Ann: High Grade Hits in Oposura Central Zone, page-16

I’m quoting directly from the Scoping Study in what I say to illustrate project economics using different (imo more realistic) metal price assumptions

Total expected revenue for Oposura is approx A$500m, minus OPEX (~A$270m), resulting in A$237m EBITDA. Deducting CAPEX (A$77.5m) realizes cumulative net cash flow (LOM) of $159.6m. Apply an 8% discount rate (assumed interest) and there’s a (pre-tax) NPV of A$112m.

As I said, metal price assumptions for Zn & Pb (which account for 98% of LOM revenue) are waaaay higher than current market prices (17% & 21%, respectively). I wouldn’t use them as an investor. I doubt potential financiers will.

Importantly, these prices are also much higher than where many analysts see Zn & Pb sitting in coming years. Several weeks ago, Hedge Fund Raymond James predicted a 2020 Zn price of $2,429/t (6% less than current price; 22% less than price assumed in the study)

According to Table 9, if one plugs in today’s Zn price, NPV drops by A$40m. Use the RJ 2020 forecast, it drops by A$50m. Use Sep 2018 prices, it drops by A$80m. Using today’s Pb prices wiould strip another $A22m from the NPV.

This project will succeed or fail on the basis of base metals prices over the next several years. Recoveries, grades, capex efficiencies etc, will all take a back seat to macro and geopol developments. The sensitivity analysis makes this very clear.

Don’t believe anyone who says Oposura is ‘derisked’. There’s little buffer in these margins. If, over coming years, Zn heads close to (let alone below) where it was a few weeks ago, the SP will sink like a stone (It will be a loss-making venture). Of course the flip-side is also true - hence why I call this project one for metal bulls