Member Info for southwesterner

What a great opportunity to revive mining in the South West (again). A shame about what happened last time, but it looks like a huge amount of research and work has been done to learn the lessons from the failed 2015 startup. It's just a question of execution now. Obviously some risk built into the share price, one must decide what ones own views of probability of success are in order to successful value the business. If you think there's an over 50% chance of achieving their (fairly conservative?) targets, then this is a BUY. Obviously price of tungsten is another variable which moves the equation significantly, and then also the price of tin, to a lesser extent.

Tungsten, though - an extremely strategic commodity of significant importance. 80% of production from China. Significantly less concentrate available on the world markets than there used to be, as China are making finished tungsten products with theirs now. Its actually quite hard to buy quality tungsten products made in the West now unfortunately, and this is something a lot of mining and drilling companies I'm sure would quite like to improve going forwards. The only way that will happen is if we secure supplies of tungsten concentrate. Hemerdon is a big piece of this jigsaw.

Another thing to mention is the Plant is being designed to produce byproduct tin and aggregates. Tin will be a useful revenue stream at current prices for sure. But the aggregates is something new that the previous operators did not engage in. Significant potential value at very low operating costs for this aggregate, and access to the port of Plymouth and rail facilities, means penetration of the London market is possible. Together tin and aggregates could pay for a substantial amount, at least half, of the total operating costs - if this potential is realised.

I would point out Quebec, Iceland, Norway, and several other places have Aluminium smelters based mainly on Hydro power. But Hydro power has a number of major advantages over wind/solar, namely much reduced intermittancy, and scale. There are no significant Hydropower resources in the UK.

I would also point out as an aside, China produces 56% of the world's aluminium, and 57% of its steel production.

To bring this back to CUSN, I do not have the stats to hand for tin (smelted) production, but I would not be surprised if China had a similar proportion of *smelted* tin metal production, because all the tin concentrate from Myanmar is going there, as well as a some from a few other places. It'd surprise me if it was less than half of global production. For tungsten, China's share of global production is over 80% now, and they are exporting much less concentrate than a few years ago, preferring to add value and make more finished products. I might continue that train of thought at LSE:TUN some time. CUSN's newly listed neighbours over the Tamar, planning to start production of tungsten and tin next year!

"Other countries have the same net zero target and the solution for them is probably nuclear in northern climes. Polands copper manufacturer has ordered multiple small nuclear plants from the US"

Small Modular Reactors are potentially a major part of the energy mix of the future, essentially they are one of the few non-fossil fuel based technologies with the potential to provide reliable baseload power, and given construction costs of nuclear are such a high % of the overall cost of electricity from them, if that can be substantively reduced, nuclear would become much more favourable. Nonetheless, it would be a bold move by KGHM (copper, Poland) to invest in this technology, although I'd point out at this point it is only a Memorandum of Understanding to explore the potential use of this technology, so any financial commitment will be minimal at this stage. But the fact they are even going to the trouble to look at it, shows that they are highly concerned with the plans being put in place, and understand that existing renewable technologies, even combined with batteries, will not be adequate for their needs.

https://newsroom.nuscalepower.com/press-releases/news-details/2021/NuScale-Power-Signs-Memorandum-of-Understanding-with-KGHM-and-PBE-to-Explore-SMR-Deployment-in-Poland/default.aspx

"Solar powered smelters have been built."

Actually, no, they haven't, and there's many very good reasons smelter powered off solar energy alone is not viable. The project you refer to is no doubt this;

https://www.nsenergybusiness.com/news/uae-solar-aluminium/

If you read the *details* - and details are crucial, what you will find is they are providing solar energy of 560,000 MWh to the Plant, to make 40,000 tonnes of aluminium - with potential to expand. Given the company make 2,300,000 tonnes of aluminum, this means your "solar powered" aluminium, is in fact 1.7% solar powered. 40/2300 = 1.7%

So, yeah, its really a lot of window dressing at this stage. A lot of companies are starting to buy only "renewable electricity" - 100% certified Green, and claiming that their products embedded CO2 is thus very low, but the reality is there is a lot of creative accounting involved. I am sure there will be places in the world where you can use much higher % of renewable energy in major industrial processes cost effectively, but you always need backup thermal power, or very capital intensive energy storage solutions.

And before you start up on "batteries" - the largest battery energy storage facility in the World, Moss Landing Energy Storage Facility (1600MWh), in California, would power EGA's aluminium smelters, for less than 30 minutes. Largest battery in the world, wouldn't even get them through half an hour of the night... and if the power stops in a smelter for more than a couple of hours, and the metal solidifies, the whole line is a write-off, incoming bill for hundreds of millions of $ to fix.

