Growth12,834%
Target$7.76/sh.

Notes: All Values in U.S. Dollars

Black Iron Inc. enjoys an MTQ Score of 0.7, which places it within the 80th percentile of companies under investigation. In other words, Black Iron’s projected Net Profit Margin potential is high, while its projected Absolute Cost Structure is low, a combination for which Fahy Capital Management looks when placing a prospective investment under the microscope.

MTQ Scores (BARS — Higher is Better) Vs. Absolute Cost Structure (LINE — Lower is Better)
Update, 27 September 2019

Ukraine’s Defence Minister, Andriy Zagorodniuk, has agreed to the transfer of land required for the development of Shymanivske. A Memorandum of Understanding will be signed next month.

$FCUUF : Fission Uranium — Independent Economic Analysis (U/G PFS Update)

U/G PFS, 23 September 2019
Long-Term Price Case$50/lb. U308
Flagship ProjectPLS (Triple R)
Ownership100%
Mineral Reserves81.4M lbs.
Shares Outstanding486,014,642
Market Cap$141,867,674
Average Annual Production13.1M lbs.
Recovery96.8%
Payable Product78.7 lbs.
LoM7 Years
True All-in Costs (TAIC)$35.26/lb.
Gross Revenue$3,935,000,000
Provincial Revenue Royalties($287,142,555)
Net Revenue$3,647,857,445
Total Operating Costs ($567,803,677)
Operating Cash Flow$3,080,053,768
Provincial Profit Royalties($328,593,580)
Income Taxes($492,136,715)
Total Capital Costs($1,099,582,645)
Net Income$1,159,740,828
Net Profit Margin29%
Absolute Cost Structure (ACS)71%
MTQ Score (Higher is Better)0.4
True Value$2.39/sh.
True Value Discount (TVD)88%
Cash Flow Multiple10x
Net Annual Cash Flow165,677,261
Future Market Cap1,656,772,610
Future Market Cap Growth1,068%
Target$3.41/sh.

Notes: All Values in U.S. Dollars

$DNN : ISR Field Tests, Early Results

In a word, in Test Areas 1 & 2, hydraulic responses were observed where hydraulic responses were expected and no hydraulic responses were observed where hydraulic responses were unwanted. That’ll give the naysayers of ISR at Phoenix something to chew on.

Next Step: Commercial Scale Well at Test Area 1.

We believe Phoenix will prove a game-changer, with the potential to soon demonstrate that EBITDA may be generated by select operators in a world of sustained low spot and LT contract prices.

Denison Mines has a current weighting of 3.4% in the NuChem International Catalyst Fund.