Rainbow Rare Earths Phalaborwa project shaping up to be one of the lowest cost producers globally. Watch the video here.
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".....We have updated our valuation for SolGold (“SOLG”) following the filing of the
Cascabel PFS technical report. The changes result in a US$3.6bn NPV8% and
22% IRR (immediately pre-capex) at US$8,500/t Cu and US$1,850/oz Au,
driving a modest cut in our target to 85p/sh (Jun’23E) from 101p. Nonetheless,
we view this as a solid base case, with tangible potential upside through:
inclusion of the open-pit Tandayama-America (“TAM”) deposit 3km away;
additional caves and throughput capacity to capture the remaining 79% of M&I
tonnes outside the 26-year PFS mine plan; capex efficiencies; and positive tax
regime changes within an Investment Protection Agreement (IPA) for extraction. ..."
cont'd
"....The revisions to our estimates follow release of PFS results on 20th April and the
technical report filing on 1
st June. Key changes include a reduction in throughput
to 25Mtpa vs. 30Mtpa in our previous, pre-PFS model, as the study “right-sized”
the project to a robust base case compared to the 50Mtpa PEA. Reserves of
558Mt @ 0.58% Cu & 0.52 g/t Au (vs. our previous 959Mt assumption) offer a
25-year mine life (vs. 33-years). We also tweak assumed royalties in-line with
the PFS, increasing the Franco-Nevada royalty rate to 1.27% (from 1.00%) due to
production provisions in the agreement, and reducing the government royalty
rate to a flat 3% vs. 5-8% previously. Assuming prices of US$8,500/t Cu and
US$1,850/oz Au, this generates life-of-mine EBITDA of US$27bn and FCF of
US$14bn, giving a 4.2-year payback and an NPV8% of US$3.4bn at Jun’23E (or
US$3.6bn immediately pre-capex), a ~30% like-for-like cut vs. previous H&Pe. ..."
cont'd
".....The PFS initial mine plan targets the Alpala high grade core within one cave,
with copper grades expected to average over 0.75% (~1.35% CuEq) within the
first 10 years of production. As a result of strong by-product contribution and
highly productive bulk mining methods, Alpala enjoys low cash costs of
US$(0.40)/lb Cu and AISC of US$0.06/lb Cu on a post by-product basis. This
places the project well within the first decile of the global copper cost curve
(according to WoodMac 2032 estimates). Within this is an exceptional negative
AISC average of US$(1.38)/lb in first five years from achieving nameplate
capacity (190ktpa Cu, 680kozpa Au and 1.3Mozpa Ag average annual production
in that period). These quantities would place Alpala within the top 15 and 30
projects globally for gold and copper production respectively (vs. 2021 global
production figures), and in the top ranks of undeveloped junior held projects...."
cont'd
"....SOLG is assessing optimisations that will be included in a PFS Addendum due in
H2 CY22, in preparation for the Definitive Feasibility Study (“DFS”) planned for
completion in H2 CY23. This is likely to include upside which we believe could
be unlocked through a satellite open pit at TAM. Our conceptual scenario
estimates TAM could bring forward first output from the Alpala plant by two
years, enhancing the NPV by US$240m whilst also providing flexibility and
derisking the Alpala cave operation. The Alpala Mineral Reserve is another
avenue of upside, currently representing only 21% of Measured and Indicated
Resource tonnes and ~38% of contained metal. Inclusion of additional material
could see the throughput jump to over 30Mtpa by adding another module,
though follow-on caves are beyond the scope of key technical work at this stage.
Enhanced fiscal terms could be agreed in an updated IPA (early 2024), with
Solaris Resources recently announcing a 5% reduction in income tax to 20%
amongst other incentives, setting precedent and providing further confidence in
Ecuador for FDI..."
cont'd
"....Alpala now contributes ~US$2.3bn to our SOTP based on 85% ownership and a
target P/NPV of 0.8x our ~US$3.4bn DCF (as at Jun’23E). We add a further
US$72m assuming 0.3x our ~US$240m DCF for the conceptual inclusion TAM.
We then include US$150m for SolGold’s regional portfolio including US$75m
for Porvenir and adjust for net cash and outstanding options and warrants to
derive a GBp85/sh target, implying ~200% upside. SOLG has a cash position of
US$58m (Feb’22) to but we note that at a cash burn of US$70-80m pa
additional funds will likely be required during H2’22...."
END
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