Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Hi Sq52
I think the current JORC is 0.44% CU and 0.064 g/t AU so approx 0.48% CU equivalent, no mention of silver in the headline figures I just glanced at.
So on the surface yesterday’s figures where an approx 5-6% increase on what we have currently, I’m far from a geologist but without knowing what had been included in the geological model for the area drill 8 targeted I don’t get how Steve can suggest hole 8 will substantially increase the CU in the existing JORC? I would be delighted to be wrong of course, and quite easily could be.
I read the below quote from CB as hole 8 has proved up our concept and future holes will add the value to what we have
“These results support our plans to design and develop an open pit in the Racecourse porphyry region. These initial results suggest that the crown area has a propensity to carry good grade and will continue to add value to the conceptual open pit. A number of holes in the drill programme are outside the current resource and thus our conceptual pit modelling”
My thought process is that the SP won’t budge much until the market see the value of work being done e.g. an updated model or material income comes online.
Cheers
James
Isn’t it just a case of yesterday’s assay results were from a drill in the existing Resource (my understanding) and the grades were very much inline with existing Grades (0.44% CU and 0.064 g/t AU) so despite being a positive RNS there wasn’t a lot of value that the market could easily add without knowing exactly what the forecast was for the hole (grades / metres etc)
Hi Steve
I agree it’s to early for news on BR, but Africa there is loads of news pending (in my opinion)
Eureka, assay results, open pit mine commencing
Kalengwa, CB has confirmed in podcast that a processing facility is being built but nothing has been confirmed in RNS. So an update on this and possibility first sales seems due to me.
Then in Africa there is GF which surely production must be starting from imminently (this seems news worthy to me) and then any developments with FB with production due to start in Q4 there should be loads of news on its way.
I’m sure I’ve left things off as well
Cheers
James
Hi Dibs
Unless the assays are spectacularly different to what we had back from P1 I can’t see a material appreciation in the SP (happy to be wrong on this), what I think will lead to a meaningful and sustained increase will be an update in the economic results (assuming this is good of course), hopefully we get to a stage where the project flies at a copper price of 3/lb (this is the point I believe majors will get interested but I may be a bit conservative here).
In addition I think there will be a nice tick up once Manica comes online, you can tell from the negative comments on here that most people don’t take the African assets seriously, and it will be hard to ignore $400/500k of positive FCF each month!
Cheers
James
Hi andmillsy
CB has around 14 million shares in total, I’d guess he’s actually averaging up with this purchase.
A funny amount of shares to buy, he normally deals in round numbers (last several purchases)……
Cheers
James
Hi Captainbob
I was expecting a Eureka update today, solely based on the fact there wasn’t an interview yesterday so was thinking maybe CB was waiting to discuss a few things….
I heard him say 500-700k tonnes of copper as well but assumed he meant ore, as this fits in with the the 2/3 mine life at 250k tonnes of ore per year.
Cheers
James
Yes a podcast would be nice, I find it a bit hard to visualise how a near vertical hole could touch both the east and west flanks.
Hopefully CB was reading the BB yesterday and defends the value of the Africa Assets as he defended the Drilling speed in P2 (a few words on FB, Eureka and Kalawenga would be fantastic)
Cheers
James
Hi CE
I disagree that this is all about quantity, if you look at the average grade mined in scenario 10 I think this works out to be 0.25% copper. So if we generate a huge volume of low grade material say 0.2% average the majority of this would be mined at the back end of the project (say 12 years from now, 3 year capex build plus 9 year LOM) so the economic value of this due to discounting will be relatively minimal for example all CF in year 12 would be discounted at .4 (10m undiscounted becomes 4m discounted, still nice to have but you get my point).
Therefore in my opinion what the economics of this project require is richer material (this was also confirmed in the podcast by Jeremy I think) let’s say 0.35% which can then be targeted in the earlier years of the project the additional margin of the higher grade material would significantly improve the economic metrics and attractiveness of the project to any buyer (independent valuer) e.g. NPV/IRR up, payback and BE copper price down.
Cheers
James
Jadu
I think we all realise that the economics are based on current JORC which is likely to increase significantly.
