True, but these forums are all about some informed (hopefully) speculation. Here are a few figures.
The 2008 BFS summarises down to an 800,000 tpa steady state operation over a 10 year mine life, producing an after tax NPV of US$149 (discounted @ 8% but b4 financing costs). This is on life of mine revenues of US$1,286m. So in this assessment, on average, every $8.60 of revenue produces $1 of NPV (roughly profit).
The life of mine BFS prices, used to estimate revenue, ranged from:
Cu lb $3.20 to $2.50 Au oz $850 to $650
Co lb $30 to $16 Ni lb $12 to $8.50 Zn lb 90c to 75c
To narrow down what prices were used when, the BFS states the average annual production over the first 5 years and the associated annual revenue.
Copper Gold Concentrate: Cu 8,800 tonnes (19.4m lbs) $57m $2.50 Au 11,900 ounces $ 8m $670 Bulk Concentrate (co-product): Co 1,900 tonnes ( 4.2m lbs) $73m $17.40 Ni 1,350 tonnes ( 3.0m lbs) $27m $9.00 Zn 3,800 tonnes ( 8.4m lbs) $ 5m 60c Cu 1,700 tonnes ( 3.8m lbs) (part of $57m)
So what would some of the changes be to update the BFS? Well the cost saving on the plant drops straight down to the NPV - fantastic. Production falls to say 500,000 tpa and the mine life extends. This is negative for NPV as fixed costs run for a longer period and the cash is received later and thus discounted more. The $2.50 for copper appears conservative, though copper has swung either side. The $670 for gold is too low, though a relatively small revenue earner. They used euro to US$ FX rates of 1.55 to 1.15. The lower the euro goes, the lower production costs will be relative to the revenue earned. On the negative side, ore transport costs will be higher.
In this BFS Cobalt and Nickel were forecast to be big revenue earners. The $64 question is what margin do these co-products generate. I can make an educated guess but thats all it is.
These are interesting figures to play around with. They are why I find it a bit odd that the co-products arent guaranteed to be an integral part of the project. Mgmt will have a good reason. Ive made a suggestion as to why and no doubt mgmt will make it clear in due course.
Not investment advice and I like the longer term prospects.
URL Price at posting:
14.5¢ Sentiment: Hold Disclosure: Held
