Marshal - some good points made and if we can’t make LC work now when Copper is at a 8 year high it will never work. I also agree that a JV partner will drive a hard bargain and If we can get the money somehow and maintain 100% ownership the actual operational elements can be contracted out as appropriate.
Lupi’s point that financing should already be set up / aligned is correct, but I wouldn’t take anything for granted here.
One final point - when the updated operational plan for LCCM was produced in November 2019, PW went on record at that stage to state that there were no outstanding issues at LC and subject to finance the project was viable and ready to go.
DYOR. Good luck all.
Is the new Parys PEA built into the price and current Mcap at £13m? hope not, but we’ve seen little movement on the SP this week.
The LIM proposals are the ‘wildcard’ here and that could be the catalyst for some significant upward movement in the SP and it may well be that the 2nd PEA will be the important one.
All in my own opinion. DYOR
Very Good summary Shed
As you say, Mistakes have been made, (which I would suspect is normal for small cap miners in a high risk sector) but we’re getting there now and the resources in the ground speak for themselves. If the project stacks up financially then the overriding value will win through. It’s also extremely important to have the local and regional backing of the residents and Government. GLA
Fira - don’t worry I’m not that sensitive - lol
No, I don’t think that a loan has ever been mentioned by the Board and it may not be there preferred option. It just struck me from a ‘layman’s’ perspective that if I owned a business which could potentially generate $10 income and circa $5m profit in year 1, I might knock on the bank managers door for a $2m loan. The overriding factor is the short payback period once we’re up and running etc.
The South Australian Government appear to be pretty efficient at dealing with these PEPR applications, which is contrary to what we were told in October 2019 which was something along the lines of ‘No point in submitting the PEPR between now and Australia Day (end of January) as nothing much will get done between now and then’.
We need the truth not ‘spin’.
Good luck all.
Lupi - I disagree with your comment that LCCM will just recycle itself. If we can generate upwards of $15m if income every year it will do much more than that. DYOR
I think the customers (Adchem) required percentage concentration for the Copper Cement is 80%. You’re correct in that it might be necessary to produce 1.15 to 1.20 tonnes in order to get the minimum 80% grade. As with all of these things, the devil is in the detail.
I would expect that any profits from at least years 1 and 2 will be redirected within the group to advance Redmoor and build a new additional plant at Lynda/Lorna Doone. Obviously this is Mining and not everything is straightforward, but you have to admit for an initial outlay of circa $2m to get up and running the prospects look very good and the payback period is less than one year.
Economies of scale and any JV deals will be extremely important in the final outcome / profitability etc. Even if we take a low copper price of $6000 per tonne, the following income could be generated:
- 1000T produced per year = $6m
- 2000T per year $12m
- 3000T per year $18m
We know that the estimated cost for processing is approximately 50%, so half the above numbers for a bottom line Gross Profit every year.
As stated previously, volume and JV arrangements are critical. For example if we only produce 800T per year and we’re in a 50/50 JV then it’s not as good - 800T@ $6000 = $4.8m less 50% cost to manufacture less 50% profits from JV = $1.2m for SML. However, a different scenario if we were able to go it alone and produce higher quantities could look like the following:
2000T per year@ $6000 = $12m less 50% costs = $6m profit to SML. Clearly we would have a debt of $2.5m (inc interest), but this could be quickly paid off etc.
Food for thought, but fundamentally, we need to answer Yes to the following questions:
- Will the PEPR be approved?
- Can we source $2m?
- Will the Copper leaching process work successfully?
- Can the existing plant produce at least 100 tonnes per month?
- Can the contractors deliver the Copper Cement on time and on budget?
Clearly there are other questions to be boxed off, but if we can put a tick by the five questions above, then we should be fine.
GLA. All in my own opinion. DYOR
Fira - cheers for the reminder.
I found my post from October and have updated it as follows:
LCCM- Re: $7000 Copper
Quick calculation based on 200 tonnes of Copper Cement a month:
200 tonnes @ $7000 @ 85% LME multiplied by 12 months = $14.2m income per year less 50% cost of sales = $7.1m gross profit on the operation.
Let’s say we can get a short term loan of $2m (needed to commence operations) over two years @20% interest = approx $2.5m paid back in total ($1.25m in each of the first two years). This would still leave over $5m profit in each of the first two years.
Then the profits / surplus in late year 2 or early year 3 could be used to build a new plant at Lynda / Lorna Doone. Then from late year 3 onwards we have two plants operating - with maybe upwards of 500 tonnes produced per month.
So in summary, based on 200 tonnes a month an approximate net profit in years 1 and 2 of $5m each year and a possible
$10m + profit every year from late year 3 onwards. Obviously this summary is over simplified, but there are some very big income numbers here and there is also slack / scope just in case the costs are higher than we anticipate etc.
If we can do 300 tonnes or more a month in years one and two then boom! Even at 100 tonnes a month it still stacks up.
All in my own opinion. DYOR.
The revised proposal to mine the MOL area and the subsequent lower projected costs (of $2m) now make this project extremely attractive.
The last buying opportunities at these lowly levels might be upon us.