Savannah the truth is out.

It certainly wasn’t received well initially by the market, but then I am not sure what entered David’s head to release the information on a half day of trading between Christmas and New Year.

But whats done is done and we know need to look at the info in more detail.

I know many wanted a much bigger resource than this to be defined, however we need to think about the strategy that Savannah has undertaken. Its picked a few shallow strip holes near to roads and infrastructure, its concentrated on higher grades of HM. It’s taken the view that smaller and cheaper is better and either more profitable and or easier to sell.

This is a strategy I completely endorse in the current climate, there are plenty of high cost high profit projects currently shelved. Low cost, straight to profit operations are much more in style and will likely receive funding.

We have to remember that we could easily times the current JORC by 5 or 10 if we SAV wanted to and given a bit of work, particularly with some of the larger strandlines. It could be that David wants to farm out the license piecemeal, or that he want to see Savannah as a producer.

Regardless of all this, we have learnt for more from this Maiden JORC than we have seen before.

Extraction is to be dry i.e JCB digging shallow, dumping in trucks before going to a centralised processing unit, no crushing needed, no engineering of pit walls, no underground plans, nice cheap and simple, with extraction and therefore profit starting at day 1 from surface.

Extraction costs are $1.5 per tonne, processing and production costs are $50 a tonne for HM concentrate.

In total my calculations give profit (underline profit) of $97m for these small simple initial pits. This takes into account CAPEX etc. If we times the area or JORC by 10 we get nearly $1bn profit from this license all easy low cost hanging fruit.

Production could take place within 3-6 months of Environmental sign off and DEA. Initial capex would be around $8-10m and would add $50m to Mcap.

I think we need to understand that David does things his way, with is not the AIM way. He’s earnt the right to do this by creating mid-sized mining companies from nothing in the past.

I’ve not mentioned anything about Oman yet, I think it’s an amazing setup, but not for this blog today.

Happy new year all and enjoy.