Member Info for southwesterner

I've just explained all of that....

100t of what... 100t of WO3 conc, 100t of WO3, or 100t of tin or tin conc or what... ?

If the prediction of 90t WO3 and 40t Sn, metal, is correct - then that will be worth around $2.5m at current prices.

Brentharg; "What would you say is the cost of pushing the PEA to a full Feasibility Study, along with firming up inferred resources into indicated?"

To convert all the inferred resources and complete a Full FS, probably looking at around £4-5m realistically. If you are doing that, you may as well do some additional drilling into exploration targets to expand the resources, so you could easily spend £6-8m if you wanted. Equally, could a PFS and conversion of a portion of the inferred resources be done for less, sure, maybe as little as £2-3m. Depends what you want but the choices are amongst those numbers and options. The Board need to decide on and communicate a path forwards and strategy for the project though, otherwise the market will value Parys Mtn at... zero or thereabouts. Thats the reality of this business.

"SW , appreciate your inputs - you haven't commented on the discounts to spot metal prices and the fact that the NPV doubles if spot metal prices are used. Is the discount used industry standard or are they being more conservative than they need to be ?"

Pretty much standard, the prices they used are similar to what the majority of studies are using at the moment.

Sammybow; "For info, Cornish Metals RNS this morning are listing to raise £5m for drilling 8000 m @ South Crofty
mine in Cornwall; Copper Tin and battery materials for the 5 G and EV revolution."

Yeah this is significant. Shows there is appetite out there for funding "brownfield" exploration, and AYM need to tap into that. Interesting though they are pushing the United Downs project to investors if you look at the PR, not South Crofty. Crofty has significant indicated and inferred resources but the grades arent spectacular and the majority of resources are extremely deep and fairly narrow lodes, whereas United Downs is just a couple of (albeit very high grade and wide) drill hits. So the interesting thing is they are going drilling for something new and exciting at United Downs, not doing resource upgrade drilling and following South Crofty through to a Feasibility Study. They must have a clear guide that is what the market wants from their advisors. Fortunately, 8000m of drilling shouldn't cost anywhere near £5m, so there should be money left over there. Will be interesting to see the Prospectus for that when it lists on AIM.

Seaangler; "Let’s face it. No one knows what’s going to happen here , not even the BOD I suspect. I am an investor here , I’m hopeful , but that’s it. This is a gamble and more so than a lot of other shares. My bugbear is the idiot who say’s buy buy buy , 15 p is a dead cert , and equally the idiot who spouts the opposite. No one knows but weaker minded / inexperienced people get sucked in by this tosh. I can afford to lose the lot and I will blame no one apart from myself , plus if the SP goes up and down ( they all do ) I’m not that naive to blame someone."

Truth. Great post. Upvoted.

Tommymech; "I don't think anyone with a brain who has read the PEA or listened to the BH video is thinking that mining at Parys will start in the very short term."

And yet someone said basically exactly that earlier today; that Bill said in the video they are starting mining in 2 years, I was merely addressing that before some people get too carried away.

Tommymech; "So if all you have is 10 years of operational mining experience in a fairly large outfit you are hardly senior and will not have been involved in making any significant or any financial investment decisions at all - in reality these things tend to be a little different to having read a management textbook."

Look you're just going to have to read what I say and analyse the content of that rather than going ad hominem, as much as you'd clearly like to just dismiss me for not meeting your required benchmark of being the CEO of a FTSE 100 mining company in order to comment here. Like I said, I am involved in signing off technical/economic reports on investments, and I have the necessary experience and knowledge to analyse and understand this kind of report.

"In other words the necessary investment monies will most certainly come. What were the pertinent investment parameters of only a short while ago have been significantly revised - if you think otherwise it's because you are not in any sufficiently senior role to know what is being discussed at board level in these strange days."

The necessary investment monies will almost certainly come! Now that is a bold claim. Investment monies for what? Are you suggesting the mine will be financed on a PEA Study? I can tell you more or less categorically that will not be the case. I genuinely think they will need to improve on the economic outcomes in a Feasibility Study if they want to get financed, and I think the BOD know that with the references to "further improvements" in the PEA report.

"Whether or not you are sincere I cannot tell but if you are then, given that you say that you have sold almost all your AYM shares, you are a most odd individual to spend your time running a very negative campaign against AYM on this Board as you patently do."

