Friday, March 11, 2011

What bloody next department


After our obligatory management change of top echelon Barrian types we are immediately bombarded with a plethora of news including yet ANOTHER $ 7m financing which brings our fully diluted number to something in excess of 115,000,000 shares.

Does it not raise the slightest suspicion that even more dilutive millions are required to make Nixon Forked fly when the PEA made promises of ...

a)Capital costs to resume production are estimated to be $6.3 M with a projected payback of 3 months.

b)the project delivers an IRR of 549% and NPV of $60.9M on an undiscounted cash flow of $64.3M

c)a two year production forecast at a production rate of 150 tonnes per day with an average mined grade of 30.1 g/t.


With these kinds of numbers one would be encouraged mightily to suppose immediate and instant cash flow from copious gold bricks that would be flooding the FAU treasury faster than water engress into the mine shaft.

Well that obviously isn't what this "braintrust" is counting on, is it. Among the patently insulting is the disclosure that cash burn is expected to run $ 2.5m per month, which may be the first grain of truth from this Company in eons.

This humble scribe has another, far more likely cascade of events. The $ 6.3m CIL circuit may be operational by late July, giving all of 60 days of feed from 8 gms/ton tailings before they are frozen solid for another year.

At 85% recovery and 150 tons per day that amounts to a whopping 36 ozs per day at a cash cost around $ 440. Will that plant net $ 500,000 per month before all other overhead and expenses?

After 60 days there will be no other feed available and a body can make book on that. That plant will sit idle over the winter while fixed costs keep adding up. By then the PEA and 30 gm/ton material will be a proven, water logged lie.

The additional $7m won't keep this guaranteed white elephant in cash until next spring so ANOTHER dilutive share issue will obviously be required to keep the improbable dream alive, and who will be the next dope to step forward when in excess of $ 15m has been burnt off with zero return possible?