Kaiser Bottom Fish OnlineFree trialNew StuffHow It WorksContact UsTerms of UseHome
Specializing in Canadian Stocks
SearchAdvanced Search
Welcome Guest User   (more...)
Home / Works Archive / Trackers
Trackers
 Thu Feb 17, 2022
Tracker: P2 Gold - Retired Gabbs Outcome Visualization based on 2021 resource estimate
    Publisher: Kaiser Research Online
    Author: Copyright 2022 John A. Kaiser

 

Tracker - February 17, 2022: P2 Gold - Retired Gabbs Outcome Visualization based on 2021 resource estimate

Outcome Visualization Project as of Feb 16, 2022: P2 Gold Inc: Gabbs
Project:GabbsLocation:United StatesStage:4-Infill Drilling
Net Interest:100% WIUncapped NSR:0.0%Target Metals:Gold Copper
OV Project ID:1000034OVP Posted:10/27/2021OVP Retired:2/17/2022
Current OV ID:1000090Current OV Confirmed:10/27/2021Visualizer:JK
P2 Gold Inc (PGLD-V)
ProfileSearchWeb SiteTreeForumSEDARQuoteIPV
Issued
62,374,395
Price
$0.740
Working Capital
($1,347,212)
Key People: Joseph J. Ovsenek (CEO), Grant Bond (CFO), Kenneth C. McNaughton (VP EX),
Diluted
90,446,097
Insiders
40.1%
As of
9/30/2021
Visualized Outcome: P2 Gold Inc: Gabbs - 20,000 tpd OP HL/Flot Scenario
The Gabbs project is a cluster of copper-gold deposits in Nevada that P2 Gold has acquired from Waterton and which have received considerable work in the past from various operators on which a 43-101 resource estimate for 4 zones - Sullivan, Lucky Strike, Car Body and Gold Ledge - with oxides and sulphides has been defined. The objective is to update the resource estimate and potentially expand the tonnage by extending the depth of the Sullivan and Lucky Strike zones, complete metallurgical studies to support a two track flowsheet where the oxides are heap leached and the sulphides are milled and floated to produce a copper concentrate, and deliver a PEA by the end of 2022. Because the OV model only works with a single LOM flowsheet the costs and recoveries have been averaged out to reflect the relative proportion of sulphide and oxide ore. This scenario is based on the existing 2021 43-101 inferred resource of 26,200,000 tonnes oxide at 0.72 g/t gold and 0.25% copper and 46,900,000 tonnes sulphide at 0.54 g/t gold and 0.26% copper. The 20,000 tpd combined mining rate supports a 10 year mine life. The valuation upside resides in achieving better grades and expanding the mine life through bigger tonnage.
Visualized Outcome Summary: P2 Gold Inc: Gabbs - 20,000 tpd OP HL/Flot Scenario
Deposit Scenario: 73,100,000 t @ 0.26% Copper, 0.53 g/t Gold
Mining Scenario: Open Pit 20,000 tpd 10.0 yrs, CapEx $375.0 million, SustCapEx $60.0 million, OpEx $23.85/t (USD), AISC $29.80/t (USD)
LOM Payable: 279.0 million lb copper, 1.0 million oz gold
Economic Value (after-tax): IRR 26.8%, Payback 3.3 yrs, NPV at 7.5% - USD $345,495,122, Future Price/sh: CAD $4.85
Economic Outcome - Discount Rate: 7.5% - CAD AT NPV: $438.0 million - Poor Speculative Value
Gross Rock Value (USD/t):$58Recoverable Rock Value:$45Payable Rock Value:$43
LOM CapEx & Sustaining Cost:$435,000,000LOM Operating Cost:$1,743,435,000AISC per tonne:$29.80
LOM Net Payable Revenue (USD):$3,114,516,686LOM PT Cash Flow (USD):$1,311,081,686LOM AT Cash Flow (USD):$1,076,166,534
USD Pre-Tax NPV:$489,096,151Pre-Tax IRR:33.0%Pre-Tax Payback:2.9
USD After-Tax NPV:$345,495,122After-Tax IRR:26.8%After-Tax Payback:3.3
CAD Fair Spec Value Low:$21,914,756CAD Fair Spec Value High:$43,829,511CAD Implied Project Value:$66,930,112
Price Target if Visualized Outcome delivered by Expl-Dev Cycle without dilution: CAD $4.85
Economic Outcome (USD): Revenue Model at OV designated Metal Prices

