Post
by garindan » Mon Jan 03 2022 12:38pm
So I have thought very carefully about this company and our investments in it.
Firstly, I'd say that the New Year, finally getting the systems for the new treasurer sorted out and exiting of those members that wanted to leave has given us the opportunity to seek investing the cash funds we have at our disposal. We will move that cash into new investments and in the process of doing that we'll greatly alter the balance of our portfolio of shares. No longer will we be as heavily into gold, so worries about that should not longer prevail.
Secondly, I've come to understand a fair bit more about mining for gold in the past months. One thing is for sure - setting up a new mine, dialing in your gold extraction systems and honing gold recovery is no easy thing to accomplish at speed. There is also a great consideration to be made as to what material should be run through the systems during this time. It clearly makes absolutely no sense to run your best material through a sub-optimal set-up. Likewise it does not make sense to run purely low grade material either. You'll either lose high percentages of gold during the tuning set-up with high grade material or you'll struggle to dial-in the extraction system if the material is so poor there is little to recover in the first place. Hence mixed grades are normally used during set-up, which is going to produce lower gold per ton than expected over the long-term.
Thirdly, there is always a call to be made as to whether run lower grade material through the extraction process or just to class it as equitable to the overburden useless dirt removed to get to the cost effective gold seam. It's quicker to class it as overburden but if it pays to run it through the extraction process you are losing money you could have, even if it is not a great return.
From the reports I've seen I'm inclinded to believe PUR has struggled to dial-in the machinery and has been running a mix of mediocre and lesser quality materials since the start of production. If this is true, which is not incredibly surprising noting the complexity of the mine, it can be understood why the gold recovery rates reported as lower than "expected" by the shareholders. If they were truly poor grades from the good areas the likes of Sprott would be looking elsewhere. They fact these investors are still in suggests there is nothing materially wrong with the mine's gold reserves. Gold doesn't go off, it's in the ground waiting to be recovered after all.
Clearly the management has done themselves no favours over the past year. In 2020 they were full of interviews, reports, news and so forth. In 2021 things have been far more quiet. The director share sales have stoked the fire but gold recovery reports are improving.
So my view is to continue to sit tight. I still feel excited about the prospects with this one, despite it having been so high and fallen back. In hindsight it would have been great if we had sold at the high and now been able to buy back again. We all know that is not how the cookie crumbles very often. I do feel we will get back to those kind of prices again though, even if it takes another year to do so.