CHZ - Chesser Resources

[The Triangle]

They finally put out their resource today. Nothing amazing - but good strip ratio, and good grade (with a higher cutoff). Looks like a drill campaign to start in January to increase the total ounces.

If they went with a 0.8g/t cutoff and a 3:1 strip ratio I'm confident that they would have the ASIC down to well under $1000 AUD/oz.

• Say $6/t mining cost x 4 tonnes to produce 1 tonne of ore = $24/tonne cost.
• Call it $50/tonne including processing
• 2g/t is worth about $150/tonne
• ~ $100 per ore tonne of cashflow to pay corporate costs, tax, more exploration, capex etc.
• That's about a billion in cashflow. Not bad for a 70 million market cap.

Obviously the market was unimpressed. SP did nothing today other than an initial jump up. People only interested in million ounce+ deposits and few understand the importance of strip ratios!

 

[mullokintyre]

Seems not too many interested in this one.
I picked some up at 0.11 over a few days.
As the three sided one said, they could be a very low cost producer.
More drilling results out today sowing their initial deposit is open along the strike in both directions and at depth.
Happy to put something into these West Afrocan miners for a medium return.
Mick

 

[The Triangle]

Seems not too many interested in this one.
I picked some up at 0.11 over a few days.
As the three sided one said, they could be a very low cost producer.
More drilling results out today sowing their initial deposit is open along the strike in both directions and at depth.
Happy to put something into these West Afrocan miners for a medium return.
Mick

Well that's disappointing to hear. Preferred to be on this unloved island by myself!

Thought the 10c mark would fall today based on the last few weeks of trading and I may have been able to get more at a lower price - but then they had to go and announce more gold. Also looking forward to scoping study, which is a polite way of saying back of the envelope in house calculation - as mentioned before, a low strip and what could be a high grade surface open pit is going to be very profitable.

A scoping study has commenced over Area A and Area D at Diamba Sud post the release of the maiden Mineral Resource Estimate. The aim of the study is to demonstrate the expected robust economics of the current resource base.

I like the cut-off grades here because even if gold drops 100, 200, 300 dollars an ounce, they could lift the grade easily without a dramatic drop in the resource. So many mines it seems are stuck around that 1.5g/t mark no matter what they do. Would not be surprised if they can pull a 350 million+ NPV out of their hat using reasonable numbers.

 

[mullokintyre]

Che shucked out some more drilling results with reasonable concentrations of gold.
Few high garde areas and some only so so ones for an everage of 3.0 gmt at a 1.5 cutoff to give a total resource of 493 oz.
Not a big deposit, so they need to expand this area significantly via more drilling to get someone to take notice.

 

[The Triangle]

Che shucked out some more drilling results with reasonable concentrations of gold.
Few high garde areas and some only so so ones for an everage of 3.0 gmt at a 1.5 cutoff to give a total resource of 493 oz.
Not a big deposit, so they need to expand this area significantly via more drilling to get someone to take notice.

Was happy to see they still have well over $5 million in the bank. The admin costs are tiny. Maybe $130k/month - which is on par with some of the garbage juniors here with absolutely nothing. They have started drilling again so we should see some results come back, but I don't think anything will significantly move this until their scoping study comes out or until they update the resource. I've said it before many times that many resource investors don't grasp the economics of strip ratios with open cut projects.

 

[mullokintyre]

Announced today they hve been granted licenses over a larger area adjacent to the Diamba Sud holdings.
Drilling underway to see if there is anything exciting within it.
Mick

 

[The Triangle]

Not a bad scoping study:

AISC $820 USD/oz
IRR 59%
NPV $300 USD
Capex $182m USD
$1800 USD/ Oz assumption
1.25 years payback from production

That's all for 700oz and 45 million EV.
Anything added in drilling I think should add to mine life and NPV with minimal impact on Capex estimates.

 

[mullokintyre]

Not a bad scoping study:

AISC $820 USD/oz
IRR 59%
NPV $300 USD
Capex $182m USD
$1800 USD/ Oz assumption
1.25 years payback from production

That's all for 700oz and 45 million EV.
Anything added in drilling I think should add to mine life and NPV with minimal impact on Capex estimates.

Yeah, its a bit of gamble to hope that the further drilling expands the resource, but searching for gold has always been like that.
Happy with what they have firmed up, at the price I paid, its good value.
Any firther good drilling results is icing on the cake.
And I love cake.
Mick

 

[The Triangle]

Yeah, its a bit of gamble to hope that the further drilling expands the resource, but searching for gold has always been like that.
Happy with what they have firmed up, at the price I paid, its good value.
Any firther good drilling results is icing on the cake.
And I love cake.
Mick

I think they are very confident in adding additional ounces otherwise why drill new areas right now? Another few 100koz is not unreasonable and tacked on to years 8-9-10 would probably jump the NPV by at least $50 to $100 million USD. But I'd be happy with this study even if I was told there was zero chance for any upside.

After a little more reading I thought either CHZ have dramatically overestimated their costs or TIE have dramatically underestimated theirs. CHZ with a startup of $182m USD TIE with a startup of $200m USD - Yet setup to handle double the tonnes per annum. CHZs scoping study probably has more details than most ASX listed Feasibility studies (I'm not suggesting they are accurate, but its good to see all the numbers and assumptions they use) I go through a lot of these studies and CHZ looks to me to be going for the under promise over deliver theory. Which is very different to the recent over promise and pump - capital raise - over promise and pump even more - capital raise - under deliver - but that's ok, we raised so much we'll be ok theory.

