This is coppied and pasted from the SGO Channel on CEO.ca but thought it worth sharing to other platforms & investors.
I have a few thoughts regarding SGO’s PEA and a conversation I had with Sonoro. In Summer of 2020, SGO announced a “Project Development Report” for it’s Cerro-Caliche project in Sonora Mexico. There was an estimate added to the resource that could bring the ounces to SGO to > 1 million. In the latest PEA the resource estimate was M&I of 349,000 + 71,000 oz inferred. The report also mentions that outside of these pits there could be another 365,000 gold and up to 3mm ounces of silver. We also must remember that only part of the property has been mapped and sampled, and of this explored portion only 30% has been drill tested, meaning there is significant upside for SGO still ahead.
The importance of this fact is that once in production (estimated sometime H1 of 2022) SGO will be able to self fund the additional exploration, resource increase and as a result the mine life. If additional ounces are uncovered (which is highly likely based on the past reports noted above) this would change the PEA significantly. I’m not an expert so I reached out to SGO to discuss further what this could look like, and they had some solid answers (they told me they have run some numbers for different scenario’s internally are really like what they see. Some scenarios included decreasing CAPEX by leasing equipment, contract crushing or contracting other portions of mining operations; as well as obviously increasing the resource size). They did tell me that if they expanded to 1mm they felt confident and conservative in stating that this would increase the mine life to at least 15 years. Obviously as a result of increasing mine life, the financing costs and repayment would amortized (repaid) over 15+ years vs 7 years in the PEA. This would therefore increase the economics, specifically the NPV and IRR.
I’m also told that SGO is in discussion with financers now and are reviewing different mine scenarios and the economics of those plans (which they hope to release in due time). I still hold the opinion that SGO is undervalued here. There is significantly more gold that SGO were hitting (and high grade) weeks before the PEA was announced. These high grade zones/windows weren’t included in the PEA but will be drilled this fall creating more catalysts for the stock. My average cost base is low 20’s and I continue to bid and pick up more shares on this post PEA sell off.
As a strong kicker I was reminded that during the first three years, the average gold production is estimated to be net 56,500 ozs per annum. Gross revenue per annum = 56,500 x $1,750 USD = $99mm USD PER ANNUM…. And we are currently trading at a $20M market cap, imo this is an easy buy here.