Annual AverageLife of Mine (LOM)LOM Stats
Recoverable Revenue:$329,917,038$3,303,689,790$45/t ore Recoverable Value:
   Smelter/Transport Costs:($18,891,432)($189,173,104)5.7% of Recoverable Revenue
Gross Payable Revenue:$311,025,606$3,114,516,68694.3% of Recoverable Revenue
   Royalties:$0$00.0% of Gross Payable Revenue
Net Payable Revenue:$311,025,606$3,114,516,68694.3% of Recoverable Revenue
   Mining Cost:($48,180,000)($482,460,000)27% of OpEx - $6.60/t ore
   Processing Cost:($120,085,000)($1,202,495,000)67% of OpEx - $16.45/t ore
   Other Cost:($5,840,000)($58,480,000)3% of OpEx - $0.80/t ore
   Sustaining Cost:($5,454,545)($60,000,000)3% of OpEx - $0.82/t ore
Total Operating Cost:($179,559,545)($1,803,435,000)58% of Net Payable Revenue - OpEx - $24.67/t ore
Pre-Tax Cash Flow:$131,466,061$1,311,081,68642% of Net Payable Revenue - $17.94/t ore
   Taxes:($23,491,515)($234,915,152)18% of Pre-Tax Cash Flow - $3.21/t ore
After-Tax Cash Flow:$107,974,546$1,076,166,53435% of Net Payable Revenue - $14.72/t ore
Note: Concentrate transport costs, smelter treatment costs and retention are subtracted from recoverable revenue to get gross payable revenue to which the uncapped royalty rate for the project is applied. The annual average of LOM sustaining cost is expensed as an annual operating cost. Annual average figures reflect full production years.
Economic Outcome (USD): Royalty Model for 1% NSR at OV designated Metal Prices
Mine Life:11 yearsStartupNPV 5%NPV 10%NPV 15%
Annual Avg NSR:$3,110,256Now$22,896,651$17,387,373$13,581,577
LOM NSR:$31,145,1672025$19,778,988$13,063,391$8,930,107
Fair Speculative Value Stock Price Range: CAD $0.24 - $0.48
MSV (Market Cycle S Curve): Market Speculative Value represents the typical market pricing pattern of a new discovery as it moves through its exploration-development cycle. The irrational pricing behavior of the yellow channel contrasts with the fair speculative value of the blue channel as defined by the rational speculation model because during the pre-economic study stages there is great uncertainty about how big the discovery will turn out.
Fair Speculative Value Ladder
USD OV NPVCAD OV NPVExch RateDilutedNet Interest
$345,495,122$438,295,1111.268690,446,097100.00%
Project StageUncertainty RangeCAD FSV RangeCAD FSV per Share RangeCAD MSV per Share Range
Grassroots 0.5% - 1.0% $2,191,476 - $4,382,951 $0.02 - $0.05 $0.05 - $0.12
Target Drilling 1.0% - 2.5% $4,382,951 - $10,957,378 $0.05 - $0.12 $0.12 - $0.24
Discovery Delineation 2.5% - 5.0% $10,957,378 - $21,914,756 $0.12 - $0.24 $0.24 - $3.63
Infill & Metallurgy 5% - 10% $21,914,756 - $43,829,511 $0.24 - $0.48 $2.42 - $4.85
PEA 10% - 25% $43,829,511 - $109,573,778 $0.48 - $1.21 $1.21 - $3.63
Prefeasibility 25% - 50% $109,573,778 - $219,147,556 $1.21 - $2.42 $1.21 - $2.42
Permitting & Feasibility 50% - 75% $219,147,556 - $328,721,334 $2.42 - $3.63 $1.21 - $2.42
Construction 75% - 100% $328,721,334 - $438,295,111 $3.63 - $4.85 $2.42 - $3.63
Production 100% $438,295,111 $4.85 $4.85 - $6.06
Market Speculative Value Stock Price Range: CAD $2.42 - $4.85
Warning: while the market spec value (S-Curve) and fair spec value channels presented in project value terms track the evolving expected ultimate outcome value, when presented in stock price terms the expected stock prices are subject to dilution through future equity financings or project interest farmouts.
Alternative Metal Price Scenarios

Metal 1Metal 2Metal 3Metal 4

CopperGold

Spot:$4.54 /lb$1,863 /oz

OV Assigned:$4.54 /lb$1,863 /oz

Pessimistic:$2.50 /lb$1,863 /oz

Optimistic:$5.00 /lb$1,863 /oz

Fantasy:$7.00 /lb$1,863 /oz

Note: for Metal 1 pessimistic, optimistic and fantasy price scenarios, OV assigned prices are used for Metals 2-4
Economic Outcomes with Alternative Metal Price Scenarios