Solar powered smelter in Cornwall? Hmm, I dont

Frankly I think a UK-based smelter is a pipe dream. These smelters are designed for 50-150kt/annum of tin concentrate feed, which is far beyond what South Crofty + any other operations are likely to produce (realistically around 10kt/year). So there'd be significant imports of concentrate from abroad, which then begs the question, why not just site the smelter somewhere abroad where energy is cheaper. I think you'll find UK demand for tin is negligible in global terms, as we dont actually manufacture much electronics here.

The environmental and planning permissions would be a nightmare to obtain to build such a smelter anywhere in the UK, no matter how isolated the site. Nimbyism. And then the main economic issue is that such an operation is at direct odds with the ever increasing energy costs in the UK. If you actually read the "Net Zero Strategy: Build Back Greener" report - which I have, you will see it involves a huge reduction in overall energy consumption in the UK. The sources of energy they will use are intrinsically extremely high cost. No one is going to locate a new energy intensive industry here.

If you read point.9 on p122 of the Report, that is the only place in the entire report where Carbon border tariffs are discussed, and well, it makes very clear HMG have zero resolve to pursue this policy. And if they don't, the reality is that the effect of the entire "Green" agenda is simply to offshore the remaining heavy industries that are high energy users. No one is going to invest in energy intensive industries in the UK, they will relocate or build new chemical factories, smelters, etc - elsewhere. And import into the UK. That has been the trend in recent decades. This plan will accelerate that trend.

I'm sorry to be a downer on this, I'm a huge proponent of Cornish mining, and very bullish about the future of metal mining in the UK, in my opinion its a matter of when not if at this point. However I'm also a realist. The Green plan isn't going to lead to an industrial revival in the UK, rather its going to obliterate what little industry we have left. If it can be moved abroad, it will be. Nonetheless, we may be able to produce some metal concentrates, from specific deposits that are economically viable at current and likely future metal prices (see South Crofty, Hemerdon, Redmoor & Parys Mtn), and that will spur on further exploration which will hopefully delineate more such resources. Underground mining is not very energy intensive, energy is a significant input cost, but its lower as a % of total costs, compared to a lot other industrial activities. So its something we can do profitably, even if we are handicapped by "saving the world". And if the GBP falls due to the incompetence of our wider strategy, that only makes mining here more attractive.

QME are mining contractors. Not exploration drilling contractors.

These are two completely separate things. Basically, QME don't do exploration drilling campaigns, they mine you tunnels underground or sell you mining equipment to do that.

The fact Irish Drilling Ltd were utilised for the drilling, says absolutely nothing about AYM's arrangement with QME.

If and when AYM want to put a decline into Parys Mtn, QME will be at the front of the queue for that contract (right of first refusal). Thats the nub of the arrangement basically. They can also elect to take up 30% of Parys Mtn in return for conducting the mine development components of the project, but its possible the scale of development being conceived now is beyond their means financially.

30% uplift in Canada today. Huge move. Either they really loved the Non-Exec Director appointment, or there's something up!

Closed at 29.5c/17.5p. Could be a big day tomorrow.

Most processing will be done on surface in a new purpose built concentrator facility which has planning permission granted, not on barges or underground.

Looks like a great appointment. Hopefully they can obtain financing somehow to move the South Crofty project forwards in the current tin price environment.

"Wrong again Southwesterner... trot off back to Anglesey mining mate..."

Looks like I hit the nail on the head, based on this response!

Actually the market has reacted much better than I imagined to these results. Only a 10% fall. I did warn it would fall after these results, that was correct.

All the people saying "oh but we have a decision to mine!" - I mean come on, this was always going to be mined, this is a huge gold deposit, some of which is fairly high grade - it was never a question of whether it would be mined, just a question of HOW MUCH VALUE there is in doing so. To me the barrier is GGP's relatively high valuation, for just a 30% stake, means there has to be a great deal of value indeed to make this a good value proposition. I'm not saying its a bad value proposition, but people should really be very cautious indeed to assume that large returns here are nailed on.

Considering this PFS has taken the vast majority of the highest grade portion of Havieron - the SE Crescent zone - over $3 billion of metal, and turned it into an NPV of just $230-500m, which justifies between 7-15% of GGP's current market capital for its stake. Many analysts would have been expecting the mining of the SE Crescent zone to justify a much larger portion of GGP's current market capital.

