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Nearly 17% down on one person's *** packet calculations? Carful people it might be a plan to buy more shares cheap. Or it shows how people trust a stranger on a board more than our CEO hahaha
Earning in 2 days. Let's see the facts.
Let’s not panic everyone - the SP is on the floor. Thank god for the gold.
If this amounts to fraud what legal recourse do investors have.
CB needs to resign and we need someone with honesty and focus in asap
Great analysis Steve, and unfortunately I think you are spot on.
Steve4077,
Thank you for all your hard work.
Would be interesting to see or hear a response from CB!
just see this as a fantastic time to jump in, or in my case, top up at a bargain price. This will be sold on. Colin knows a lot of people in the business world, with very deep pockets.
Where is your purchase of shares on the open market, Colin, to put the money where your mouth is?
(7/7)
There is still Ascot to be revealed and that could be better, especially as it is entirely new ground. However, given the Racecourse model I have considerably lower hopes than in the past, plus if Racecourse cannot at least break-even on an NPV basis to pay for the mill, adding Ascot won’t help. There is also the hope that copper prices will improve considerably and make the deposit economic. This is going to depend on the world situation and is out of our hands, but copper prices will need to reach record levels and sustain that over the lifetime of the mine. Finally, there may be some ways to reduce the opex and capex from the original. Countering those hopes is that any buyer is likely to err on the side of caution, especially given the dependence on sustained higher copper prices, the need for a more realistic build schedule compared to the above and how Racecourse might compare to other M&A options.
Regardless of what happens in Australia, there is still gold income from Manica. I strongly believe this should be invested in drilling Ascot, where the potential for adding useful extra tonnage seems most likely. Given the conclusions from above, it seems likely that spending the Manica gold income on acquisitions in Zambia would be an attempt to distract from the reality at Racecourse.
(6/n)
If we take the 0.15% scenario from the new JORC, with 336m tons of ore, then a 20mpta mill would run for 17 years. Using the above method of building everything in year one and assuming max production from year two, I produced different NPV scenarios using a copper price of $3.68 (current), $4.02 (break-even on base cash flow), $4.50 and $5. The first three scenarios result in a loss. The last is equal to a $11,200 per ton copper price, but does have a positive NPV of 292m AUD using 8%. However, that NPV is less than 3% of total spend, so it is unlikely to be attractive to investors. Also, potential investors may not believe that building all required infrastructure in year one is a realistic scenario.
One final scenario. This uses a 24mpta mill, using the assumption of a 20% increase in capex. Opex is assumed to remain static as the total amount of ore dug up is the same (higher wages, fewer years, etc.). Copper Price is assumed to be $5. This will now require 14 years instead of 17. However, that makes the situation a little worse in terms of NPV vs the 20mtpa over 17 years.
In summary, the old JORC could only generate a small positive NPV with a $5 copper price and a very generous construction schedule and it appears the new one is the same, mainly because it is double the ore tonnage but with only 50% more copper (see above). Again, I am being very optimistic on how quickly positive cashflow will be generated and that will have a major impact on NPV. Potential buyers will no doubt factor in an appropriate level of risk to the numbers.
Once I started down this road, which was only possible once we had the new JORC, it became apparent that Racecourse as it stands is not an economic proposition. Also, I believe XTR have made a significant effort to obfuscate the reality of the new JORC, without actually stating anything incorrectly, and therefore it required some effort and analysis to understand that the extensive drilling campaign for Racecourse added only 235,000 tons of copper at 0.135% to the original JORC in a direct comparison, plus some indeterminate proportion of 216k tons at 0.12%. Neither addition improves the overall economics.
(5/n)
To make the mine an economic proposition, we don't just have to break even though. We have to generate sufficient profit to create a meaningful return vs other options for capital investment. Net Present Value (NPV) is used to calculate the value of the investment you are considering – building a mine – to an alternative strategy of investing the money to generate interest. After a given period - nine years in the original conceptual study - you can compare what the cash flow would be worth vs what the interest would be worth. The difference, positive or negative, is the net present value.
