Member Info for southwesterner

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Second drill rig could be due to be mobilised to United Downs to expedite program depending on results so far.

Also another drill rig will be required for a new drilling programme just applied for at Cusgarne Farm. Looking for the extension of Trenares lode, to the south west of Mount Wellington.

"And there lies the dilemma, do you keep spending money at United Downs, where you may have something or do you spend money at Crofty where you know you gave something, buy you need more money?"

I think its a good dilemma to have for a start. But secondly, I dont think there is any question that the drilling programme at United Downs continues. They raised £8m in February with that as the main priority, so they are committed to that now. Thats plenty to conduct the Phase 1 drilling and resource estimation at United Downs (c.£2m) in addition to corporate overheads and maintenance of the South Crofty site over that period.

So that goes ahead no matter what. If they wish to accelerate the development of Crofty by commencing pumping, or drilling out the inferred resources there for the purposes of a PFS, then that will require more capital. Access to capital could be via further equity, or a loan through their partners at Osisko. If they hit further mineralisation at United Downs first, and the tin price continues to appreciate and cause an upwards lift in the market cap of the company, then dilution will be minimised.

I think this is a dilemma that often faces junior exploration companies - start developing your asset, you risk dilution. But then if you can prove you have access to capital, the market will re-rate your prospects of realising a positive development decision, and give you a higher valuation in terms of % of NPV. It can often become a snowballing effect, more equity raised causing rerating, causing a greater share price. Look at Foran Mining for an example. VMS deposit in Canada, 12 months ago, market had totally discounted them. Market cap was under C$40m, 12 months ago. Raised C$25m in a placing 5 months ago, then another C$100m last week. Share price quadrupled in the past 6 months despite the dilution, now worth over C$400m. Call it snowballing, or what you will, but essentially what is happening is the market is rerating the likelihood of development occurring, in parallel with the valuation increasing due to higher metal prices - and the overall effect is very positive despite the dilution, for existing shareholders. If Crofty can get pumping and a PFS financed and underway, and the market sees development is "happening" - we could rerate the NPV discount upwards to maybe 50% of NPV, which at these higher tin prices could easily be $200m. Of course, if something goes wrong, like the tin price falls back, or momentum is lost and a planned raising fumbles - then it can all fall apart, but in conclusion, I'd view further development financing of Crofty on top of drilling out United Downs, as positive, even if it is dilutive.

Very true, CK.

I blame the geos.

"This is a higher Risk but also a higher reward play for me. If you want lower risk, then perhaps invest in a blue chip... but rewards are in general lower..."

Exactly. Your 8 reasons all make sense. Thumbs up from me.

I honestly don't see lithium as a big value driver here, but CUSN acknowledge it is something of interest to investors via their prominent inclusion of lithium in their latest presentation. Here if you fancy a browse; https://www.cornishmetals.com/site/assets/files/4930/2020-05-01_cornish_metals_presentation_website-min.pdf

For CUSN to benefit from Cornish Lithiums activities, it has to be done on their mineral rights. The pilot plant they are looking to procure will be on the CUSN United Downs mineral rights. Not sure what sort of production levels we are looking at in this pilot plant, but I doubt it will be very much, but still could bring in some $$$. Its funded mainly by government grants, and the technology is all unproven. Technical details are scant. But "investors" seem to love it, and the hype from the media is endless! Hopefully it ends somewhere positive.

Anyway, the key value drivers here for me are copper-tin at United Downs, and tin at South Crofty.

The tin price is rampant. As Valuation-it-is, has pointed out, the NPV of the project increases by around $58m for every $1/lb of tin price increase (its actually not quite linear, it will be even greater than this for higher prices). The PEA was run at $10/lb pricing, the spot price is now in excess of $14/lb. So we are now looking at a NPV of > $350m, and IRR of > 50%.

