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Lower POG=Lower Assumptions

Bob Moriarty
Sep 11, 2014

Junior resource companies are responding to lower gold prices with changes in assumptions they are making to drop the cost of their mining projects. Two companies we follow closely have come up with some innovative changes that make their projects much more interesting. In both cases, I have a world of respect for their management teams.

True Gold Mining that I wrote about in November of last year came up with one of the more unusual changes to their mining plan. Their gold has a lot of clay so in order to get the best possible recovery in the heap leach; they add cement to the pad. It’s called agglomeration. TGM did a deal with a new cement plant in the capitol, Ouagadougou, good for 3.5 years renewable. The tiny change will reduce the overall capex of the project by $35 million.

The small change reduces the cost of mining by $1.05 per tonne, reduces the cost of production per ounce of gold by $40 and increases the IRR to 46%. I know Dwayne Melrose, the President of the company and I can assure investors, he will trim every cent off the capex that he can.

Almaden Minerals run by the father-son team of Duane and Morgan Poliquin has one of the best management teams in Mexico. Their focus is on the 100% owned Ixtaca gold/silver project in southern Mexico but the company has over 10 other high potential projects in Mexico.

On the 3rd of September Almaden released an updated PEA showing a significant cost reduction of the base case by using a ramp up model.

They have changed the base case by targeting higher-grade material earlier. That changes the initial capital to $399 million by a 19% reduction. The NPV using a discount rate of 5% would be $515 million with an internal rate of return of 28% after tax.

But using a ramp up model it generates the really startling numbers. In that case, the company would begin production at 7000 tonnes per day and expand to 30,000 TPD in year 6. The capex would drop to $244 million and would provide an after tax return of 23% and NPV of $427 million.

Times are tough in the mining business and it’s important for all junior mining companies planning on production to sharpen their pencils. Investors want to see a return of capital, not a gold plated operation. I believe both True Gold and Almaden will be early leaders when the price of gold turns.

Both companies are advertisers and I am biased. Please do your own due diligence.

True Gold Mining
TGM-V $.41 (Sep 10, 2014)
RVREF-OTCBB 397.5 million shares
True Gold Mining website

Almaden Minerals
AMM-T $1.49 (Sep 10, 2014)
AAU-Amex 64.6 million shares
Almaden Minerals website


Bob Moriarty
President: 321gold

321gold Ltd

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