USD PT NPVUSD PT IRRUSD AT NPVUSD AT IRRAT Payback yrs
Spot:$489,096,15133.0%$345,495,12226.8%3.3
OV Assigned:$489,096,15133.0%$345,495,12226.8%3.3
Pessimistic:$126,316,62514.9%$73,286,46312.1%5.5
Optimistic:$570,899,37736.8%$406,865,94629.9%3.0
Fantasy:$926,565,57952.5%$673,695,61642.3%2.3
Fair Speculative Value for Alternative Metal Price Scenarios
Stage: Infill & Metallurgy - 5.0% - 10.0%

CAD AT NPVCAD Target PriceCAD FSV RangeCAD FSV per Share RangeCAD MSV per Share Range
Spot:$438,295,111$4.85$21,914,756 - $43,829,511$0.24 - $0.48$2.42 - $4.85
OV Assigned:$438,295,111$4.85$21,914,756 - $43,829,511$0.24 - $0.48$2.42 - $4.85
Pessimistic:$92,971,207$1.03$4,648,560 - $9,297,121$0.05 - $0.10$0.51 - $1.03
Optimistic:$516,150,139$5.71$25,807,507 - $51,615,014$0.29 - $0.57$2.85 - $5.71
Fantasy:$854,650,259$9.45$42,732,513 - $85,465,026$0.47 - $0.94$4.72 - $9.45
Detailed Visualized Outcome (KRO Members Only)
VU = Very Unsure SU = Somewhat Unsure SS = Somewhat Sure VS = Very Sure
The confidence indicator is intended to convey the visualizer's degree of uncertainty with regard to a particular assumption.
Deposit Scenario

Metal 1Metal 2Metal 3Metal 4

Copper
Cu
Gold
Au






Grade:0.26%SS0.53 g/tSS

Recovery:70.0%SS85.0%SS



Payable:95.0%SS98.0%SS



Concentrate Grade:28.0%VU0.0%VS
Price:$4.54 /lbVS$1,862.60 /ozVS

Price Type:Spot
Spot




Annual Payable:27,825,800 lb
103,619 oz




LOM Payable:278,639,174 lb
1,037,607 oz




Metal 1 Note: Cu grade reflects the average of combined oxide and sulphide zones. Met studies indicate only a 25% recovery for copper from the oxides when heap leached whereas milling-flotation will recover about 93% of sulphides. For the purpose of this OV the recovery was calculated as the average for the entire deposit based on individual recovered metal from the oxide and sulphide zones.
Metal 2 Note: Met studies show that 75% of the gold is recoverable from the oxides while it is assumed milling-flotation will recover 95% of the gold in the sulphides. The grade is the average of the two types and the recovery, as with the copper, is a life of mind average that blends the output of the two processing tracks.
Mining Scenario
Tonnage:73,100,000VSStrip Rate:2.0SU
Operating Rate (tpd):20,000VSMining Type:Open PitVS
Mine Life (years):10.0
Startup:2025VU
Tax Treatment:DDBM - double declining balanceSUTax Rate:25.0%VS
Strip Rate Note: Based on management estimates.
Operating Rate Note: 20,000 tpd combines ore headed for the heap leach pile and the mill-flotation circuit, the oxides representing 35% of annual mined ore and the sulphides 65%.
Tax Treatment Note: This approach increases the cash flow in the earlier years when payback is important.
Tax Rate Note: The federal corporate tax rate is 21%. Nevada has no state corporate tax but does have a 5% minerals tax on net profits. Since a minerals tax is deductible before application of the federal tax rate, the effective tax rate is 24.95%: ((1-0.05) x 0.21) + .05
Cost Scenario

