Millennium Minerals (ASX: MOY), Mutiny Gold (ASX: MYG) and Kentor Gold (ASX: KGL) are all transitioning to precious metals producers in the near term - with these companies set to reap the financial benefits of what is still a very high gold price.
Sure - spot gold may have fallen to around US$1550 an ounce, and not punched through the US$2000 that some were hoping - (but with fingers crossed this wasn't at the expense of a systemic global financial meltdown) - but it must be remembered that producers still have some incredibly strong profit margins at the current price.
First of all take Millennium which has forecast the first gold pour from the Nullagine Gold Project in Western Australia before the end of 2012.
The Nullagine Gold Project has Reserves of 741,000 gold ounces. Total Resources is 1.33 million gold ounces contained within seven deposits. Golden Eagle is the biggest deposit and hosts almost two thirds of the resource.
Millennium's production base target will be 100,000 gold ounces annually over a mine life of eight years or better, and based on the current spot price - that would generate annual revenues of around A$150 million. The life of mine mutilplies out to A$1.2 billion.
Add to the mix the potential for a longer mine life though reserve upgrades, with Millennium already targeting million ounce gold reserve milestone in 2013.
ADD IN CASH COSTS WHEN NEW PPT OUT WEDNESDAY
Mutiny Gold (ASX: MYG) is another company getting ready to pour the yellow metal, delivering a positive Bankable Feasibility Study at the start of this month highlighting that Deflector could earn an estimated Net Operating Cash Flow of $342 million - and that is just the start.
The study paves the way for the development of the project at an initial production rate of 55,000 gold ounces equivalent (annual range 44,600 in year one to 61,612 gold ounces equivalent).
The key financial outcomes of the study provide key financial parameters of Deflector and they are impressive. Net Operating Cash Flow after debt (project finance) and taxes of $171 million:
- EBITDA of $323 million
- Net Profit of $171 million
- NPV at 8% of $103 million
- Capital costs for plant construction of $66 million
- Capital Costs for mine construction of $21 million
- IRR of 43%
A major positive worth noting is that the initial net operating cash flow of $341 million would readily service the company’s Project Finance Facility (debt plus interest).
Astutue investors will also remember that Mutiny sold forward 50,000 gold ounces at the end of last year at a very impressive A$1,847 per ounce - which is above historical Australian gold pricing - and provides a boost to the projects potenital future profitability.
Kentor Gold (ASX: KGL) is also set to join the ranks of gold producers in a matter of week's, with the company preparing for the first gold pour at the Murchison Gold Project - which is only around a year since acquiring the project.