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Cheers Bob that makes me see the sense in James’s concern regarding making Xtr just sit on it. I’m jumping a potential step obviously. Certainly a more feasible way for them to eventually farm it back out again to get it de risked further before a ‘developing’ major will put their money into it.
So let’s just get it up to the conceptual study, got a couple of years and plenty of optionality still to do it, then see what happens.
Also the other factor to consider toward improving the free cash flow status alongside an improving sustainable copper price and the optimisation of recovery rate and associated mining costs is a reminder that with seeing growth again in global economies it will inevitably reduce interest rates and also see fuel and power costs come down which will have a more positive, direct effect on the projects NPV than copper spot price.
Maybe it wasn’t from a podcast…
This from captainbob recent notes from GM
“Bush Ranger still very important asset, that it not forgotten, sort of thing majors want for inventory, regardless of wheter it will be developed or sit idle, seems there is an exit strategy from AA, that is not too expensive.”
Thats where I prob got it from about the exit so perhaps Bob can offer any further comment to substantiate from maybe a private conversation or just an assumption.
Hey James, fair one, but is all subjective in this big guessing game we are all ‘still’ playing I suppose.
He commented in one of the pod casts if I recall correctly regarding the relatively cheap exit. Or did I dream it ?
As any future BR development will be so heavily front end loaded, the extent of study work and drilling involved toward pre feasibility is crucial for it to be on the radar of any major, my rationale is that it makes no difference to AAL if the project is passed on through negotiation with an updated buy back agreement attached to the sell on clause that the next aquirer will be incentivised by. Someone else can take it to the next study level for them.
Your suggestion of a partner to get it to 2mt is not ‘at all’ unreasonable, however if through ‘choice’, I would question wether any financial benefits in the long run would be greater due to Xtr having to give away at least 50% if not far more, of the projects NPV that would ensure 3rd party full funding of an exploration programme that would not simply get it to 2mt, but also the absolute necessity to provide a supporting pre feasibility study with full mine plan with flowsheet design for any sale down the line to a developing major to be interested.
If there ‘is’ a relatively cheap exit, this has got to be in the best interests of shareholders to continue its current Zambian strategy.
Certainly have a mutual respect James you do keep me in check which is much appreciated.
Prospect ore/ xtr as good as the same thing.
Devised not designed
Sorry to be perdantic James
But of course in light of what Colin has told us about it being this legally binding agreement and the only way we can get out is if AA are decent enough to let it go. So agree It could be a concern. However he has back tracked on that apparent grip they had then, to now just suggesting there is a relatively cheap get out.
Maybe his comment is based on the fact that now neither of the buy back options are going to be met AAL will want another explorer to take it further , it’s in their interests to with their royalty attached that can now be increased.
Why would they make xtr sit on it and wait for what?
Doubts a major would take it on without its PFS so likely a consortium or mid cap miner
I still believe the buy back agreement, was devisedt to act as a marketing tool of which proved to be quite effective.
So I don’t think it’s a case it is water tight. Got to remember, Jeremy Reid came with BR from AAL where he was head of exploration.
Its wording is really vague toward decision to mine, with a number target that is just plucked out the air. (CB quote)
It gives AAL the opportunity to renegotiate the NSR sell on royalty if they don’t want it. For all we know CB has had talks already. One of the assumptions in the pit optimisation assessment was the royalty set at 4%. Why would they round it up from 3.5%?
Also to take into consideration along with increase in copper price is ‘resulting’ impact on increase in free cash flow after the optimisation of operating costs, metallurgical recovery rates, plant capacity and capital costs that are still ongoing. They included an illustrative 17th scenario based on reduction in processing cost and compared with same mining parameters for it produced an extra US$425m free cash flow on top from that reduction in processing costs.
This optimisation all in, is expected to have a positive effect on the economic performance when done, metallurgy recovery rates will improve from re sampling. The first sighter round only had 3 samples taken from RC, the other from the 4 total was from Ascot. The 3 from RC included a low reading of 78% from one in the NW that brings the average down to 88% used in all scenarios, so warranted more work. Other 2 had recovery rates of 89-90%.
Along with what you have illustrated james, it’s not difficult to see how BR free cash flow can swing positively to give a ‘lower’ break even and hopefully produce a good enough cash margin once CapEx is included.
Think BAM may go same way as Pebble NtM
Both in highly environmentally sensitive regions which maybe why there is difficulties in selling.
Permitting will rely heavily on ESG due to its location nearby to lakes and watercourses.
Bushranger however……
Finding the Ascot crown has no relevance whatsoever to what they ‘need’ to show to justify drilling to find it.
BR is far more valuable with a financially viable mining concept than just the amount of contained copper eq. Nobody is likely to buy it without one!
Due to the very nature of porphyry huge bulk tonnages and total necessity to have on site processing leading to huge capital outlay. ( imagine the cost to haul 10m tonnes of ore PA off site! ) A viability of concept along with all the data surrounding the resource model is crucial to give an acquirer the financial and geological justification and confidence to take the project further.
The project value will be derived from an NPV model first and foremost, they will ‘then’ pay for what is in the JORC only, which will see discounted to reflect being only inferred.