Im not "running a negative campaign against AYM" - I'm providing balanced analysis. I've been doing that for over 3 years as you can see from my post history. Go back and read my posts in September and October this year, including the Buy recommendation I posted then. You'll see it was all borne out in what we now see in the PEA - and my predictions for the PEA were in fact on the optimistic side, not negative. Even though, yet again, exactly the same as in 2017, some people were saying I was being negative! But yet again, I was overly optimistic! How do you square this all off in your head tommymech?

monparys; "factual from published papers"

I just want to show you, not much gets past me... I found your paper;
https://me.smenet.org/docs/Publications/ME/Issue/Oct_Web_Only_Feature.pdf

It was really striking to me straight away that in this "project risk" model, if you have a -negative- NPV, you lose 57.7% of a 23% weighting - so 13.3% overall. I mean in the real world you dont just lose a few points in a rating - if you have a negative NPV, your project is finished, its clearly uneconomic. It never gets built. So yeah I was instantly filled with a degree of skepticism about this whole paper and as you will see later that is warranted. Somewhat as an aside, if you actually scored Parys Mtn through the technical risk category here, it wouldn't come out that well because its 1) not operating, 2) using inferred resources, 3) less than 50kt/a copper equivalent.... and so on.

So what is this paper actually about, because on the face of it, its nonsense? Well, the Professor, Michael G Nelson, basically published a series of articles in the Mining Engineering Online magazine based entirely on extracts from the Masters thesis of one of his students and the paper "coauthor", Hyung Min Park. You can see the original masters thesis here; https://collections.lib.utah.edu/dl_files/ca/f1/caf1273bc3fdf50252de3ba90f81cc06fd035e0d.pdf

So, when you start reading that, it makes much more sense in its original context. This is about how a Korean company evaluates natural resource opportunities, mainly for coal and copper - globally. They use this risk matrix. And then they've sent it out to 31 "experts" from "mining" companies to rescore the weightings on the matrix. And you look through the list of companies on p52, and then it becomes really clear half of them aren't even mining companies, but rather companies that source raw materials for manufacturing operations. Thats why they are so interested in technical risks, partner risks, marketability - things which just aren't relevant to analysing the market value of a junior mining company like AYM's assets. Only a couple of the 31 companies surveyed are even junior mining companies. Anyway the original paper makes sense because its about a Korean company evaluating project risks for investment opportunities, but taken out of context its really flawed.

Certainly I can tell you now for free the economic values part of the risk matrix is bogus and you should be able to see that clearly from the fact its only losing 13% weighting for a negative NPV, when actually that is end of the road for any project. It might work for the Korean company looking at investing in giant coal/copper deposits (see p2) - but it isn't applicable to Parys Mtn or wider junior mining evaluations.

monparys, I dont doubt for a second that 6-12 years is the norm for industrial engineering projects, in fact I know you are right and that is true. Typically of course industrial engineering projects last for several decades, and would be modelled over 20+ year lifespans. But this is a mining project, its got a 12 year mine life, and its not a massive scale. Maybe I was a bit bellicose in my response, but you are wrong about this from a mining project evaluation point of view those paybacks would not be entertained. I don't care what "published papers" say to be honest, academics write all sorts of nonsense - so find me a mining project of a similar scale ($50-200m capex) that has been progressed from a PEA or feasibility study, to production, on a 6-12 year payback, and I'll take it all back! Otherwise like I've said, I've read a lot of reports over the years, and never seen that. 6-12 year payback is RIP territory in mining economics, bar long-life megaprojects.

Tommymech; "What are your actual mining qualifications SW? I see from old posts that you claim to be a "mining manager" - whatever that means. What level of seniority have you achieved in any mining company of note? Have you ever been at board level of a listed mining company?"

I'm actually the CEO of Rio Tinto in disguise! I mean come on... look, firstly you have to make judgements on these message boards from the content of the posts, not what people say, because they could say anything. But for the record I am a degree qualified, professional mining engineer, with over a decade of experience in operations, and work at a level which requires me to sign off on (internal) economic/technical studies. The fact they are internal studies indicates we aren't going to the market for money, so its a fairly big company - not Rio Tinto...

"Once the SP reaches a certain level you're like clockwork in your appearance in pouring on the negatives. Now that you've knocked the SP again, have you been by any chance buying at below 9p?"

