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Replies to post #202 on Scorpio Gold Corp. (SRCRF)
Scorpio Gold’s self-reliance and sharp focus pay off
11th Nov 2013, 10:35 AM by Anwar Ali
proactiveinvestors.com
The term ‘junior producer’ almost seems counterintuitive as deep-pocketed majors get trounced in markets, but perhaps it is a wise choice for a small cap to make in an environment that's left aggressive explorers empty handed. To that end, Scorpio Gold ( CVE:SGN) has taken a more sustainable approach that has put an emphasis on cash flow, instead of spreading itself thin by loading up on land claims.
While peers in the space struggle to drill or build mines and mills while they tread on an arid financial landscape, Scorpio has centralized its efforts on production in Esmeralda County, Nevada. Specifically, the company has a 70% interest in the Mineral Ridge open pit gold mine, where it forecasts production to be as high as 40,000 ounces this year. The Vancouver-based company hasn’t been immune to a sector-wide stock slump, however, but it is cash flow positive and profitable.
"We went out, secured our money, bought an asset and got it working as fast as we could,” president Steve Roebuck told Proactive Investors, alluding to a process he calls backwards engineering. "We have decided to go in, get mining, get profitable, pay debt, get everything in order and then start to look at the broader exploration picture."
Scorpio’s lone time going to the market, when it went public, is a contrast to what Roebuck describes as the standard industry model characterized by repeated attempts to gather funds.
"For some people it works. For most people it doesn't work,” he says. “And I think you're seeing in this market right now the companies that are producing, the companies that do have cash flow, are actually doing fairly well or at least keeping their noses above water."
The company has been in commercial production at Mineral Ridge since January 2012. Output of 32,066 ounces of gold and 13,871 oz. of silver met its yearly production guidance for 2012. In the first six months of 2013, Scorpio produced 18,180 oz., while bringing cash costs as low as $713/oz., a significant reduction to the $800 to $900/oz. range last year.
The lower cash costs are a blessing given gold’s recent unpredictability, but that is something that hasn’t really swayed Roebuck’s bullish stance on bullion. "While everyone else is falling on their horns, we're looking for opportunities."
Further down the depth chart is Goldwedge,
a fully permitted
underground mine and
400 ton per day mill,
a short drive south of the Kinross Gold-(TSE:K) (NYSE:KGC) Barrick Gold (TSE:ABX) (NYSE:ABX) Round Mountain open pit joint venture in Nevada’s Manhattan Mining District.
Scorpio recently completed a preliminary 3-D geological model of the deposit based on data from past operators, and is now in the process of compiling the assay and lithology database from past surface and underground drilling.
On the horizon is a new core drilling program on up to six fully-permitted drill sites and, eventually, the completion of the NI 43-101 compliant resource estimate. Roebuck says a mine plan could be in place at Goldwedge as soon as 12 months from now.
Even though the $2.5 million of cash on Scorpio’s balance sheet may seem paltry in comparison to other miners, Roebuck says the company doesn’t need a huge balance sheet because it puts its cash flow back into its projects.
In the last quarter reported ending in June, Scorpio’s revenue grew 19% to US$14.8 million. Cash flow declined 29% to US$5.4 million.
Shares of Scorpio, whose CEO is Scorpio Mining ( TSE:SPM) founder Peter Hawley, have a 52-week trading range between 17 and 73 cents.
AI