The Scoping Study results clearly demonstrate the very significant potential value from a future mine development at Diamba Sud. Importantly the study does not include any potential Mineral Resources from the new discovery at Area H (Karakara) or any further resource additions that might result from the current 15,000m to 20,000m drilling program all of which would further enhance the value of the Diamba Sud Project

 

[mullokintyre]

Someone must be reading your posts triangle.
Up 13% this morning.
Want to see it stay above that 13 level from january.
Mick

 

[mullokintyre]

Well, a placement at 21 cents was pretty darn good.

They should have enough cash and drilling completed to get a resource out before going back to the market for more $$$. Looks very close to surface and hopefully grades should be good enough to make it a sell off/takeover target to one of the larger players in the area. Though nothing spectacular has come through on recent results.

Well, they are back to the market for more $.With the current Sp around 13cents, , which still leaves those who bought at last CR at 21 taking a bath.
I suspect that this cR will have to be pretty well below current SP to get the kids to stump up more cash.
expect it see this one significantly lower after it opens after CR.
mick

 

[The Triangle]

Well, they are back to the market for more $.With the current Sp around 13cents, , which still leaves those who bought at last CR at 21 taking a bath.
I suspect that this cR will have to be pretty well below current SP to get the kids to stump up more cash.
expect it see this one significantly lower after it opens after CR.
mick

Sounds like its 10.5 cents. Not surprising the capital raise came, but it is disappointing to see the level at which it was done.

CHZ still sitting at a reasonably good value relative to other African juniors (EV:NPV, Margins, EV:OZ). If I recall most of the management options sit around a trigger of about 20 cents and they have 12-18+ months to get there. I'm still hopeful of a good return over a long period, but I'm less optimistic that this will be a "multi-bagger" as CHZ have not gone very well at self promotion.

Interested to see if this will be an open raise or a sophisticated placement. I agree if it's Taylors - what are they saying to their clients who paid 21 cents last year in the previous raising? I'd be pretty pissed. Euroz must be involved too as they've put out the most recent research note?

 

[mullokintyre]

10.5 it is.
Euroz and Taylor as joint lead managers, i guess taylors have gone to some "other" sophisticated and insto clients.
My first purchase was at 12, the latest purchase was at 10.5, so in some ways I am not out of the money, but was sitting on some nice profits when it was 13.
Looks like a bit of a waiting game.
Maybe it might get taken out by one of the larger neighbours.
Mick

 

[mullokintyre]

I have gone all out and entered CHZ as my stock pick for the April competition,
Expect it to zoom back up to 15 cents at least.
Have no other valid reason to pick it.
Mick

 

[mullokintyre]

After the takeout of OKU, I am betting that CHZ will eventually go the same way.
Its proximity to the B2G holdings, plus its recent announcements about "very significant gold results' (albeit from rock chip samples), puts them in the spotlight.
Will buy on any weakness below 11.
Mick

 

[mullokintyre]

More good shallow drill results out.
makes it a bit more attractive to the bigger neighbours.
mRE expected in 2nd half of 2022 should be interesting.
mick

 

[mullokintyre]

CHZ still putting out decent drill results.
Karaka at 200 meters is open at strike length and depth.
Wonder just how big they make it look before they issue the MRE , which given the level of increased drilling, may not be out till more assays are completed.
Hoping this one goes the same as Oklo.
Mick

 

[The Triangle]

CHZ still putting out decent drill results.
Karaka at 200 meters is open at strike length and depth.
Wonder just how big they make it look before they issue the MRE , which given the level of increased drilling, may not be out till more assays are completed.
Hoping this one goes the same as Oklo.
Mick

Tucked away in the recent announcement was the fact that "Definitive Feasibility Studies (“DFS”) have commenced" and re-reading the most recent presentation I noted they mention decision to mine by mid 2024... It doesn't take 2 years to get a feasibility study finished - especially considering this is going to be a reasonably simple open pit operation - I just don't understand why they wouldn't have a final investment decision by mid 2023 if not early 2023.

I dug around and found the info on options, Looks like 5 hurdles. Pretty sure the first one has been met, the second one surely will be met with the next resource estimate (as they were already sitting on 692,000 oz @2g/t) - I presume they get to play with whatever cutoff grade they want to achieve their bonus - the third one is probably going to require a lot more drilling, but it's a chance it's also reached with the new update. The 4th set of options seem like a done deal. Although I don't know what a 'positive' DFS is??? I'm guessing it means start mining. The fifth set of options look partly achievable.

 

[mullokintyre]

Updated scoping study released to include the results of the October mineral updates.

Being conservative with their figures, using $1600 an ounce , so would think that these figures should be significantly better than that.
Maybe it will now go the way of Oklo.
Mick

 

[The Triangle]

This is from the September quarter... So - assuming the same trend - CHZ would be sitting on 1.70 quarters of cash left, which means they need to answer 8.8.1 & 8.8.2 in the December quarterly which I further assume to be "Yes" and "Yes, a capital raising" I don't think anyone made a cent off the last capital raising March last year for $12 million at $0.105 (I'll note in the Dec '21 report they had 2.7 quarters left)

The numbers are looking very good for the scoping study - but maybe it needs to be a million ounces to get any attention - unfortunately, if the market is not interested then the market is not interested. Frustrating situation when everyone knows a company needs financing and a whole lot of dilution is about to happen.

Suppose the question is at what price will the capital raising be? 8 cents? Sophisticated investors only?