No. I haven't bought any further shares below 9p. The only shares I bought were at 1.5p and I disclosed that here. I have sold the majority of my shares since then. I'm not saying AYM won't or can't move higher - no one could say that, as it might very well, especially with the LIM situation. But the risk-reward profile is no longer attractive to me, for similar reasons to what Sammybow explained earlier. I wouldn't rule out buying more AYM ever again, but I don't have any plans to buy more shares currently so your assertion I'm trying to push the price down and profit from day trading is just not true. I don't day trade.

tommymech; "I doubt you'll provide the answers I'm asking for"

I provided the answers you asked for, whether its what you want to hear is another matter. I'm sure you'll try and twist the above to say I've got an agenda just cause you dont like what Im saying. But my predictive record which you can see from my past posts is not bad really. I'm just here because I find Parys Mtn interesting - which is completely plausible when if you could see the absurd accumulation of mining history books I have (and understood the historical significance of Parys Mtn)... and then also I saw AYM were seriously undervalued at 1.5p and have successfully invested based on that. Thats it.

Oh please spare us... not this again... yellow diggers turning up at Parys Mtn tomorrow and all this stuff, I remember it from 2017 and before... Bill did NOT say in the interview that mining will start in 2 years from now. He said it would take under 2 years theoretically to put the mine into production in the event of a production decision being taken, and was contrasting that with more remote locations where pre-production infrastructure work might add a year or more to that timescale. A production decision will only follow financing, and that will only follow a positive Feasibility Study. The PEA is not a Feasibility Study. To get to a Feasibility Study will require further drilling, technical studies, metallurgical testworth, environmental baseline monitoring, and so on - and that will cost much more money and take more time. It explains this in the PEA if you read it. There is a long road ahead here, and if you are expecting construction to start in the near future, you will be sadly disappointed. So please lets not start that again...

In terms of other issues...

Brentharg; "Southwesterner, you'll doubtless tear the above to shreds (I promise not to burst into tears), but I'd be interested to hear why you consider the 26% IRR (Internal Rate of Return) to be poor. The BOD describe this figure as "attractive"."

In terms of 26% IRR, I didn't actually use the word "poor" - I said "not good enough for this type of project". Not good enough to get the market excited if what I mean. Hence the SP drop. Think about it, the BOD are hardly going to say its not attractive are they? They're trying to sell the project, so you have to take the adjectives used with a pinch of salt. Go back and look what was said in 2017 I'm sure it was similarly positive, and look what happened with that. Look, 26% isn't terrible, but its not going to set the world on fire, its weaker than most projects out there that get moved forwards thats just the reality.

monparys; "Another category in the risk matrix is 'economic values' (e.g. payback period), these attract a weighting on average of 20%. It is always hoped that payback periods are as short as possible for obvious reasons, but typically in mining operations a period of 6 - 12 years is acceptable, a period of 3 years is usually only feasible for mine upgrade projects. "

I have no idea where you are getting this from, but its rubbish. If you think the market is going to put a 12 year mine life project of this scale into production with a payback of 6-12 years, you are crazy. Find me another base metal project with a sub 15 year mine life, of a similar scale, with a 6-12 year payback in a PEA that has been progressed to the next stage and then put into production. Find me one, and I'll eat my words. Just one. Otherwise I'm sorry this is just complete nonsense, I've never seen that and I've seen dozens of economic and feasibility studies over the years.

"interesting take SW, always interested to hear both sides. For me though you miss out what is priced in at a market cap of £19 mill, plus Labrador PEA to come in a few days plus Sweden as well. Sure its not for widows and orphans but seems that there's an awful lot more upside than downside at this price - and that's what matters to most investors."

If you read my post, you'll see I didn't make any statement or give a view on the overall AYM investment case either way. I just gave facts and analysis specifically of the Parys Mtn PEA. If people don't like those facts, and want to believe in an alternate reality, then thats fine - I'm just calling it how it is. The large NPV of Case C shows the huge potential value of the deeper resources, but the reduced IRR means the package overall falls short.

I am sure the inadequate rate of return and payback can be fixed, very sure in fact. But I doubt most mining analysts will have the details required to know that, and many will just look at the IRR's and conclude the project is marginal. I really don't understand why they didn't take some more time to get this right, releasing a PEA with a worse IRR than the 2017 Study is disappointing. Remember the PEA didn't start till October 2020. This shows the danger of agreeing to timeframes before knowing what the outcomes look like and if additional work is required.

"I hope that Southwesterner will tell us what he makes of it."

