ORR - OreCorp Limited

[Sean K]

This is good darts and de-risks the project further I think. Confirms that Tanzania are back in the game and open for business.

 

[The Triangle]

Slowly been picking up ORR this past two weeks. I admit I am starting to get a little concerned about gold. I am now out of almost all other commodities in the micro/small cap space. ORR on a daily basis can drop down 7-10% without any issue and then recover flat. Volumes are very low usually around $100k per day so getting in or out with any significant volume either takes time or dramatically shifts the SP. Last week one morning the SP was down 19% and finished the day up.

Less than 1 year ago ORR raised 56 million at 80 cents when the gold price was in the high 1700s. Since that time they've cleared away most of the government/permitting issues and continued work on a feasibility and still have $40 mill in the bank. MC now under 200 million for what was 5 years ago looking like one of the better deposits in Africa looing to be put into production. Pre-Feasibility was done on $1250/oz gold price.

I'm sure there are things I don't understand at all about this company or this deposit - but having done a Scoping and PFS study these guys have been very careful about not giving out much information on NPV numbers. I can flush out a 9 digit NPV calc using my thoughts on todays costs and prices. 12 years @ 210+koz a year is not too bad and we know they've added a few ounces since 2017.

 

[Sean K]

Slowly been picking up ORR this past two weeks. I admit I am starting to get a little concerned about gold. I am now out of almost all other commodities in the micro/small cap space. ORR on a daily basis can drop down 7-10% without any issue and then recover flat. Volumes are very low usually around $100k per day so getting in or out with any significant volume either takes time or dramatically shifts the SP. Last week one morning the SP was down 19% and finished the day up.

Less than 1 year ago ORR raised 56 million at 80 cents when the gold price was in the high 1700s. Since that time they've cleared away most of the government/permitting issues and continued work on a feasibility and still have $40 mill in the bank. MC now under 200 million for what was 5 years ago looking like one of the better deposits in Africa looing to be put into production. Pre-Feasibility was done on $1250/oz gold price.

I'm sure there are things I don't understand at all about this company or this deposit - but having done a Scoping and PFS study these guys have been very careful about not giving out much information on NPV numbers. I can flush out a 9 digit NPV calc using my thoughts on todays costs and prices. 12 years @ 210+koz a year is not too bad and we know they've added a few ounces since 2017.

I've been adding in the low 50s. Seems to have been bought up on weakness indicated by the long tails on the candles the past 2 weeks. Looks oversold considering the future production profile. A lot of scared people out there at the moment.

 

[Sean K]

Well, this little pup has been smashed during this flight from explorers/developers. MC down around $150m or so. Halved. Like a lot of others I guess.

I missed the announcement in May that the DFS was been delayed due to nothing really clearly articulated. That can't be the only reason, unless the delay is for a bigger problem internally, or politics.

Pre-May plan followed by the updated one.

 

[Sean K]

I'm not sure if this is good news. An "announcement regarding the DFS" does not mean the DFS is going to be released. Perhaps more delays or something more sinister. Slightly concerned.

 

[Sean K]

I guess it will be released Monday. I'll be dialling in to this.

 

[The Triangle]

I'm not sure if this is good news. An "announcement regarding the DFS" does not mean the DFS is going to be released. Perhaps more delays or something more sinister. Slightly concerned.

View attachment 145646

It's pretty much the exact same announcement wording that TIE used last year.

Will be interesting to see the cost forecast - ORR would probably be the most recent/biggest operation to put out a feasibility in our recent inflation diseased world. From memory they used $1250 USD gold prices back in 2017 and came up with a capex of just under $300M USD and AISC of just under $900 USD.

I think we can expect that the cutoff grade will have been dropped with the increase in gold price, the mine life extended, production rate increased, but course capex costs up and cost per ounce up. Cost per ounce might be down if they managed to increase production significantly (I doubt that)

 

[Sean K]

Capex looks steep compared to what TIE have just done. Different deposits with a lot of the high grade underground here. Seems like a low IRR due to capex, even though producing 200k in first year. Mining costs of $110m in pre-production explain a big chunk of that. Maybe pre-strip and the underground component. Now the trouble with finance...

Still looks cheap in their comparison with some peers on an EV/Reserve basis, although most of those are in production so I'm not sure if it's a fair comparison.

 

[The Triangle]

Weak hands folding early on the market....

Big Capex tells me these are realistic costs. Aisc still below $1000 USD. Not an amazing result but still acceptable. Takeover still a possibility.


Tie has a day of reckoning coming. I do not believe they are immune to cost increases which are impacting every other company.

 

[Sean K]

Weak hands folding early on the market....

Big Capex tells me these are realistic costs. Aisc still below $1000 USD. Not an amazing result but still acceptable. Takeover still a possibility.


Tie has a day of reckoning coming. I do not believe they are immune to cost increases which are impacting every other company.

The PFS had a $287m Capex, so that might have spooked people. AISC was $838 so a bit higher as well.

Surprised by the extent of the drop though. Volumes been pretty low with a big gap between the buy and sell sides. I didn't think it was that bad.

I'd be surprised if they take it to mining. Maybe they're already in contact with their old mates at Barrick.

Agree on TIE, I can't believe they've done it so efficiently and effectively, on time and cost. I'm prepared for some bad news...

