this is an established mining area in Australia. The company gathered old claims and put together a big resource for cheap. Why were they able to do this?? Former operating mines were unable to successfully grind the tougher sulphide ore economically in lower gold times.
So what's changed? Blackham found an open pit resource that supported the initial mine startup using easier oxide ore. They bought an old mill and refurbished it cheap and are now saying they are commercial. The reference to doubling production is a feasibility study that will investigate the economics of mining and milling that tougher sulphide ore. Since most of the 6+million oz are in this category, the results of this study will be crucial to the long term value of Blackham.
The old mining area and the failings of previous operators as well as the older mill are reasons that Blackham is cheaper than many other 100K oz producers with a 6 million oz resource. Again the 6 million oz only works if they build sulphide ore capacity into the mill circuits.
I think they will be able to build the capacity reasonably and have a very long mine life at much higher production levels.
During tax loss selling in late December, BLK.ax was A$.43 vs A$.765 today. But it's still not fully revalued for being a 100K producer. AND if that study shows they can double+ production at a reasonable price and economically produce those 6 million oz, the stock should be further rerated but they will have to raise some money. Hopefully the current operation will start to cashflow soon.
There are still issues. It's a plus and minus that Blackham has a collection of old mines that equal their resource. There may be operating issues with each different set of ores so the operation may not be one smooth transition to 200K. But on the other hand, if one site's ores prove to be too tough, Blackham can move onto the next site and prioritize their efforts.
I think the primary Australian listing and the hodge podge nature of the resource are reasons for the low market cap. They are also in that difficult time period where they are going thru the initial startup issues with no profits yet. Get them to 100K and profits and the market may start to take the full resource more seriously because it will be much easier to raise capital for mill improvements for a profitable miner than a junior explorer.
Good luck.
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