The cornerstone of the company was an inspired piece of deal-making with B2Gold (TSE:BTO) undertaken by chief executive Mark Child, and from that an asset base has been built up to the point where Condor has more than two million resources ounce in the ground as part of an emerging five million ounce district play, projects that are fully permitted for production, and a decision to mine increasingly imminent.
Getting the company to this point was a full time job, remarks Child, and it wasn’t by any means easy. What it was though, was a textbook case of how belief in a company’s potential combined with a bit of staying power can ultimately win out.
“It has been a twenty-four seven mission,” says Child.
“Most of the work was done through a gold bear market. It’s been challenging, but we’ve managed to keep the lights on and get fully permitted to build and operate a mine.”
Indeed, it seems hard to believe now, but when Child was putting many of his hard yards into Condor, gold was trading at less than US$1,100 an ounce, a far cry from today’s bull market US$2,000 price.
But that just goes to show what a difference timing can make: the all-in sustaining costs at Condor’s flagship La India project have been pegged at US$700 per ounce on the base case scenario outlined by the company’s pre-feasibility study, so that US$900 jump in the gold price since the worst days of that bear market should in theory all drop down to the bottom line.
That prospect in turn accounts for the recent strength in Condor’s share price, which has risen by 150% since the beginning of the year.
Might it go higher? – well, that’s a matter for the market, but there are certainly some positive milestones ahead. The first is a decision as to how exactly La India will be mined. As a major shareholder himself, Child is mindful of the deleterious effects of dilution, and as a result the company has proposed, as an option, a two-stage development for La India, which would reduce the need for up-front capex and allow for the development of the second stage to be paid for from cashflow.
With the margins on any gold produced likely to be very high at the moment, this option has a lot to recommend it.
The cost of the full-scale plant for La India has been set at around US$125mln, but Child is confident that starting out with a US$50mln plant would be viable. On the other hand, getting into production at a higher initial rate also has something to recommend it too, since there would be more margin on more ounces sooner, or to put it another way, the company could lock in the current high price of gold for more of its inventory.
It’s a fine balancing act, and one that may take a bit of pondering, but a decision won’t be stuck in the pipeline for too long. By the first or second quarter of next year Child expects to have secured financing and to be in a position to press the go button on construction.
In the meantime, as highlighted in a presentation Condor presented (virtually) at Mines & Money just a month or so ago, there’s also the possibility that the company could generate early cash flow from toll treating some of the high grade, near surface ore.
Precisely what the economics of this operation would look like remain unclear at the moment, but what is known is that there is a plant nearby that was recently sold by B2Gold because the associated mine was running out of ore and a 2,200 tonnes per day ball mill is on idle. If Child could construct some sort of deal with Condor’s near-neighbour by the end of the year, then it could be that even while the financing is being put in place for the main La India project and construction is getting underway, cash could be coming in.
That would be a welcome sign for a market that has waited patiently through the permitting and economic modelling processes, and would represent a real statement of intent for the company in the years ahead.
Because as chief executive of Condor, Child isn’t just planning a quick and dirty operation here. Rather, La India has been given a complete environmental overhaul, it’s managing to avoid any resettlement, and because the district play could end up producing as much as five million ounces the company could be around for a long time.
With US$2,000 gold in Condor’s sails, there’ll certainly be plenty of incentive to keep the exploration programmes going after the production starts rolling in, although shareholders may well decide that in due course a nice chunky dividend ought to be forthcoming too.
In the meantime, the company is sitting pretty, following the injection of £7.6mln in new cash in June via a placement and the exercise of warrants, so there’s unlikely to be any dilution any time soon.
It’ll be an interesting few months, and Condor could look very different by the end of the year.