Re: GBM - Greater Bendigo Gold Mines
Following losses in Bendigo, I studied this area extensively, especially over the last couple of months as GBM caught the eye. I am sure that there are enough critical differences between GBM and Bendigo to continue/increase support of GBM. (I haven’t studied Perserverance).
My thinking is a follows. I would be grateful for any feedback.
While success in Central Victoria appears to be trickier than other places, the returns should be greater. Particularly so with a company Cap’d at $ 20 mill.
According to
www.Goldnerds.com.au, (and confirmed by other research), the reason is that the gold in Central Vic is “nuggety” (in rich patches) and in narrow veins. Therefore it is not easy to get a JORC standard resource assessment. Rather a successful company will do bulk sampling and mine it commercially in conservative quantities. This seems to be what GBM have done.
In most other areas, including WA, the gold is evenly spread. To get an accurate JORC statement of resource the WA miners drill down at regular intervals until they stop getting a consistent and economically viable assay result, and having done so in all directions, do the assays to determine grams per tonne, and it’s maths to calculate volume of earth times the grade. Apparently that's the resource to a JORC standard. I've seen web-photos of 15 drill rigs extended in a straight line across a "being-proven" WA goldfield.
Bendigo Mining, apparently with South African experienced management who had no experience in Central Vic, did not understand this. They used the computer modelling methods that worked in WA but that don't apply in Central Victoria. Basically, the multiplication of gold-rich patches by the total area of the field, (rather than the rich patches multiplied by the extent of the narrow veins), resulting in a hugely inflated resource. The second reason they got it wrong (and the reason they probably won't fully recover) is that, based on the inflated resource, they installed mining and processing plant for wide vein. As the gold is in narrow vein, their end grades were diluted below the economic production level. The third reason is that they over rode the views of their local staff, most of whom shot through to work for other miners in the area.
Apparently a cost prohibitive number of infill drill holes is needed to get a proper JORC resource in Central Victoria. So the way is to get in cheaply and mine conservatively at a profit, and then, for the future, do the conservative maths based on actual mining.
It seems that GBM know what they are doing. They have:
1. Enough cash (recently).
2. Know the gold is there (Assays, bulk sampling results and rich history - see the web site).
3. Able to process it profitably (the tenements, mine, access and plant exist and we'll know their cost when they turn their plant on).
4. Good people (assumed - not checked by me at this stage) and management with local knowledge.
At a Market Cap (commencing production) of $20 million, with production ready to start, the risk of GBM appears to not be comparable with Bendigo, who had a (pre-production) Cap over $ 1 billion (if I recall correctly).