I am really disappointed to say it, and maybe our expectations were again too great, but it's not that good I'm afraid, certainly not fantastic. Not a total disaster either, it shows very clearly there is potential and massive value in the inferred resources of the deeper zones, and I think if they hadn't made a couple of critical changes to the 2017 Study that have actually deoptimised the project, this would have been a different story. You need to look at the IRR and paybacks, and compare to expectations. Calmtrader was banking on an IRR "north of 50%" (see 9 Dec '20). But instead we have a 26% IRR and 5 year payback (pre-tax), that simply isn't good enough for this type of project. I appreciate the metal pricing assumptions used are below spot pricing, but the prices used in this Study are very similar to the 2017 Scoping Study, and that had a higher IRR, of 28%, thats a fact. On the flip side, the NPV in Case C is massively increased, but having a large NPV is no good without better IRR/payback metrics. The market is not going to put up $99m pre-production capital for a project like this with a 5-6 year payback. That all said, I think its obvious IRR/payback could be substantively improved without sacrificing all the NPV gains, and the details in the report reassuringly match closely with my models. Its just the way they've gone about extracting it is different, and that can be changed. I hate to say it, but this is going to need another go to realise the true potential here.

"I'd like to hear SW's views on the likelihood of Government support now that there are no EU constraints and the Chancellor has discovered a magic money tree."

All I can say is based on this PEA, they will need it. The market isn't going to fund the project on these numbers, once the PIs reading the headlines fade away and serious mining analysts look over this, the prognosis isn't so good. The government like giving a few million for research grants and so on, but this is needing a big chunk of $60m+ debt guaranteed by the government to progress on these numbers. I would obviously support the government doing this, but that doesn't necessarily mean they will, and it can be a fools game banking on such things.

"Brent I too would like Southwestern take but I fear of he gives an honest appraisal if it is not massively optimistic he will come in for undeserved criticism"

Eh, I'm used to it by now... have at it.

Yeah LBRMF/LIM are bleeding out the past few days there has been a negative shift in sentiment there - they need to get that PEA out tomorrow or first thing next week. At current iron ore prices, that project should be like printing money - which doesn't mean for a second the project is worth $billions like people here keep saying, but it does mean moving towards a production decision as fast as possible is warranted. Iron ore prices won't stay high forever, they never do. Progressing to production will require more than a PEA, even if the economics stack up as strongly as we presume they will at $170/tonne - there is plenty of engineering work, contracts, procurement, etc to complete, before the project can be put into production. New roads and mine plans don't make themselves. And that engineering and preparation work won't happen till they pour some money in, and they won't have the money to spend on it till they get the PEA out and raise it. So, move LIM fast - get Parys Mtn right.

For Parys Mtn yes metal prices are important too, but because of the timescales involved in starting production and the much higher capital to revenue ratio, a decision won't be made on tomorrow's prices, but rather longer term pricing averages/predictions. The complexity of the project with the different ore zones and production rate options means that making the right decisions technically is more important and difficult compared to LIM. The very fact that we're looking at a totally different scale at Parys Mtn mine to what the 2017 Scoping Study examined, without the fundamental geological data changing at all, just shows how difficult it is to plan this complex project optimally.

"Covid and the Welsh Tier 4 lockdown will delay the PEA. I can't see potential mining projects as being "essential" so everything will have to be paused. Personally, I'm looking towards end of Feb for news."

I mean this really simply is irrelevant, as I've said before. Nothing in the PEA requires any site work or even visits to site now. This is a desktop exercise involving computer modelling, data analysis, calculations and reports. The geological resource data is stored on a 3D model, which was created in 2012, and remains exactly the same today as no further drilling has been done since then. Mining engineers then create extraction areas within this resource, and then from that the outputs can then be analysed in financial models, based on a series of assumptions. It is all computer based work, done by consultants at Micon and possibly Fairport involved too in this for the processing plant. They should be communicating with each other and to AYM through video calls. There's no reason why the PEA would be delayed *because* of Covid. The truth is simply this is the same as the 2017 Scoping Study, which was delayed too - this is a fairly complex project, and there are some big decisions to make which have been consequences, such as the production rates and metal pricing assumptions. There is very probably some last minute tweaking to the numbers taking place, who knows maybe even larger adjustments - we will see a result soon though I am sure. Honestly, the outcome is so critical, they need to take their time to get it right. If the numbers dont work, we can forget Parys Mtn for another 3 years, and we dont want that.

