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Edison Report

lse:omi

#1

Released 5Dec16:

Apparent market reaction today is decidedly -ve; maybe as focus is on the next quarter results having higher costs/lower production due to completion of transition from Arenal into the SG underground [West side/upper] mine and production ramp up thereof.
On the other hand, the detailed analysis of the 4 SG ore bodies is quite encouraging. An extension of reserves and mine life looks very probable; hopefully during next few weeks.
Plus, although the SG grades aren’t that great, they are relatively accessible and cheap to develop compared to what it cost with Arenal.

But as ever, all is highly sensitive to the POG.
We are on a razor edge here.
As this report concurs: “Reflecting the company?s short mine life, a US$100/oz (ie 10%) change in the US dollar gold price has a material effect on our base case valuation of anywhere between 90% at the lower end of the range, to 24% at the upper bound value of US$1,500/oz.”

Maybe this spooked some investors.

Hmmm…at least Edison have been tolerably conservative in their POG forecasts for the next several calendar years. $1275/oz for 2017 [previously $1347], $1220/oz for 2018 [was $1408], $1283 [$1484] for 2019…
Ouch!
Yet the profit, earnings per share and share price forecasts are not dismayed.
Far from it.
Well at least they seem plausible; the reasoning is at least worthy of serious consideration.

It looks to me rather as if the Orosur game plan is to carry out a carefully targeted, ongoing development/production plan, over the next 5+ years, focused in the Isla Cristalina belt, rolling from new pit to new pit, on a 1-2 year turnaround, churning out ~40k/pa gold: ~30k underground/~10k open pit.
Anza in Columbia will, it seems, provide some of the above gold [from 2017H2?]; the hope being the cheap method of extensive heap leaching can be utilised for the grades and [oxide?] ores available.

TS