Moss Lake Gold (MOK.V) has released the results of a PEA on its 100% owned Moss Lake property in Ontario. As the initial capex comes in at C$543M and the operating cash cost at $922/oz, this project doesn’t seem to be viable at the current gold price, as neither the $543M initial capex nor the C$315M sustaining capex includes a contingency provision.
Using a gold price of C$1396/oz, the after-tax NPV5% comes in at just C$28M, or C$0.59/share. When using a gold price of C$1318/oz the project has a negative Net Present Value. Even though this PEA seems to be worthless at the current gold price, consultant InnovExplo has recommended a C$13.5M work program which includes C$4.5M for drilling.
It doesn’t look like the Moss Lake project will be built anytime soon, as even at a gold price of C$1861/oz the project has an IRR of just 21%. As the company had a negative working capital of -C$1.15M at the end of Q1, Moss Lake Gold will have to raise additional capital not only to complete the work program recommended by InnovExplo but also to be able to repay a C$2M loan due at the end of September. As Wesdome is the main shareholder of Moss Lake Gold, I expect this loan to be extended again. A capital raise at these prices will obviously push the amount of outstanding shares much higher, thus reducing the NPV/share even further.
> Click here to read the press release
Disclosure: The author holds no position in Moss Lake Gold and has no intention to initiate a position. Please see our disclaimer for current positions.
