old investor, new BB15 Jun 2018 10:22
Hi guys, i've been invested in SAV and other mining companies for a while. Friends told me it was useful and fun to discuss on BBs. so here i am.
Great scoping study yday. i read it carefully and there are a few very interesting technical points that bode well for the DFS.
1/ they make it clear the deposit is meant to be 22-26mt by the time they mine it. and there are a few mention of reservatorio licence extension imminently approved to contribute to that increased JORC.
2/ the economics are very impressive despite a meaningful deterioration in opex after 4-5 years due to the significant increase in waste to ore ratio (i suspect due to grandao's deeper ore). The economics are that good because from an NPV point of view, the earlier cashflows matter more than later ones.
3/ they mention that a big advantage of extending the resource is to prolong the shallow mining activity to maintain a low waste to ore ratio for longer (say sub 2:1 ratio for 10yrs would be great). It seems thats what Reservatorio extended will help to achieve.
Those things matter beyond the calc of NPV. It matters because the longer you can maintain high margin thanks to low Opex, the more money you can allocate to further exploration, so that after 2 years of production, we would have paid off all debt and focus all the cashflow on a mix of shareholder rewards (divi/buyback) and exploration/extension work.... Dont forget the current and extented JORC is based on 3-4 zones at Mina Do Barroso. There are a few more (Romainho, campo de futbol, etc..). And beyond that, we have a licence portfolio 200x the size of Mina Do Barroso. yes two hundred times !.
So short term, it is great to focus on that Phase 1 project and its value (20-25p now, 30-35p DFS). But you can see how the guys on the ground are keen to optimize it so that they can become a major producer shortly after first production.
You could see SAV hold reserves of 50mt @1%+ in no time. Which by the way is what you need if you want to potentially build a strategic partnership with a chemical manufacturer for example (not just an offtake with chinese companies, which is already great in itself).
I read FTSE100 Johnson Mattey just committed 200mn to build a cathode plant in mainland Europe soon. this is the kind of companies SAV could partner with and become the heart of the supply chain in Europe.