Not necessarily a bear case and I acknowledge it's easy to be negative, but I am cautious with gold juniors and wary of ramp up risks.

I'll frame these as questions I'd need to have answers to if I were to hold an interest in the company. Hopefully those close to the company can shed some light.

Why the dramatic drop in head grade in the March quarter?

I understand rainfall but how much did they have and did it really impact the plan to this degree? The Meeka Airport Data indicates significantly lower rainfall than the long run average for the quarter, suggesting the site were pretty unlucky with localised event and/or access issues. Additionally, the potential impact seems to have caught the team off guard, as the weather events were not reported as a material impact at the time of the event.

The company hasn’t yet disclosed the stockpile grade or percentage of the feed material which leaves me uncertain regarding mining vs stockpile contribution. Prior reports indicate the strategy stockpiled 0.6g/t material alongside 1.6g/t stockpile material. Later reports only give the closing stockpiles as a total and average. Given they reported prior with stockpile and low grade, I assume these two sources are still available. On volume they could not have consumed the higher 1.6g/t stockpile and fed the 0.6g/t material, however, the quarterly result would make sense if there were circumstances that forced the feed of the 0.6g/t material.

An AI summary of stockpile movements assumes at 2.0-3.0 g/t feed before blending the 1.0g/t stockpile gives a potential ratio. Speculating heavily here. A cross section of the pit showing the grade that'll come back into Q4 would alleviate my concern.

How is the plan progressing as compared to the base "$1B FCF, NPV $616M, 180% IRR" plan that is quoted.

Is the AISC in line? The cash costs for the first half were much higher than the AISC shown on the presentations for the project. Whilst AISC backs out the ore inventory build, this will unwind somewhat with stockpile consumption. I also note AISC rising in December and broker notes are estimating this to continue for an average $2400/ounce for the year.

The company are clearly high grading throughput- which is expected to maximise FCF, so we could expect fluctuations in quarters if the open pit feed is not mining a high-grade block. Given this, are we likely to average closer to 1.6g/t until the UG feed comes online?

The ore sorting solution. This is framed well as a solution to debottleneck/unlock value of the throughput material. I find this an interesting area of focus when considering the relatively good grades from 1.8-3.4g/t reserve pits and 3.8g/t underground.  Analysis uses a 3.2g/t Andy Well ore source essentially scaling the UG throughput grade by 85% by removing assumed dilution material.

Mill upgrade to 800ktpa- Stockpiles are building so it seems like a good business decision. But is it a necessity due to the FCF performance of the 600ktpa mill or pure upside on the existing project?

Andy Well Questions:

I'd like to better understand the history of Andy Well as the underground upside seems to be where the future value will come from.  I followed Doray after Andy Well went into care and maintenance and recall AISC were extremely high but unsure of the reason why.  

Conclusion

The latest announcement is softening expectations from investors, with the company is guiding towards September as the quarter to expect a greater proportion of higher-grade underground ore sources. Assuming they have a good June quarter, say 135kt @3.3g/t and 98% recoveries, they will land at 36koz for the year.

On my reading, the April update lowers confidence in the near-term ramp-up rather than breaking the project. The key issue is whether the March quarter was mainly a temporary ore-access problem or whether it exposed a more persistent grade blend/cost issue. Until the company gives better disclosure on stockpile mix, pit sequence and cost tracking versus the DFS, I think a cautious discount to headline project economics is warranted.

Ignoring the potential for the business to develop Andy Well as a cornerstone asset, a simple 5-year DCF, with capex factors from the broker note shared, returns around $0.23 (10% discount factor). Given risks taken, I think a 20% discount rate gives a margin of safety which lands around $0.16.