The first marked the taking down of the “For Sale” sign at Condor’s flagship La India gold project in Nicaragua on 18 January and, on the whole, the market reaction was muted: the shares dipped by a penny to 18p.
The indifference was perhaps understandable. It was fairly widely understood that stock exchange regulations had mitigated against the company in forcing the sales process out into the open and no one mourned the passing of potential early-stage negotiations out of the spotlight and back into the periphery.
That that process has not yielded an actual sale at this stage is hardly a surprise given that markets have weakened and sentiment towards gold remains uncertain.
But what the official end of the sale process also allowed was more information about the upside at La India to be released publicly.
Accordingly, on 22 January, Condor announced the results of a study for La India conducted using the world-famous Whittle pit optimisation methods.
The shares jumped immediately, sparking a substantial rise across five days of straight gains.
The reasons were not hard to identify: the study boosted the net present value of La India by an average of 56% across three different production scenarios and by 78% if the parameters as set out in the previously worked pre-feasibility study are adhered to. The price-to-book ratio averages 0.12 times
What’s more, the internal rate of return was boosted too, and now averages just over 30% across the three given production scenarios.
Underlying those positive financial developments is an improved mining model, which allows for a 27% increase in the indicated ounces that can come into the La India open pit to 866,000.
Allowing for feeder pits, the amount of gold that can be brought into the operation rises by 29% to 1,066,000 ounces following the Whittle study, while adding an underground scenario boosts overall production to over 1.5mln ounces.
The final icing on the cake is that all-in sustaining cash costs remain at under US$700 per ounce under all scenarios and that to date all assumptions have used a US$100 West Texas oil price.
So good news all round, and a corresponding boost to the share price, helped by director Jim Mellon increasing his shareholding to 10.2%
But there’s still much work to be done.
In Nicaragua, the company’s ongoing dialogue with government officials is progressing well and chief executive Mark Child expects to be able to announce satisfactory progress in due course.
More broadly though, market sentiment remains decidedly uncertain, notwithstanding a recent upward tick in the gold price as safe-haven buying has increased.
Mark Child knows this, and he’s been paring back on the company’s expenses accordingly.
There’s £1.1mln in the bank, which means that short-term survival is assured. In the more medium term the trick will be to keep costs down until some sort of deal can be done on La India, on terms satisfactory to everyone.
The problem with sales process that the company has just come out of was, ultimately, timing. Gold came off during the period to a 6 year low in December 2015, and the company’s share price duly fell too, such that when sales process was terminated it was worth much less than when it began.
At one point, the gold at La India was valued at less than US$5.00 per ounce in the ground compared to recent average M&A transaction prices of US$56 per oz in the ground.
And these are not levels that Child would have been comfortable to sell at.
Nonetheless, the sales process did throw up a few positives.
“We had six companies come through the assets and they liked it,” says Child. “The overall resource is two-and-a-half million ounces but it’s a substantially bigger district with over 40 targets. It looks like a big system.”
In due course then a big player might well come in and help to deliver some serious value.
In the meantime though, Child is mulling his options.
After all, there are plenty of other ways that Condor could take La India forward.
“We might look at selling a portion of the asset to someone,” says Child. “If we think we’ve got five million ounces, maybe it’s better to do a joint venture. And there’s also gold streaming, and gold royalties – there’s different types of access to funds.”
What would really be nice though, would be if gold would recover some of the strong upward momentum it enjoyed in the earlier part of this decade.
Child certainly doesn’t rule it out. “I think we’re going to form a major bottom in the gold price this year,” he says.
“I think that China will continue to devalue this year. I think we have hit a tipping point as gold redemptions out of ETFs in the last 3 years were snapped up in China and won’t come out of China; in recent weeks there have been net inflows into ETFs. We’re in a transitional year. Now’s the time to be in the metal.”