 

[The Triangle]

It sticks out to me the massive cost increases in the mining & contractor/construction areas. Effectively the prices have tripled. I have a feeling the 'contractors' and 'vendors' who gave them budget pricing probably jacked up the estimates to account for inflation and covid. If ORR are looking for debt rather than equity funding then this is probably perfectly fine.

I don't think this project is big enough/long enough for Barrick to be interested. B2Gold might be a suitor. They have random projects everywhere, have low debt, and high cash and a big enough market cap to absorb ORR. Could very easily make a script (and probably should) offer for $300 million and walk away with the remaining cash on hand that ORR has.

	2017​	2022​	Change
Process Plant	75.9​	89.2​	18%
Reagents and services	16.4​	23.8​	45%
Infrastructure General	56.7​	71.5​	26%
Mining	35.7​	110​	208%
Contractor & Construction	13.9​	42.4​	205%
Management Costs	17.6​	31.2​	77%
Owner Project Costs	34.3​	62​	81%
Working Capital	4.1​	3.9​	-5%
Taxes	0​	3.7​	N/A
Contingency	32.7​	36.1​	10%

 

[Sean K]

Looks like the debt will be a combination of things. Been in the toilet for a while with MC at $150m. Perhaps extending the LOM is intended to get some interest from a larger miner to take it over.

 

[Sean K]

I think ORR is in the trough of the orphan period on the Lassonde Curve at the blue star at the moment. Getting finance sorted and getting into development should see value increase, if it's not taken over before hand.

 

[Sean K]

I don't think this project is big enough/long enough for Barrick to be interested. B2Gold might be a suitor. They have random projects everywhere, have low debt, and high cash and a big enough market cap to absorb ORR. Could very easily make a script (and probably should) offer for $300 million and walk away with the remaining cash on hand that ORR has.

I've been looking into Barrick's operations in Africa and they probably could be a suitor for this project. They start losing ounces in 2026 from their Tongon mine which will need to be replaced. About 200k oz. Their Tanzanian mines are doing 300 and 200k oz. Bulyanhulu is only about 50km away. They could easily tack this on and create a Barrick gold province producing 750k oz pa. They had some issues with social license due to a legacy TSF issue but are back in the good books after pumping in cash. Though, perhaps it's not ideal to put too many eggs in an African basket...

Interesting heading here though: "deliver growth through partnership".

 

[The Triangle]

I've been looking into Barrick's operations in Africa and they probably could be a suitor for this project. They start losing ounces in 2026 from their Tongon mine which will need to be replaced. About 200k oz. Their Tanzanian mines are doing 300 and 200k oz. Bulyanhulu is only about 50km away. They could easily tack this on and create a Barrick gold province producing 750k oz pa. They had some issues with social license due to a legacy TSF issue but are back in the good books after pumping in cash. Though, perhaps it's not ideal to put too many eggs in an African basket...

Interesting heading here though: "deliver growth through partnership".

View attachment 149801

Maybe, but Barrick had this project not too long ago. I have not kept up to date with the company, but my feeling is that they want very simple shallow bolt on open pit mines, or company acquisitions. taking Nyanzaga/ORR would still require them to finance everything, take all the risk, and do all the project execution. Surely they would rather pay a premium in 2-3 years time after all the hard work has been done?

But I also think ORR is about the cheapest it's going to get with regards to market cap so won't be surprised (well it's why I'm invested) to see it taken over.

ORR hit 65 cents today! But has already fallen back to mid 57.5 on low volume.

 

[Sean K]

ORR hit 65 cents today! But has already fallen back to mid 57.5 on low volume.

Yeah, hardly any volume. Was very strange. Maybe the sell side disappeared and someone bid at market not seeing the gaps.

 

[The Triangle]

Yeah, hardly any volume. Was very strange. Maybe the sell side disappeared and someone bid at market not seeing the gaps.

Probably, ORR has some wild intraday trading historically. Several months ago, there was something similar where it was sitting low 40s and spiked up to mid 50s on a few hundred thousand at best. When it was trading higher it used to routinely swing +-7-8% and finish the day flat with low volume.

 

[tech/a]

Thought Id throw in a few comments.
Strictly from a technical Volume range perspective.

Price cannot rise when met with Supply.
Demand absorbed supply on low volume compared to Friday.

There isn't a rush (At the moment) to liquidate at this level
Not unusual to see inside days or reversals off highs on extreme range days.

Going forward inside days with less range would be preferable.
Consolidation around 50c is also good.
New highs are longer-term best news.
A pullback in supply will be the catalyst for higher prices.

Just thought Id post this up to follow along.

 

[Sean K]

Might have to put this down to an anomaly I think, unless there were some desperate FOMOs. The couple of trades at 65c look pretty dumb. Or, has someone done that to offload positions after the expected pile in.

 

[Sean K]

Well, I'm putting down 5 Dec to fat fingers and a lack of liquidity on the price spike to 65c and drop off. Interesting that it's held up around the 50c mark after going sideways in the 30s for some time.

MC at $200m, which still seems undervalued for their ounces at grade, even though there's a lot UG that will take some capex to get to.

Project financing seems like not a problem with quite a few banks lining up and other options to get it off the ground.

Pre-tax NPV almost $1b, post-tax $600m, warrants a higher MC, IMO. Just 50% of the post-tax NPV is a 50% price gain. Hopefully a take over offer is at a much larger premium to that.