The LIM PEA is in many ways more simple, they know exactly what production rate they are going to run, what ore they are extracting and in what sequence, and what most of the costs will be from quotes and the 2011-13 data, so that Study really should be fairly simple to conclude. Possibly the workload of having to deal with both PEA's simoultaneously is bottlenecking on our CEO. Getting the LIM PEA out now, but getting the Parys Mtn one right even if it takes longer, would be my priority.

to be honest, I know absolutely nothing about graphite, the market, the deposits, absolutely nothing. Maybe some day I will do some research on it, but for now I cant really pass an opinion on TGR. cheers.

"TSX stockmarket for LIM should be open @ 13.30 our time, if you want to check it."

Its not actually TSX listed, its OTC Pink.

Also Kudos to calmtrader who called a £7m value for AYM in its Labrador stake by year end! At 49c, that is now the case. The stake is now worth 3.5p per AYM share.

LIMH (LBRMF) stake @ 37c per share, *currently* worth £5.3m. AYM market cap @ 6.8p worth £14.6m.

This values Parys Mtn at under £10m now, because LIMH has increased whilst AYM has remained relatively static since the last peak. I would say Parys Mtn could certainly be worth £15m with a mid case PEA result.

So fair value for AYM shares currently at least 9p, and potentially 15-20p with a more positive than expected Parys Mtn PEA, or further increase on Labrador as they move closer to their PEA.

I think the real beauty of this LIMH situation is that Parys Mtn further studies could be funded by selling part or all of the stake, without needing to dilute AYM with an equity raise. If the Parys Mtn PEA is positive enough to justify moving the project forwards to a PFS and beyond, then this can be done potentially without any dilution, or funding risk. Very few mine development companies can say that, or even have this option.

"1/8th is not a big chunk of the difference. 24c vs $15 is approximately 1/60th, so 1/8th is not a ‘big chunk’.
Some of the ‘experts’ need to sort their maths out."

Well actually its over half the difference in % terms... so I think its mathematically sound. 1/8th of $15 is $1.87. And $0.24 is more than 1/8 of $1.87.

Clearly there is potential for LIMH, trading as LBRMF - to go up further. To around $2 anyway is certainly achievable.

I'm just saying comparing directly with the 2011 numbers is flawed, the dynamics in terms of shares on issues and % stake of the asset have changed since 2011. Nevermind the fact, in addition, for AYM itself, we now own 12% instead of 33% of LIMH.

"I see when Iron ore prices were roughly where they are now in 2011 LIM was trading at $15 a share cw 24c now - can anyone square this circle in terms of price difference ??"

Yes.

Firstly the 2011-13 production from LIM was basically a disaster that burnt through over C$240m cash from equity raisings, plus generated a massive amount of debt. What exactly went wrong I have no idea, but clearly quite a lot. So the market doesn't have much confidence in the project.

In return for writing off the debt, 48% of the assets were given to the creditors. Some previous "contributers" here who shall remain unnamed, claimed Gerald Group "invested" $250m to clear the debt, but the fact is the creditors would have known the company was bankrupt and they could would not recover their money, so they accepted the 48% of the company instead. That is fairly routine in restructurings, and certainly not equivalent to "investing" $250m in cash terms. Anyway, so LIMH now owns only half of what they owned in 2011. Additionally, as a result of all the equity raisings, there are now 162m shares in issue, instead of 45m, so each share is worth around a quarter of what it was. So, the 52% ownership and the 4 times more shares in issue means that means each share should only be worth 1/8 of what it was in 2011.

So there's a big chunk of the difference. The rest is probably the lack of confidence in both the project specifically, and in how long prices will stick at their current levels. The project is clearly viable only at higher iron ore prices, or else it would not have failed in 2013. The fact is the easily accessible iron ore was taken in 2011-13 from the James deposit which was next to existing rail infrastructure. The next deposit to be worked, Houston, is about 15km away from the rail sidings so will require capital investment to access with a haul road and then the ore will be trucked to the rail terminal. Additionally, skimming through some of the 2012-2013 financial reports, there seems to be a big difference between the market price of iron ore, and what LIM contractually received once shipping costs and quality penalties were taken into account.

AYM holding is currently worth just under £3m. So you are expecting the LIMH share price to more than double in the next 2 days? I guess we won't have to wait long to see whether that materialises anyway!

As a bit of an aside... from the modelling.... whats really striking is the importance of the exchange rate GBP:USD, if you use $1.35:£1 instead of the $1.25:£1 used in the 2017 Study, you lose 10% off the IRR instantly. Conversely the opposite is also true, if you run it at $1.15:£1, the results are spectacular. Basically... a no deal Brexit and consequent devaluation of the Pound would be highly advantageous for Parys Mtn... whatever your political beliefs, thats the reality.