These days I’ve belatedly arrived at the wisdom that many commentators and social media posters know a lot more than I do so I have become more reluctant to spew out enthusiastic text about stocks now.
I won’t be referring to scrawled notes or online reports much as if I interrupt the flow, the flow won’t happen at all – my approach will be discursive*
I prefer to buy stocks that have proved they can earn money so that is why a few years ago I got into NST, RRL, RMS in the gold sector – but gambling gets the better of me and BC8 got through my defences when I searched what a poster whom I follow on h.c had been talking about.
* discursive – moving from topic to topic without order
The light bulb moment was when it sunk in what a huge set of advantages entailed to a junior which aready has a small mineable resource only 25 kms from Kalgoorlie. Number one advantage is that Black Cat won’t need to dilute and incur debt for a processing plant to become an active miner. There are 5 mills within trucking distance, maybe more, which I imagine will likely jump at the opportunity to toll treat or buy outright BC8’s ore.
Black Cat can get a contractor to mine the ore from open pits, so again, no significant capital needed for equipment or a decline and drives. There’s 168k ozs @ 2.4 g/tonne already outlined in a close sequence of optimised pit shells with the main one, ‘Myhree’, holding at least 100 kozs @ 2.7 g/t. All are open along strike and at depth. The ore from Myhree metallurgically tests at > 95% recoverable gold with fast leaching time and low reagent demand. From the graphics it looks like the lode starts virtually at surface with very little waste to be removed. While I don’t have a real idea of the profit margin considering contract mining, trucking and toll millng, $800/oz free cashflow seems plausible at an A$2,200 gold price, but let’s say $500/oz margin, that would be $50m cash for BC8 from Myhree alone, BC8 being a company with an enterprise value on Friday of ~$18m – being m.c of $24m minus $6m or so of cash. Doesn’t take account of 14m escrowed shares and 17m options @ 23c avg – the management have looked after themselves, no surprise.
The big pay-off will come if/when they find a big one from a number of prospects they are drilling or plan to drill. So when considering a buy I saw this as a junior prospect where good quality ore could be dug up by a contractor and sold or toll milled to amply fund intense drilling campaigns without much further dilution. This for a company that currently (post placement @ 43c) would have only 115m shares fully diluted – of which the unlisted options exercised @ 23c would bring in another ~ $4m.
The tenement package is only 20-25 kms from Northern Star’s Kanowna Belle mill and I suspect this is the front running prospect for selling or toll treating the ore. Also Northern Star (NST) is a possibility for taking out the Bulong tenements or BC8 itself (just my speculation). Having taken out Newmont’s half of the superpit at Kalgoorlie, NST’s management sounded a bit acquisitive about the local area?
The tenements at Bulong have had little modern exploration – it was BC8’s use of Australian innovated geophysics (so called SAM surveys) that found them Myhree just 7 months after listing.
From the January 2018 prospectus it looks as though a major interest down the track will be the Queen Margaret project which surrounds the Queen Margaret mine where mining ceased in 1913. The old miners took 96 kozs out of Margaret grading at 1oz/t. Before its abandonment they dug a 400m exploratory drive east from Margaret which passed through 2 lodes and numerous ‘stringer’ patches. They mined a sample stope which graded at 10-12 g/t, this wasn’t particularly high for them at the time, lol. Then they got water ingress and abandoned it, what with WW1 and price of gold at the time – I imagine those were factors along with more primitive dewatering technology. No-one’s been back since in any serious way! A bodgy 3 holes were drilled later on but the company sounds dismissive: one hole hit a void, one was abandoned. With those grades Margaret was only mined down to 280 metres with almost no exploration below.
Black Cat’s been drilling out what could be a feasible open pit around Margaret, good grades, and then with new diamond drilling below the extent of the old mine there might be an underground option from the base of the pit. Maybe they’ll have so much cash from Myhree and supplementary pits that they’ll be able to dewater the Margaret shaft and that old exploration drive and set up a drilling platform from down there – just my speculation.
Other prospects are Greater Woodline containing Woodline itself which I read was the richest alluvial gold field in W.A.
There’s some Kanowna Belle lookalike prospect, remember, the multi million ozs Kanowna Belle mine now run by Northern Star is only 20-25 kms away from my reading of the map.
There is ‘Anomaly 38’ where something heavily mineralised has been detected by BC8’s SAM survey lurking around and below very high grade but short intercepts drilled by Anglo Gold in 2001. Anglo was looking for very wide low grade results suitable for a multi-million oz open pit – maybe that’s why they passed, don’t know.
Well that’s as good as I can do, I’m exhausted, doesn’t take much these days. The price of BC8 is 36 cps, up 2c today, chart might have turned at 30c. The insts and sophs paid 43 cps in the placement 3 months ago. If your interest is piqued, check out the prospectus back in Jan 2018, look at the Nov 2019 AGM presentation and lurk on the chat at various places. Decision to mine Myhree and linked pits should come as early as June Quarter 2020. Look at that A$ gold price.
Disclosure: hold 40,000 BC8 shares @ average 26c, won’t be selling any until at least double todays price (36c)
Sentiment: spec buy
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