Calculations; 14Mt @ 3.7g/t, 0.54% Cu = 73kt copper + 1.6Moz gold = $3 billion @ $1500/oz gold.
NPV using Newcrest assumptions = $228m, GGP 30% share = $68m
NPV using GGP assumptions (higher gold prices, copper prices, USD:AUD exchange rate) = $508m, GGP 30% share = $152m

So between $68-152m of NPV for the project in GGP's share. Compared to a market cap of £740m, or $1 billion currently.
So only 7-15% of GGPs current market capital is justified by this PFS. All the rest of the value allocated by the market is in the breccia resource, and as yet unquantified exploration potential.

Obviously as some of this is incremental production, costs will be lower, but the limitations of the infrastructure being built - using single decline truck haulage, means the mine won't be capable of a production rate beyond around 3Mtpa, and as depths increase, capability decreases. So to instigate bulk mining to make extraction of the breccias viable, a shaft will be required or a second decline with conveyor - and this will all take more time and capital.

"Start off processing 2mtpa of ore, and increasing to 6 mtpa. That is alot of ore at 4g. 500000 oz per year?"

There's only 18Mt of 4g/t resource in the Crescent Zone - including both the indicated and inferred resources. So you'd only get 3 years of production at that production rate. The rest of the orebody is 1g/t breccia.

To all those saying this is a fast start... there's no production till 2024 in this plan, so to all the people (zoros et al) saying they would be in production H1 2022, which I warned was optimistic, again this is a rebuke.

And to all those saying this is only 14Mt of indicated resource... and there is 37Mt of inferred resource... so this is only a small fraction of the resource, the facts are the indicated material is 4x higher grade than the inferred.

So the majority of the gold in the resource, is in that 14Mt of indicated resource. You can see this from the mineral resource statement on p10.

To be precise, 53% of the gold, and 60% of the copper - is in that 14Mt of indicated resource. Only 47% of the gold, and 40% of the copper, is in the remaining 37Mt of ore.

To only create $228m of Net Present Value, from the $3 billion of gold and copper metal (1.6 MOz gold, 73kt copper) in the mine plan - is not the best result to say the least.

Newcrest have done the dirty on GGP here...

They've made a very big gold deposit look distinctly average... Havieron's NPV is $228m... IRR is 16%... awful stats, considering GGP is valued at over $1bn and only owns 30%.

I mean this Study is only looking at a small part of the deposit, but it makes it look absolutely tiny. Blatant attempt to move towards a NCM buyout of GGP?

No production till 2024?

10p tomorrow?

If they can get a $10m loan for LCCM, why on earth would they want to list on the ASX, incurring the costs associated with that? You only list on multiple stock exchanges if you are having trouble accessing capital from the one you are on.

All the right moves so far, a small raising to get the feasibility study level works underway is just what was needed. And Jo buying into that placing with his own money, making a material investment, is most encouraging. The plan to commence the easy infill drilling, obtaining samples for geotechnical and metallurgical data - and also to commence environmental studies, is very sensible. Hopefully this will begin to demonstrate to the market AYM is serious now about progressing Parys Mountain, and it will be revalued accordingly. As he points out in that proactiveinvestors article, this project is seriously undervalued compared to peers, and presumably that is mainly down to the company record of making slow progress, rather than location or any other aspects, which are all fairly positive.

I mean its all written in the most encouraging language, everything is imminent - but thats been the case for some time. On the 31 March, the PEPR was to be fully approved in Q2. On the 25 June, the PEPR was going to be finalised in July... now its by "the end of the year".

As for the financing, what kind of "top global bank" will give them a $10m loan with no equity component, based on the back-of-the-envelope "studies" they have done. I really would be surprised if that turned out to be the case, but anything is possible I suppose.

I mean this paragraph really says it all;
"In commencing the initial work on the DEM resubmission, the project's mine manager, John Speck, has identified that, at current copper prices of in excess of US $4.00 lb (compared to US $2.40 lb when PEPR was submitted), it is economic to enlarge the open cut mine footprint which will potentially recover a further 600 tons of saleable copper. In line with the Company's existing offtake agreement, this could result in an additional US $4.5m of revenue. Given the expected operating margin of 50% and the fact that this would be recouped within two to three years, the Directors believe this is a meaningful boost to the project's inherent value."

By very definition, if this is extra material that would be mined at $4/lb copper, that wasn't to be mined at $2.4/lb copper, then it is higher cost to extract. Yes the rest of the material may well be 50% margin, but the additional material being brought into the mine plan cannot possibly be the same margin. Therefore the expected margins of the additional material will be lower, and must be, by very basic maths, under 50%. Its really very basic, if it wasn't economic at $2.4/lb, but raising the cut-off to equivalent production costs of $4/lb brings it in to the mine plan, the average margin is likely closer to $0.8/lb (mid point). So back of the envelope calculation would say 20% margin, not 50% margin, on the additional material. The fact they are putting out RNS's with these absurd speculative concepts (and incorrect speculation at that) is revealing as to the level of understanding. If a global bank that knows what its doing in mining, sees this sort of nonsense, surely they will run in the other direction, fast.