In the original conceptual model (which used a $5 copper price), the base cash flow of $1b AUD was reduced to 268m AUD using an 8% NPV and 135m with a 10% NPV, based on a mine life of nine years.
I created a simple example to replicate the NPV numbers from the original conceptual study and the result was 264k AUD vs 268 AUD. This assumes all capital expenditure before project start then equal opex and revenue in each of the nine years stated in the project. This is an extremely optimistic view because it assumes immediate cashflow, when in reality it might take a couple of years or more to build the necessary infrastructure, including the mill for processing ore.
Below (Missing screenshot) is a slightly more realistic scenario, but still optimistic, with no cashflow in year 1 but still the same nine year mine life. This is reasonable because it is supposed to be a 20mpta mine and this is 162mt over eight years with the build happening in the first year. This NPV is a little lower (192), but still positive with $5 copper price. This is the method I am going to use for future scenarios: build the mill and all other infrastructure in a single year then assume max production from day one of year two. This is still a very positive view given normal construction and ramp-up times (consider Manica).
(4/n)
Basic Model – 0.1%
If we run this basic model again with the 0.1% cut-off, capex remains the same but we have 512m tons to mine and process so the opex increases to 13.122b AUD. Total cost 14.576 AUD
Recovered copper would be 0.18% x 90% x 512m = 829k tons. 829k x 2240 (lb per ton) x $3.68 = $6.837b
Recovered gold would be 0.05 g/t x 90% x 512m = 23,040m grams or 648k ounces. 823k x $1750 = $1.440b
Total revenue is therefore $8.277b or 12.172 AUD at current FX of 0.68.
Therefore with current copper and gold prices, mining everything with a cut-off of 0.1% would have costs of 14.576b AUD and revenue of 12.172b AUD, which is a loss of 2.5b AUD. To break-even, copper price would need to be 1.35 AUD higher, which is $0.92, or $4.60 ($10,300 ton).
(3/n)
So, now we have the above, how does that affect the economic viability of a potential mine at Racecourse.
As mentioned above, this is using the old JORC but based on a 0.15% cut-off, 20mtpa mill and $5 copper price. Therefore the ore tonnage is 162mt, not the ‘official’ 71mt of the old JORC which was based on a 0.3% cut-off. The revenue in that scenario is 6.63b AUD, mainly from copper but including 230k oz gold. 914m lb of copper at $5 yields $4.57b, or 6.18b AUD, so the gold adds 0.45b AUD at about $1500 per oz. This is based on an FX rate of 0.74 in July 2021 for AUD vs USD.
Below is the new JORC broken down by cut-off. I am going to run the same conceptual study using the same XTR parameters from above but based on the 0.15% line below. This has 336mt of ore, or slightly over double the old JORC for the same cut-off. Also note that the contained tons below is copper equivalent, not copper. For example, the 882k tons at 0.15% cut-off is only 705k tons of copper with the other 177k tons being the gold equivalent
Basic Model – 0.15%
Lets assume capital expenditure (capex) for the 20mtpa plant is the same in both scenarios (1454m AUD) and that operational expenditure (opex) is pro-rata for the ore tonnage mined, which means 4152m AUD in the original and 8612m AUD in the new version. Lets also assume a 90% recovery rate, which is a little better than the original conceptual study but reflects the recent metallurgical analysis. The copper price when I ran this analysis was $3.68 and the gold price was $1750.
Recovered copper would be 0.21% x 90% x 336m = 635k tons. 635k x 2240 (lb per ton) x $3.68 = $5.234b (USD)
Recovered gold would be 0.06 g/t x 90% x 336m = 18,144m grams or 648k ounces. 648k x $1750 = $1.134b (USD)
Total revenue is therefore $6.368b or 9.365b AUD at current FX of 0.68.
