I am certainly aware of how downrampers are treated on HC, and with a fair few RVR shares I think the opportunities for RVR to grow are good. However, today's announcement was frankly bloody disappointing when you go over the numbers in detail.
Firstly, from this diagram, it would be fair for investors to assume a fairly large LOM increase and metal content was due for West 45 (from 21/11/2017 presentation):
Prior to today's announcement the Reserve at West 45 looked like this (from 21/11/2017):
We can work out a Zneq. metal content of 421kt x 15.0% = 63.15kt Zneq. metal
When we read today's "narrative" it appears OK. They fail to provide comparable numbers (which I have just done above), but this is what the new West 45 Reserve shows (20/12/2017):
OK, so lets compare and contrast:
The tonnage has increased from 421kt to 567kt for a 146kt increase, or +34.6%. That's a small increase by anyone's standards, but West 45 is a small deposit. It'll keep the mill running for about 5 additional months at the 325ktpa run rate it is doing.
The grade has dropped from 15.0% to only 11.6% Zneq. ... that's not good in anyone's books. The $$ contained in each t of rock mined and processed is worth less now ... so lower margins.
But how much additional metal can RVR turn into cash? Doing the same calculation as previously we can work out:
567kt x 11.6% = 65.77kt of Zneq. metal
Hold on ....
65.77kt - 63.15kt = 2.62kt of Zneq. metal .... WTF ... that's not a 10% increase in metal. It's more like 4%.
So, RVR are intending to haul 34.6% more ore for just 4% more metal ... that doesn't sound right.
So how much cash is this potentially worth? Let's make the generous assumption that RVR get paid the LME spot price for Zneq. of US$3,200 t. This means 2,620t x US$3,200 = US$8.3m in additional revenue (it will be less as RVR won't get paid this amount per t).
For this revenue, they have to haul an additional 146kt of ore. This means the revenue per additional t of ore comes out at $57t.
RVR have stated that their C1 cash cost estimate is US$0.18c lb or US$396t over their LOM.
We can't really use this figure to work out the cost of mining/ hauling/ processing/ transporting the additional ore as there will be some sunk costs that are incurred regardless such as the drift etc.
However, the numbers don't look at all flash to me. This is at best very marginal for RVR.
I realise that RVR have a bigger game in Far West, Waterloo, Liontown, etc, etc ....
... but unless someone can tell me where I am going wrong (and I freely admit my stupidity) then this is absolutely lipstick on a pig ... and I don't see where they can claim 10% more metal ... my calculator must be busted.
I am just surprised the SP didn't go down today on this.
Cheers
John
RVR Price at posting:
28.0¢ Sentiment: None Disclosure: Held
