$SBGL : Shrewd Moves from Froneman

Sibanye-Stillwater to mothball, close four gold shafts, but limits job cuts to 3,450…

Shafts that didn’t escape the cull were Beatrix 1 shaft in the Free State, which will be placed on care and maintenance, and plant facilities at Beatrix 2 which will be closed. The Driefontein shafts 6 and 7 will also be closed, while Driefontein 2 shaft will be placed on care and maintenance. [LINK]

See Fahy Capital Management’s Notes and Recommendations for Driefontein and Beatrix from 22 June 2018 for more details: If We Had an Audience with Froneman, This is What We Would Say

$PZG : Paramount Gold Nevada — Independent Economic Analysis

Long-Term Price Case$1,700/oz. Au & $24/oz. Ag
Flagship ProjectGrassy Mountain
Mineral Resources (M&I)1,103,461 AuEq ozs.
Mineral Reserves369,285 AuEq ozs.
Fully-Diluted Shares29,288,909 
Fully-Diluted Market Cap23,724,016
Average Annual Production47,706 AuEqu ozs.
LoM7.25 Years.
Payable Product357,794 AuEq ozs.
True All-in Cost (TAIC) $1,008/oz.
Gross Revenue$608,249,800
Transportation & Refining Cost($1,882,000)
Sherry & Yates Agreement($9,095,517)
Total Operating Cost($185,789,000)
Operating Profit$411,483,283
Net Taxable Income (Net of Depreciation & Applied Loss [ ($158,880,000) ])$252,603,283
Federal Income Taxes($53,046,689)
Total Capital Cost($110,947,000)
Net Income$247,489,594
Net Profit Margin41%
Absolute Cost Structure (ACS)59%
True Value$8.45/sh.
Cash Flow Multiple5x
Annual Cash Flow$33,012,552
Future Market Cap$165,062,070
Future Market Cap Growth596%

Notes: All Values in U.S. Dollars.

Paramount Gold Nevada is a growth company in the making and will likely be awarded a rich premium on the back of timely execution, exemplary management, a robust asset pipeline in a friendly jurisdiction, and a high probability of discovery at Frost.

Paramount’s Net Profit Margin is good and it has an excellent Absolute Cost Structure which enable us to award the company with a 5x cash flow multiple resulting in possible Market Cap appreciation of up to 596%.

$AUG : Assays of Up to 11 g/t Au and 448 g/t Ag at New Target, Bria

Two new large-scale gold and silver opportunities have been identified at Auryn’s Homestake Ridge Gold Project. The Northern Target, Bria, “is defined by high-grade gold and silver rock samples from mapped quartz veins.”

Bria Target Rock Samples
Sample IDAu (g/t)Ag (g/t)Cu ppmPb ppmZn ppm

The Southern Target, Kombi, “has been defined by a 2km trend of gold-in-stream sediments with multiple adjoining drainage basins” … and “a 1km-long trend at the southern limit of the property.”

Press Release: Auryn Identifies New, Significant Gold and Silver Targets at the Homestake Ridge Project

Sibanye-Stillwater: If We Had an Audience with Froneman, This is What We Would Say

We respect Neal Froneman and we respect his bold bets. His strategy is not a complex one: buy countercyclically. The Rustenburg, Acquarius and Stillwater deals were good ones, and well-timed. The proposed acquisition of Lonmin is pushing the envelope, but we agree it is a special situation of which Froneman must take advantage.

We are long-time platinum traders and investors and many of the mines flying under Sibanye-Stillwater’s flag have a special place in our hearts. A new era is dawning for platinum mining in South Africa: the industry is graduating to UG2 ore. Consequently, upon sealing the Lonmin deal, Sibanye-Stillwater will need to act decisively in order to transform operations from ones fraught with incalculable risk, to ones that redefine safety in the sector.

Firstly, Froneman needs to commit to swift change at Lonmin’s Marikana, phasing out the following Generation 1 Shafts: Hossy, Newman, Pandora E3 Joint Venture and W1, East 1 and East 2. K4 needs to be closed permanently. Generation 2 Shafts — K3, Rowland, 4B and Saffy — need to be nurtured.

We would like to see Impala Platinum buy out Sibanye’s 50% interest in Mimosa. JV or no JV, we think Wedza Shaft should be placed on care and maintenance and all energy devoted to further development of Mtshingwe Shaft.

We also think there is a case to be made for placing Driefontein on care and maintenance, while concentrating on yield and safety at the Beatrix and Kloof gold operations.

We think Altar, an exploration-stage project in the Andes, should be spun out to shareholders immediately.

On the Valuation of Sibanye-Stillwater

We value things conservatively at Fahy Capital Management and Sibanye-Stillwater is no exception. Its resource base is large, but we believe only a fraction of it is economical at any price and that is the portion we value. Also, we don’t incorporate prospective additions to reserves from the proposed Lonmin acquisition into our calculations.

Resources Subject to Valuation

PGM = 44,261,000 oz

Au = 30,971,000 oz


We believe Sibanye-Stillwater is trading at a 46% discount from intrinsic value. In a word, on any day that Sibanye-Stillwater trades below US $5.14, it is a bargain. But what about tomorrow? What kind of return can one expect at higher Au and Pt prices? We believe that a return of ~200% is probable in an environment that is not hostile to Au and Pt. Our own long-term target for Sibanye-Stillwater at much higher Au and Pt prices is US $8.50.


Dalradian Resources Avoids the Chopping Block

Flagship Property: Curraghinalt = 100% Ownership … 1 Point

After-tax IRR = 25.5% … 1 Point

NPV/CapEx = 167% … 1 Point

F/D Market Cap per Resource Ounce = $86 … – 1 Point

Cost Structure = 50% … 1 Point

Resource Base = 3,066,000 M oz. … 1 Point

Future Cash Flow = US $1,983,702,000 … Unrated

Future Cash Flow Multiple = 5x … 1 Point

Share Structure = 367,579,114 … – 1 Point

Debt Coverage = 0 Debt … 1 Point

Projected Future Market Cap = US $1,149,750,000 … Unrated

Projected Future Market Cap Growth Percentage = 334% … – 1 Point

Location: Northern Ireland … 1 Point


Dalradian Resources excels in almost every area, but dilution has negatively impacted several factors, including Market Cap per Resource Ounce and overall future growth potential. At higher gold prices, Dalradian will do exceptionally well as one of Europe’s lowest-cost future producers. We have a target of $3.13 a share.




Flagship Project: 100% Ownership … 1 Point

After-tax IRR = > 20% … 1 Point

NPV/CapEx = > 1 … 1 Point

EV/Resources = < 1 … 1 Point

Cost Structure = < 50% … 1 Point

Resource Base = > 80 Mlbs. U308 … 1 Point

Future Cash Flow = Unrated

Future Cash Flow Multiple = > 5x … 1 Point

Share Structure = < 200 M … 1 Point

Debt Coverage = > 50% (or No Debt) … 1 Point

Projected Future Market Cap = Unrated

Projected Future Market Cap Growth Percentage = > 500% … 1 Point

Location: Friendly = 1 Point