Therefore with current copper and gold prices, mining everything with a cut-off of 0.15% would have costs of 10.066b AUD and revenue of 9.365b AUD, which is a loss of 700m AUD. To break-even, copper price would need to be 0.49 AUD higher, which is $0.34, or $4.02 (or $9k per ton). Bear in mind that is break-even and does not account for discounted cash flow (more on that later).
(2/n)
The new JORC doesn’t show copper tons directly, but it does have the ore tonnage and the grade with a 0.15% cut-off. 336m tons at 0.21% grade = 705,000 tons of copper.
So, given a direct comparison, the result of the phase 1 and 2 drilling has been to add an extra 235k tons of copper to the JORC at a 0.15% cut-off, while reducing the average grade from 0.29% to 0.21%. Consequently, that means the extra 235k tons must be at a grade of 0.135%. Bear in mind that the original JORC of 470k tons at 0.29% was valued at £1.25m, because that is what we paid for it.
What about the 1.1m tons at 0.1% cut-off? Well, firstly that is ‘copper equivalent metal’, not copper. The quoted grade for the 0.1% line in the 23rd November RNS is 0.18% and the ore tonnage is 512m, so the actual copper is 922k tons. That is an extra 216k tons vs the 0.15% cut-off, but with an average grade of 0.123%. We don’t know how much of that was already in the original JORC because we don’t have a 0.1% version for comparison.
As the additional copper in the new JORC is at a much lower grade than in the original JORC, I believe it is safe to conclude there is no newly discovered ‘high grade core’. Any higher grade material was already included within the original JORC and therefore within the original conceptual study.
In terms of gold, the original JORC was 0.064 g/t for the 71mt at 0.3% cut-off. However, the 162mt in the conceptual study at 0.15% cut-off must have lower grades because the conceptual study shows 229k oz after an 82.3% recovery rate. That is 278k before recovery, or 0.048 g/t. The 0.06 g/t assumed for the new JORC at 0.15% is a higher grade and for twice as many tons, giving 160% more gold. However, it is still very low grade and a relatively small part of the overall revenue.
(1/n)
I’ve run a detailed analysis over the weekend on the new JORC vs the original JORC and what that is likely to mean for the economic potential for Bushranger. The results were both surprising and concerning. This analysis is based entirely on numbers provided by XTR in various RNS.
The original JORC, which was part of the package of licences we acquired for £1.25m, is usually quoted as 71Mt @ 0.44% Cu and 0.064 g/t Au at a cut-off of 0.3% Cu. That gives us 312,400 tons of copper. The new JORC is 1.1m tons, so that sounds like a substantial increase. Except, it isn’t.
XTR produced a conceptual study on 26th July 2021 that looked at various options for an open pit mining operation. Out of all the scenarios presented, one option resulted in a positive NPV: a 20mtpa annum mill, a 0.15% cut-off and a $5 copper price. Obviously that did not include either the phase 1 or phase 2 drilling, so the assumption was that a substantial increase in JORC would make Bushranger far more economic and open up additional positive scenarios.
https://www.lse.co.uk/rns/XTR/bushranger-conceptual-open-pit-mining-study-c05hq78ws9qagfq.html
On November 23rd 2022, we received the updated JORC.
https://www.lse.co.uk/rns/XTR/racecourse-prospect-updated-mineral-resource-k5dfrxajgs0ls13.html
This was headlined as “Following the completion of a substantial drilling programme by Xtract, independent consultants, Measured Group, updated the historic Inferred Mineral Resource Estimate for the Racecourse Prospect, which is now reported as 512Mt @ 0.22% CuEq*, at a cut-off of 0.1% CuEq, containing 1.1Mt of copper equivalent metal and classified as Indicated and Inferred in accordance with JORC (2012)”
There are several important differences for the new JORC versus the original JORC.
• It is a 0.1% cut-off vs 0.3% for the original JORC
• The new JORC is quoted as Copper Equivalent grade
• The total contained metal is quoted as Copper Equivalent tons.
