So much Volume AUZ, page-102

Lack of news builds selfdoubt – hold fast IMHO all is on track for AUZ its just a little delayed, whichif I look at most exploration to mining stories is not all unusual in fact Ican thing of few that aren’t. IMHO this is just one of the last of the ‘treeshakes’ to frighten out the last of the weak hands.

When things look dark its often difficult to see the forest from the trees 

 We are getting close to some good news –we have much to look forward to IMHO hang in there

 

-       Optimized BFS duein this month – this I think will surprise many being much better than expectedand a big improvement from the original BFS.

-       NAIF Fundingdecision could come at any time and I hope and expect it to be positive.Hopefully this will happen before the elections, though I think as others havestated that its ticks all the boxes for all parties.
Remember NAIF loans can be
> up to 30 years
> Lower Interest than commercial lenders
> Extended periods of capitalization of interest (i.e no repayment interestadded to loan) and tailored loan repayment schedules including interest onlyperiods
> Subordination in security and or cash flow to other lenders (i.ecommercial lenders /banks have first charge/security over assets and cash flowof company and AUZ willing to accept 2^nd charge/security behindbanks and commercial lenders

-       Project Funding.It does not surprise me that SKI has not yet committed to any funding yet, IMHOthey are waiting for decisions from the NAIF in addition to perhaps other stateand federal funding. i.e they are not going to pay over A$80 million to orderlong lead time items i.e autoclaves until confirmation that total projectfunding is secured.
As previously mentioned I think the banks have largely committed and AUZ andSKI are waiting to see the potential contributions from NAIF plus perhaps inaddition state and federal entities so that they can figure out remainingfunding requirements.
Original BFS suggested forward sale of Sconi product i.e first 2 years ofproduction advanced

So hang in there I think weare close that’s why only raised A$5 million.

As previous mentioned I thinkpeople will be positively surprised by the Optimized BFS.

The original BFS from 20 Nov  2018  has the following assuming mining at all 3 Sconi Deposits
(Greenvale, Lucknow and Kokomo )

Length of Mine LOM 18 years

Average annual Revenue fromproduction (LOM) A$512 million
Average annual EBITA (LOM) A$ 295 million
Project Payback 5.2 years
Pre tax IRR 21%/ Post –tax IRR 15%
Avg Ore grades

Total Capital Costs US$ 974 of which
Processing plant capital costs US$730 million
Non processing Capital Costs US$103 million

Mine Construction costs US$31million

Contingencies US$110 million(15%)

The original BFS assumed quote “The mining operation will be centered at theGreenvale site, where the processing plant will be located. A separate open pitwill be constructed at Lucknow 10 kilometers away to the south-east withGreenvale and Lucknow being trested as a single –fleet mining area. The Komkomoopen pit, 60 kilometers to the north-northeast of Greenvale, will be operatedwith a separate mining fleet with ore to be hauled to the processing plant.

However since then we have the revised Mineral Resource Tonnage at Sconi ASXannouncement 14 Feb 2019 where additional AUZ drilling at Greenvale and LucknowDeposits only increased Greenvale Mineral Resource by 63.2 % and at Lucknow by94.6% with particularly Lucknow recording very high cobalt rich ore up to 3.14%and many great intersects of circa 10 meters at above 1% cobalt.

 

Thesenew drill results mean that AUZ

 

a.   Can achieve a LOMof 18-20 years just from the Greenvale and Lucknow deposits.

b)     No more Kokomo in the Optimized BFS and no more separate mining pit and mining fleet for Kokomo trucking ore 60 km to the processing plant.

c)    Greenvale is thelargest and Nickel more rich while Lucknow has the best higher value cobaltores and good scandium grades in places – so it makes sense as planned to plant at Greenvale and truck the highervalue cobalt rich ores from Lucknow. However having fully drilled Lucknow theyknow where best to start mining to maximize the richest cobalt and therebyminimize ore transportatation optimizing and probably bring down projectpayback from 5.2 years to hopefully circa 3-3.5 years.

d)   Not mining Kokomoin the Optimised BFS plan will lower Capex (no need for roads to and pit andfacilities at Komkomo and lower Opex no more 60 km trips to deliver ore fromKokomo to the processing plant.

e)    Also note fromOriginal BFS – they asked for quotations from 7 entities for the contractmining of Sconi (Greenvale, Lucknow and Kokomo) but at the time of issuing theOriginal BFS had only received 3 – so there could be lower quotes after publishthe Original BFS
‘ To inform this process, the Company requested pricing estimates from sevencontractors with 3 submissions received prior to the BFS deadline. The totalcontract mining operating costs for the Length of Mine are forecast to be inthe order of A$760 million, which includes road train haulage of the ROM (Runof Mine) pad from Lucknow and Kokomo to the processing plant area of Greenvale’

IMHO we do not have to wait much long for the Optimised BFS as I said I believeit will be better than many expect, however I am sure Flippa JD and co probablyhave a better idea of the above impact on Capex and opex.

Flippa great you when to see the demo plant and met Tim Mclean COO and Sophia and many thanks in posting a report, did they mention anything on when the Optimised BFS might be out and are you as optimistic about the Optimised BFS and I am ?

Everything is falling into place though at a slower pace than we would alllike. The move to EV is accelerating even though we are in the mere foothillsbefore the actual demand cliff from the battery 50 + battery plants being builtaround the world that really start producing for the new EV cars deliveryvehicles, trucks, scooter and bikes start rolling of the production lines,mainly starting from 2020. Even in China probably with the highest actual EVoptions at present EV sales are relatively minor % compared to ICE vehicles.

However we are already seeing the price of cobalt move in the last 6 monthsfrom circa US$4.8per lb to US$6.12 per lb and appearing to be on an upwardtrend. As Flippa reminds us that price is for ferro nickel not nickel sulfatewhich typically has a 20% premium over the ferro nickel price quoted and forwhich demand is set to increase over 10X between now and 2025 cobalt demand setto increase 4X over the same time period. (UBS report)

Everyone if they have not done so should have a look at these 2 You tubepresentations made by Tony Serba they are also good for any young buddingengineers in your family. The move to EV’s is gaining pace it will be quickerthan we all expect, and will not be seem less. We are already seeing asignificant slow down in demand for ICE vehicles, nobody wants to be left witha ICE vehicle with no or significantly lower resale value in 3-4 years, whiledemand and sales for EV is increasing at an every increasing rate as consumers atthe EV options get better and consumers understand the benefits. A recent UKAuto trader survey reported that last year only 25% of UK drivers wouldconsider an EV car as their next car purchase now only 1 year later 71% would.

IMHO we are at the lowestpoint of the ‘orphan period’
this is when the games are played and the downrampers and institutions are out in force trying to get a lower entry point.IMHO we are on the cusp of some great announcements and its worth waiting forthese to come out. GLTA

 

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