The discussion was whether the current JORC is economic as is, some think it is I disagree due to the price assumptions used (happy to be corrected but copper has never been $5/lb? Not to say it never will be but today the resource being economically viable is contingent on the copper price increasing). Additionally the result are before tax, so the after tax Metrics e.g. npv /irr will obviously be worse and these are the results which count. So guess I can argue or at least question the results being economic.
So for me this report doesn’t add much value to the company as it currently is however neither has it changed the story e.g. we need to prove up the resource size.
Cheers
James
News read the RNS……
Ps the report is in AUD not USD
Would also be interesting to see what contingency was used in the capex and opex cost assumptions.
I’d disagree that the resource as it stands is viable, I struggle to believe anyone would sink AUD 1.5bn of capex (I presume most of this is up front) for a positive pre tax NPV only at $5/lb. for me this analysis shows that the current resource isn’t economic and basically just means we are in the same position as before, waiting for the resource to increase in size. It’s a shame that there wasn’t a sensitivity provided to show how the economics could look if you add say 50% and 100% to the resource size.
Cheers
James
Hi Steveosaurus
Hope this works for you
https://twitter.com/ResourcesXtract
Cheers
James
Some nice pictures of the drill rigs arriving on Twitter, interestingly looks like they are using a different contractor this time. From memory CB was raving about Mitchell (previous drillers) so guess he couldn’t secure them due to demand in the area or maybe a less specialised Rig/crew were required for the phase 2 wells due to depth etc
Hi Andrew
One other upside to consider on the monthly cash flows is capital allowances (depreciation). Shockingly my knowledge of the Mozambique tax system isn’t great…….however assuming it’s similar to tax regimes I now a little better I would expect that the JV could could depreciate the Manica land acquisition ($7m from memory), plant costs ($8m plus at a guess) over a number of years. There might also be some tax losses carried forward which could also be utilised.
I’ve not factored the above into my projections which are aligned with yours (circa £350k per month), as I’ve not read/heard anything on this point from the company but I certainly feel that our tax costs could be lower than the estimated $350/oz over the 7 year mine life.
Cheers
James
https://xtractresources.com/investors/rns/definitive-feasibility-study/
Was from 2017, hopefully not to much inflation since then!
Hi Andrew
Good post, I would guess/hope that empress royalty is only on MMPs share of production. Assuming my expectation is correct this puts total production around 33k Oz (577/2.25%/77%) which is a bit more consistent with the other production estimates.
Hi Ella
From memory the DFS (q1 2018 I think) had direct cash cost of 556/oz
Cheers
James
I think my favourite part was from the going concern section;
“The Directors have assessed the working capital requirements for the forthcoming twelve months and have undertaken assessments which have considered different scenarios based on a number of production forecasts until June 2022.
Upon reviewing those cash flow projections for the forthcoming twelve months, the directors consider that the Company is not likely to require additional financial resources in the twelve-month period from the date of approval of these financial statements to enable the Company to fund its current operations and to meet its commitments. The Group will continue to monitor corporate overhead costs on an ongoing basis.
The Directors would not expect for funds to be raised through further equity fund raising. As is common with early producing companies, the Company raises finance for its activities in discrete tranches to finance its activities for limited periods only and further funding will be required from time to time to finance those activities. Further funding will not be required for the Manica Hard Rock collaboration agreement which was signed on 29 May 2019”.
Good to see in an RNS that further equity raises are unlikely.
Cheers
James
Hi Jwoz
I’m not disputing your logic as I agree there is POTENTIALLY serious money to made here.
However I would guess that cash is significantly less than £8.5m, maybe more like £5m. My number is no more accurate than yours as I don’t have inside knowledge obviously. But I assume things like IP surveys, expanded teams costs, open pit models, drilling in Eureka (plus open pit prep), plant in Kalengwa (CB said a small plant was being built in his interview this week, I have in my notes from the TW interview that a small plant would cost approx $1.1m).
Hopefully we get a up to date cash balance along with the annual results although I’m not holding my breath.
Cheers
James
Thanks for the link 1plus1, I’m looking forward to seeing what the initial open pit model economics look like