This can make it hard to make a fair comparison. Fortunately, there is other information that allows us to do exactly that. The conceptual study from July 2021 provided a 0.15% cut-off version of the original JORC, because that was part of the only scenario that showed a positive return. The new JORC from November 2022 also gave a breakdown of the new JORC at different percentage cut-offs, so we can run a direct comparison at a 0.15% cut-off.
The original JORC had 162m tons of ore at a 0.15% cut-off. While the study does not highlight the grades, we can work backwards from the production numbers: 914 million pounds of copper with a 86.8% recovery rate and 229k ounces of gold at 82.3%. It is interesting in itself that the study used pounds when everything else uses tons. So (914m / 2240) / 86.8% = 470,000 tons of contained copper. We can also work out the grade: 470k tons copper / 162m tons ore = 0.29%
I ran a analysis of the new JORC over the weekend, comparing it to the old one and using only numbers provided in XTR RNS. I've dropped a PDF into the Telegram channel with the results, which is several pages long. The main conclusion though is that using a direct 0.15% cut-off, the phase 1 and 2 drilling updated the JORC from 470k tons of copper at 0.29% to 705k tons at 0.21%. The extra 235,000k tons was at 0.135% grade. Running the new numbers though the July 2021 conceptual study produces slightly worse results, because there is double the tonnage of ore but only 50% more copper. Adding the lower grade material below the 0.15% cut-off makes the economics worse.
I'm going to publish the analysis in a few linked posts but I won't be able to post the screenshots from the RNS
Sorry, several thousand. ;)
Same podcast different link
https://www.share-talk.com/colin-bird-executive-chairman-of-xtract-resources-xtr-l-interview/
Gixxer just for info
Earliest mention I’ve got link for of the magical 2mt back in April ‘21 at end of phase 1
@5min10
https://podcasts.apple.com/gb/podcast/share-talk-ltd/id1093206470?i=1000516000961
It looks like Colin Bird's approach is rubbing off on you Porvenireal.
"several hundred better properties"
There seems little point in debating with you. I think I might have spotted an exaggeration
XTR can still drop Anglo's name in any news release, but Anglo's side of the agreement is VERY much "don't call me, I'll call you."
And so now we have the resource numbers.
OK, Anglo-Albanian might offer 100 million zloty's, but Anglo-American? Oh c'mon! It's like in highschool, a 6* pining over a 10... will only end in tears. *(being generous.)
Can a small or midsized company buy this Racehorse etc property instead? It doesn't have to a bigboy, anyone's money is good, right?
Well, the answer is no, and it's a standard problem in the porphyry exploration industry worldwide...ie...a porphyry mine is a long term, long life, HUGE CAPEX serious national undertaking.
Small and medium sized companies can't afford this, and will basically NEVER get such a notion financed, (even if the economics are golden.) So that leaves one, possibly two dozen companies worldwide, who can/will successfully finance the whole shebang, with a nice pay out for shareholders.
Problem there is, the guys in those companies, they're conscientious suits who know the name and phone number of several hundred better properties than this one, for them to choose and stake their careers on.
If you think I'm mischaracterizing Racehorse, I'm all ears.
The uncertainty is exactly why Colin should clarify.
Well put Andrew.
My only concern is the comment that we need to, “show them that we are moving toward financing.” Hence my earlier posts. Maybe I’m being too pessimistic and there is a clear path now to an end.
Listening back again, it’s was the show us you got a feasibility study comment that Stevem originally picked up on that made me doubt what I initially thought to then look at the worst case scenario. But on reflection I think his, ‘A’ feasibility study comment simply referred to an appropriate pfs.
Hi BL
We are tied into the agreement that is legally binding, it is designed to give AA first refusal but is not weighted in their favour. It gives us and them optionality, with a process toward a conclusion that will be followed in accordance with the agreement terms if they both cannot come to an agreed value. So trigger the process with DtM otherwise the only way to be free from it is if AA decide to let Xtract be freed from it basically.