Propinquity; "According to Southwesterner, yes."

Not just according to me - its all here, in black and white; https://www.lse.co.uk/rns/SML/redmoor-update-review-of-mining-scoping-study-l3xbq0nl3y5b3kn.html

"Key results of the 2020 mining study include;
· A life of mine schedule that includes 7.2Mt @ 0.59% WO3, 0.10% Sn, 0.39% Cu"

Thats 6x as much tungsten as tin in the mine schedule produced last year. Yes, you can convert those numbers to a "tin equivalent"/SnEq to make it sound like a tin project, but it doesn't change the fact its mainly tungsten you are getting out!

In terms of recovered values, at current spot prices, the project revenues are 70% tungsten, 17% copper, 13% tin.

I agree Suzki, there is a possibility he will be stifled, not given the latitude to take the necessary steps to progress the project, or simply that he won't be bold enough to push past the inertia that has beset this company historically. Certainly the Annual Report was not particularly encouraging, given it was much of the same old platitudes rehashed, the only sign of JBs influence perhaps being the spin about modern tech metals thrown in.

But lets give him a few months to get the wheels in motion. The old guard need to let him take the helm, fully. He will need to conduct a significant raising at some point, or sell the LIM stake, to fund the prefeasibility studies, either way - they need to support it. More value will be created by progressing the Parys Mtn project, even if it does mean short term dilution or selling liquid assets. If they don't support him, or he isn't bold enough to take the necessary risks, it could all become stuck again. That outcome is definitely a risk that I am conscious and aware of, but I am encouraged by the changes to his linkedin profile emphasising AYM, so lets give him some time to put together a proper strategy to move forwards.

"https://twitter.com/styledgentleman/status/1436338501696565253?s=21"

Whilst no doubt very interesting to see, the reality is those cores were drilled in the 2018 programme, you can see the core in the front of picture is CRD021 (drilled in June 2018). No diamond drilling has taken place since 2018 at Redmoor.

The "Deep Digital Cornwall" soil sampling and geophysical programme, whilst providing plenty of nice things to tweet about, conferences to attend, and some funding to keep the lights on, isn't going to allow any additional JORC resources to be declared at Redmoor or move the project forwards meaningfully, only diamond drilling can do that.

The future of Redmoor is tied to whether Tungsten West can get their IPO off the ground, and arrange a collaboration between them and SML to move the project forwards. SML don't have the money to do anything with Redmoor for the foreseeable future, Redmoor is not economically attractive standalone, and financing LCCM will be a big enough challenge for SML.

My post at "02 Aug 2021 12:22" in this topic said it "would be good to have some actual information in these monthly updates" and there was "no real numbers".

Well credit, where its due - Phil Day has delivered a September update with plenty of real numbers. So well played, and I must say, a very competent and focused performance in the last interview. The situation is clearly much more upbeat now than it was, given they are now covering operating costs.

The main interesting things the numbers tell us is that they have good grade gold mineralisation at the face and they anticipate that to continue for the rest of this year. And there is also massive opportunity for improvement in building revenues, from two key areas in the plant.

Firstly, recovery rate of the plant. If you back calculate the tonnage processed at an assumed 12g/t grade, versus the concentrate produced, then you can see the recovery rates are 60-70%. This is poor. This plant should be (and was designed to) recover 90%+ of the gold. So there's a 30-50% improvement there to be had.

And then secondly, tonnage processed was 2,100-2,200 in the month. And the plant is designed to do 3,000 tonnes per month, and in the RNS he talks about 4,000 tonnes a month, so there is a 40-90% improvement possible there.

Both improvements taken together should result in a minimum of 80% higher revenue going forwards, which suggests at a minimum that the mine will be generating £650k/month profit, or £8m/annum - by the end of the year. But realistically this should eventually be much, much higher, once they iron out all the issues. I think the key thing is that they are breaking even, and so any imminent collapse looks much less likely now, so yeah this SGZ looks a much safer bet than it did a few weeks/months ago.

Ultimately like I said before, this mine should be printing money given the grades it has in resource, benchmarked operating costs, and the current gold price. Quite what a fair valuation is given the residual risks, Im not entirely sure, but certainly 70-105p seems justified (£40-60m).