CurrencyUSD CostExchange Rate
CapEx:$375,000,000SSUSD$375,000,0001.000
Sustaining Capital:$60,000,000VUUSD$60,000,0001.000
Mining Cost ($/t rock):$2.20SUUSD$2.201.000
Mining Cost ($/t ore):$6.60
USD$6.601.000
Processing Cost ($/t):$16.45SUUSD$16.451.000
Other Cost ($/t):$0.80SSUSD$0.801.000
Total OpEx ($/t):$23.85
USD$23.851.000
Copper Concentrate Cost ($/t con):$175.00
USD$175.001.000
CapEx Note: This number I am least confident about. The $6 million needed to buy out the Waterton NSR is included in CapEx. The breakdown for HL and milling is $325 million for the milling-flotation plant and $50 million for the HL facility.
Sustaining Capital Note: Based on a range of $5-$7 million per year for a 10 year mine life.
Mining Cost Note: Mining cost is assumed to be the same for oxide and sulphide, though by using a LOM average strip of 2:1 the total mining cost punishes the cash flow in the earlier year when a lower strip rate applies.
Processing Cost Note: The processing cost is a blend of heap leaching and milling/flotation costs. Heap leaching is estimated at $8/t ore and milling at $21/t ore. The $16.45/t average prcoessing cost is based on 35% of annual ore processed being heap leached and 65% milled and floated. This assumes the same relative processing rate in each year of the LOM, but the reality is that the oxides will be depleted earlier, so this approach makes the cash flow in the early years lower than would be in reality.
Metal 1 Con Cost Note: The concentrate grade is expected to be 25%-30%. This figure is muddled by the fact that the copper recoverd from heap leaching does not end up in the concentrate. However, the oxide copper represents only 12% of LOM copper output, so 28% was chosen lower the impact of transport cost to the smelter.
Risk Factors - Risk-Adjusted Discount Rate: 7.5%

Risk LevelRisk WeightConfidenceNote
Environmental Permitting:Very Low0.5SSNevada may be the best jurisdiction in the US to permit a mine. Gabbs is within the BLM rather than USFS jurisdiction.
Social License:Very Low0.5VSThere are no indigenous people in the area and there are already operating open pit mines in the area.
Title:Low1.0SSThe risk that Waterton does not have underlying title to Gabbs is very low, but P2 Gold's title hinges on making a USD $4 million payment to Waterton which is not currently funded. However, Waterton with 15 million shares representing 25% of issued is the largest shareholder, and if there is a reason P2 Gold does not have the cash when it is due, will likely agree to a modification of the terms to prevent default.
Tax:Low1.0SSThere is an ongoing push by progressive Democrats and NIMBY advocates to destroy America's mining industry by creating super-royalties such as exist in third world countries. However, the bigger threat is that the 21% federal rate will rise.
GeoPolitical:Very Low1.0VUIt is best to ignore hand-wringing about the cultural war between autocrats and liberals leading to a breakup of America. This probably would not happen as a coup as attempted on January 6, 2021, but would occur as a gradual slide into autocracy.
Infrastructure:Very Low0.5VSPower, roads and people are close by.
Technical:Very Low1.0SSEnough work has been done on the mineralogy that fatal surprises are unlikely, and the P2 Gold management team has plenty of experience with advanced projects.
Management:Very Low0.5VSVery experienced management team.
Financing:High1.5SSAlthough Joe Ovsenek and Ken MacNaughton were key people at Pretium, that did not help with the institutional audience in 2021 when they acquired Gabbs as a feasibility demonstration project. To deliver the PEA and vest they will need to raise $10 million plus over the next 12 months. The risk is at what dilution price does this happen?
Risk Factor Weight Table

Very LowLowHighVery High
Environmental Permitting:0.51.01.52.0
Social License:0.51.01.52.0
Title:0.51.01.52.0
Tax:0.51.01.52.0
GeoPolitical:0.51.01.52.0
Infrastructure:0.51.52.54.0
Technical:1.02.54.05.5
Management:0.51.53.04.0
Financing:0.51.01.52.0
The risk adjusted discount rate is the sum of the weight of the risk level assigned to each risk factor.
Disclaimer: A visualized outcome is one of many possible outcomes for an exploration project as it moves through the 9 stages of the exploration-development cycle from grassroots to a producing mine with failure as an outcome at any point along the way. The range of possible outcomes for the physical nature of a deposit shrinks after delivery of an initial 43-101 resource estimate. While the nature of the deposit constrains the range of mining scenarios, the cost assumptions will vary as the project moves through the feasibility demonstration stages of the cycle, which affects the economic value of the final outcome. This economic value will also vary according to the prices of the metals targeted for extraction which may change during the years it takes for a project to become a mine. An outcome visualization is thus a compilation of best guess assumptions for the key variables that drive the discounted cash flow model, the basis for assigning an economic value to a mine. An OV is not intended as a prediction, but rather as a framework that allows the incorporation of new information generated by the exploration-development cycle for the project into a valuation model on an ongoing, dynamic basis.

 
 

You can return to the Top of this page


Copyright © 2022 Kaiser Research Online, All Rights Reserved