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Well let's see. First hurdle getting the debt sorted. Personally don't have much faith in the diamonds materialising but I may be totally wrong - still only in for a punt because of the negatives here. Hope this changes going forward. All the best.
Thanks xcoder. All of that, if materially different from the pre-existing position, and reaching any conclusion, would have needed to be RNSed. I don't think any material changes were.
How could Vast strike a measurably better deal with Mercuria than before when Mercuria is the creditor doing Vast the favour of rolling the debt? AP has a long history of chatting carp in interviews, unfortunately.
But as regards the relationship more generally, my guess is that there's been a semi-mutual plan that (a) the company hits breakeven on its ore extraction and copper concentrate production; (b) they then ramp up volume to "nameplate", which might create a cash margin to play with at the mine itself; and (c) they apply that cash margin to expanding the scope of the BPPM operation from the tiddler it currently is into the monster it was advertised as being.
More specifically, I think there will be costs to bringing on a molybdenum concentrate. Like the copper concentrate, molybdenum might run at a loss for a while until it's optimized. So they will probably look to cross-finance the molybdenum from the copper until the molybdenum hits profit in its own right. Etc. Etc.
What that, IMO, means is that "breakeven" is indeed a moving frontier, not a fixed point. Revenues will rise but so will the budget.
I think the company could really be a lot more forthcoming about its plan for BPPM going forward. Note that they bounced off the idea of profit (once upon a time targeted April) to become "nameplate" volume, which is a production comment, not a cash comment.
Found the mention in a podcast 28th Feb this year with Justin Waite Vox Markets round about the 5:50 min mark. To be fair he does say a new agreement coming up end April and nothing about renegotiating anything but who knows - lol. He does mention access to funding too but I guess that didn't happen or I haven't seen anything subsequently about it.
Xcoder: btw, glancing back, I should clarify. I meant that the Plc management salaries are a separate corporate overhead budget; obviously the miners are a BPPM budget, yes.
Thanks xcoder.
Hi Sandy. I found a mention by myself on a thread titled AP interview from Feb 28th. So it seems like it was mentioned in an interview - I will see if I can find it.
Xcoder: do let me know if you can find that. If so, it's slipped my mind and I'd be interested.
Yes, I'm fairly sure they said they were renegotiating and I mention it in an April post I made. I'll see if I can find the source. I get your point though that it doesn't particularly give us any more info.
Xcoder: I don't recall seeing anything about renegotiation. But we were never told about the terms in the first place 🙄
I wonder if the company actually renegotiated off-take and was it on more favourable terms. Can't remember if we actually heard about that yet?
Nevergonnaretire: yes, the BPPM budget and the overall corporate budget are two very different things.
I definitely want to return to this over the weekend as we can use some figures to find the difference.
Nevergonnaretire: thanks.
Yes, it's a very oddly low budget. I'm increasingly of the view that a big part of the issue is with the processing plant side of the operation.
1. To refer to a point I think I made to xcoder just earlier, I think the original budget projection probably included the processing costs for one or more other concentrates (e.g. molybdenum) that haven't yet come on stream.
2. The processing plant itself is operating at much lower efficiency than originally projected. This is partly about purity of concentrate being lower than targeted but it's also about the ore volume to concentrate volume ratio. I posted on the numbers for that issue some months back but I'll try to return to it with the new figures this weekend.
My hunch is that a big part of the operating cost is the processing plant, and that as the plant does more work, with additional concentrates and higher purities, the processing budget will rise significantly. The issue will then be whether they can optimize the financials of the new concentrates quickly, and in the first instance subsidize any losses internally via profitability specifically on the copper concentrate.
Actually thinking about it again, I think Vast will need money for a while yet to cover their 'corporate obligations' as they put it..
