I've spotted a few errors that need to be corrected. At Bonanza Ledge I left out ore haulage from cost, although the final total operating cost of $35,655,964 is correct. Trying to keep multiple documents in memory without using detailed written notes, while firing off a post, doesn't seem to work. Here goes (all values in metric):
- Ore Mining: (297,532 t) x ($6.70/t) = $1,993,464
- Waste Mining: (5,328,528t) x ($2.98/t) = $15,879,013
- Processing: (297,532t) x ($27.54/t) = $8,194,031
- Administration: (297,532t) x ($11.82) = $3,516,828
- Ore Haulage: (297,532t) x ($20.41) = $6,072,628
Total operating costs = $35,655,964 for the life of mine or $8,913,991 for each of the four years of operation.
Since the mining permit only allows 73,000 tonnes per year, and grade is estimated at 9.05 grams/tonne, with a recovery of 93%, this comes out to 19,754 oz Au production per annum. At a cash price of $1700 oz gold, this would be worth $33,582,000. If you then subtract the annual operating cost of $8,913,991, you are left with $24,668,000 for income as a best case scenario. I say best case, because there will be other expenses, and these values for operational expenses date back to 2009. Only the listed expenses are base case. Assuming a value of $1700 for gold is definitely not.
The bottom line is particularly susceptible to increased operational costs, which is now a definite factor, and a higher American dollar. The original prefeasibility study placed the US dollar lower. Both factors will put sharp downward pressure on profits. By how much, we don't know. If the QR mine is any indicator, it could be a lot. The QR Mine was suoposed to be profitable at $821 gold, but an impairment test in the February 29, 2012 Annual Financial Statements (section 12.1) shows that at $1700 oz, the carrying value of the asset (book value on paper) would be greater than the recoverable amount (what it's worth in the real world, or how much income it generates). Since the carrying value of the QR Mine is only $1,616,292, it pays to mothball the project.
Could higher operational costs substantially reduce profitability at Bonanza Ledge? All things being equal, quite likely. The best case scenario is $24,668,000 yearly income, but other cost factors will continue to whittle away the value through attrition. The only way out is to prove up an economy of scale. At 86,500 oz Au total reserves the story is simply too small. You need hundreds of thousands of ounces at Bonanza Ledge to make this really work.