Xtr just need to produce numbers that work to do this and sell, an acquirer might throw many more millions at BR and show that there is an alternative concept leading to feasibility that involves Ascot in that payback phase.
Xtr have really still only scratched the surface of what is in Bushranger.
You miss the point Cygnus 1.5-1.6 mt is no good if it cannot be all used in a viable mining concept, it was far more important to utilise as much of the lower grade bulk tonnages as budget would allow. We already have the RC high grade parcel that will kick start the projects early payback phase.
“never did understand that ploy....”
Before Ascot was identified as a seperate porphyry the vision/dream was that the potential size or amount of the racecourse open pittable material would extend all the way through to, and to include the southern anomoly (Ascot). With the disappointment that the grades between southern RC and Ascot were too low to see them join up RC and Ascot as a 3km long single mining concept. If so the economics would have been far stronger toward the overall financial performance of the model due to economy of scale, that has been recently released.
So was very important indeed.
Xtr now need to get the best economic performance out of the financial model from the material just from RC which is why Ascot material has not been included at this time in a mining concept due to it being isolated.
Far more drilling to Ascot and RC may change the dynamics but won’t be for xtr to do.
Maybe why he doesn’t want to go there again.
Even as far back as when Auroch minerals produced the feasibility study for fairbride, xtr put it under review. This was primarily toward the initial mining phase but the same risks will always be there.
Mining consultant Daan van Heerden of Minxcon had said: "The Manica study has produced a robust project targeted toward simplicity and predictability. We concur with managements approach to the concession and agree that the previously announced hybrid approach might have led to enhanced capital and operating risk."
Hybrid approach was surface then going straight into underground mining.
Point being risks are real and is not smoke to justify selling up just to go chasing rainbows. Could argue management were reluctant to go UG from day 1
Net ‘present’ value unfortunately Jez
CB has been so clear in reiterating that they have no intention of or want to go into underground mining for good reason. It presents far more dangers in comparison to mining on the surface. You don’t have more serious issues such as air loss and cave-ins, workers don’t have the extra regulatory processes of operating machinery UG.
There is risk of fires, floods, collapses, and toxic containment. Fires can be caused by short circuits or friction from defective bearings; collapses can result from induced seismicity or blasting, with toxic containment being from ventilation issues.
Far too risky for xtr to be going into, without any input into design and mining strategy operation as a minority partner. This just the long shot , there’s no guarantees they can keep a consistent feed going from the transitional ore with current set up to make the upgrades needed.
The droughts in Zambia, which should mean there will be no delays to drilling schedule, had an impact on Copper futures with a surge to above $4.27 per pound in April,
“”the highest in 14 months, lifted by increasing supply risks and signs of some traction in demand for top consumer China. Disruptions in major mines in Africa were the latest to weigh on growing global supply issues, with logistical problems in Congo and droughts in Zambia hampering activity.””
From Asnalysts report.
Off the back of the news release 7feb re Ongombo it could well see the final nudge to development stage with a potential new partner and cash injection from XTR.
Ongombo (by name only) was mentioned by Colin as a further project that XTR was looking to JV at a recent GM to vote on the disposal and sale of their Manica mine.
Ongombo certainly fits the criteria at this point in time in its evolution for XTR’s acquisition strategy. Would benefit both AFP and XTR if this is not one of Colin’s name muddle ups as the project described at XTR’s GM was just west of FQM Sentinel mine.
Could be interesting.
Just trawled back a little further March ‘16 update and an in house PEA was done the previous year to update economic metrics for the ongoing feasibility study.
Key metrics for it were in 2015-
Project Net Present Value ('NPV') (discounted at 10%) increased to US$70 million (PEA NPV: US$50 million) with an Internal Rate of Return ('IRR') of 50% (PEA IRR: 58%) assuming a gold price of US$1,250/oz
· Life of Mine ('LOM') increased to 12 years (PEA LOM: 8 years)
So the offer price for disposal was US$17.5m would have been based based on that economic assessment which is considerably optimistic in light of the eventual DFS
Compare to the actual bankable feasibility study.
After-tax Internal Rate of Return ("IRR") of 41.1% at a gold price of US$ 1,262 per ounce
· Project life of 7 years with average gold grade of 2.62 g/t producing 215,293 recovered ounces
· Project payback within 2 years
· Direct cash cost ("C1") of US$556 per ounce
· All-in sustainable cost (including royalties and capital)("AISC") of US$862 per ounce
· Total capital expenditure of US$43.68 million
· The Net Present Value ("NPV") of US$ 42 million at 8.4% discount rate
Can clearly see the disparity that reflected the higher offer in 2016.
“our main asset has been sold for less than previously offered”
To be fair on valuation now, the price is reflective in that the first stage ‘mineable’ ore has already been depleted by about 50%. With many more millions being needed to be spent to tap into the sulphides and transitional ores.
It’s a completely different proposition now, to before when the feasibility study wasn’t even done. A lot more difficult for a project to be valued without an NPV.
Could well argue that the price offered in 2016 was over valued as was just based on potential and what the buyer was willing to pay and how much they wanted it.
Https://www.lse.co.uk/rns/XTR/disposal-of-manica-gold-project-for-us175m-e2l0lbeow2nube4.html