How much that is per month..? Then we can work out roughly when BP will be officially profitable 📈
Thanks Sandy for your input.. as always..😊
On this basis, looking back at previous production reports, especially January this year where they reported sales of 488DMT of copper conc in Q4 2022 , it would seem that Vast was much nearer to break even than I previously thought back then..? I do remember an rns stating that if certain problems didn't arise then break even would have been achieved much earlier..?
Why no sales in April, this must have had a big impact on any monetary reserves Vast had.. and thus money was needed via a placing to shore up the accounts.. but how many more placings will be needed to leave BP self sufficient..?
The monthly running costs seem or feel a little low to me, but this could be explained to an extent by 'de humanising' the operation and as previous rns have stated, the purchasing of machinery to ramp up operations and thus reducing costs over the near term..
Xcoder: that's not a BPPM operating cost. It's corporate overhead, which is a separate budget.
One obvious issue, IMO, is budgeting the molybdenum production and other concentrates they've aired in the past.
The management didn't take a salary is one thing I can think of.
Sandy - thanks for your breakdown. That's a big disparity. Is there something we are missing? The number of miners has increased considerably so running costs should actually be higher.
Message was cut off. Here's the rest:
2. Will continuing operations and increases in production involve the budget floating back up towards previous expectations? In other words, is "breakeven" a moving frontier as costs that have perhaps been held off need to be worked back in?
The direction of travel is positive. But there are questions.
Okey-doke. It's one of those times where there's a lot to analyse so I'm going to do this in stages, as I get to it over the weekend. First things first: breakeven.
Q2 report confirms that BPPM achieved operational breakeven in June. What does this look like?
(Note: although the company gives both wet and dry concentrate figures for reference, wet is used for shipping whereas dry is used for sale valuations, so I refer here to dry.)
Breakeven is a financial position, not a production position. So benchmarking breakeven ought to be done on the 167 dry tonnes *sold* in June, not the 255 dry tonnes *produced* in June.
We also know that, as sales lag production, the dry conc. actually sold in June drew on earlier inventory, which was a mix of purities. At end of Q1, they had 241 inventory. They sold nil in April and 149 in May, leaving 92 dry tonnes from that inventory at 23% purity available to sell in June.
That means June sales (167 dry tonnes) probably included:
-- 92 from Q1 at 23% purity
-- 75 from April at 17.6%.
June sales therefore probably consisted of:
-- 92 x 23% = 21.16 pure tonnes equivalent
-- 75 x 17.6% = 13.2 pure tonnes equivalent
= equivalent of 34.36 dry tonnes at 100% pure for sale valuation purposes (average purity being 20.6% on the 167 tonnes).
London Metal Exchange shows yesterday's spot cash valuation at $8450 per pure tonne.
https://www.lme.com/en/metals/non-ferrous/lme-copper#Trading+day+summary
Taking that value as an approximate indication:
34.36 pure dry tonnes x $8450 = $290,342 gross value of copper concentrate sold in June.
From this, you have to deduct Mercuria's cut plus tolling and refinery fees; but you also have to add gold and silver credits. We do not have values for these. (The working hypothesis has been that they more or less balance out.)
About 3-4 years back, when they got the licence and were starting to reopen the mine, the company projected a monthly operating cost at BPPM of around $800k-$1m (say ~$900k) and a breakeven monthly sales volume of around 450 tonnes. Prices were lower then but they were also anticipating a much higher purity (~30%), so these shifts largely cancel each other out.
** So we are currently looking at a very substantially reduced budget at BPPM being covered by a very substantially lower sales volume. **
The figures we now have, with monthly breakeven at 167 dry tonnes and gross sale value of ~$290k is a new reality, different from earlier projections.
Breakeven is obviously a major step forward. But achieving it at around one-third of the original budget on about one-third of the formerly expected necessary sales volume is an ambiguous situation. It raises two immediate questions in my mind:
1. What operational impacts has the much lower budget had?
2. Will continuing operations and increases in production involve the budget rising back up towards previous expectations? In other words, is "breakeven" a moving frontier as cos