Of course no one uses spot prices for economic assessments, but nonetheless the rising tin price is realigning the trailing price that one would use for a PEA, and using a price of $10/lb or greater is certainly justifiable now. At these kind of prices, if they are sustained over the next 12 months and beyond, yes reopening South Crofty is worth progressing, and further funding will be available on the market to achieve this, despite all the risks and challenges with the depth of the flooded workings, shaft accesses and narrow vein mining methods required.

And then we (might) have something at United Downs. If the copper lode structure intersected in 2020 has any continuity in grade and width laterally or at depth, then it will be worth a great deal indeed. I'd be surprised if such a big intersection is "nothing", all lodes have some degree of continuity in this area. It will be something, its just a question of what exactly.

I'm not convinced its likely we are looking at a multi-million tonne deposit of 8% copper, but even if there was just 600kt at 4% copper and 0.8% tin, you could make cashflow >US$150m extracting that (at 85% NSR, 80% metal recovery, 80% of current spot prices) - which is triple our market cap. And then it would unlock further cashflow from Crofty. Access to the orebody via the existing Wheal Maid decline. Fully permitted for a processing plant at Crofty, and whilst this deposit is being mined and cashflow coming in, Crofty could be dewatered and brought into production to follow on.

We could be looking at getting the first drilling assays back in the next 2 weeks. Exciting

"The biggest issue the mine has is underdevelopment. They started this year with one stope in production and in March they lost that to a rockfall. They are now back with one stope in operation and a second in development, so by the end of q2 they should be looking at 2 production stopes and a 3rd in development, which should see approximately 900t - 1000t of ore per day headed to the mill. Now the mine staffing is back to where it should be and definition drilling is proceeding, it should reduce the risk of another stope failure"

Always a weak position to be in to have one source of ore, fixing that will massively reduce risk in the plan I agree. But did a lack of definition drilling really cause the stope failure though? Possibly they went through the hangingwall and that caused a problem? Or maybe its a more inherent design issue with these wide but shallow angle stopes at increasing depths, and they need to introduce additional support measures. We know how geotechnical design works, its nearly all empirical, for a specific case especially once you start getting away from the historical data you are basing the design on, you only know it doesn't work, when it doesn't work. I didn't even mention geotechnical risks in my earlier post, but yes, there's another risk.

"A lot is made of the hedge as if its some form of bad management. The bottom line is it was a condition of finance that the amount hedged was hedged. At the time the hedge was announced it was for around 95% of the then copper price - that is an outstanding deal."

Yeah I get that, I never said it was bad management. I'm just saying, you have cashflow problems, you don't get to set the terms and conditions, if someone wants to hedge your copper they can, if they want a slice of something else, they can have that too. Facts are based on current copper price, West Face Capital have made $7-8m on the hedging component of a $5m loan. It hasn't *cost* RMM that, but they've missed out on that extra revenue. Which is unfortunate as it would have been handy to be making 30% more revenue right now. It wasn't a bad deal though, management did what they had to do, as you say 95% of the then price, hindsight is wonderful.

redorwhite - This is a in-production mine. Of course there is risk. The Press Release earlier this month stated;

"recent delays to the production ramp-up have had and are expected to have a negative impact on the
Company's cash position in the short term. To ensure the Company has adequate funds available for both
development and working capital through this production ramp-up period, the Company is investigating
financing options"

When you consider that they are selling the copper (hedged) for $7700/tonne, which is 20% more than their business plan ($6400/t) - and they still managed to get into a situation where the business plan created in Q3 2020 (in the presentation on their website, slide 19) didn't work in terms of cashflow. Then yes thats a pretty significant underperformance, and you'd be a fool to say there was no risk of further stumbling blocks along the way!

And these stumbling blocks are very expensive. The 3000 tonnes of remaining copper hedged at $7700/tonne, is going to lose them about $7m at current copper prices. That was a condition of the $5m loan from West Face Capital. They have coined it in on that. So long as they are short on capital, the debt funders have them where they want them, so the execution of the mine plan has to be exactly right. And thats a risk, because its difficult to get things exactly right in mining, there are always uncertainties. For instance... uncertainties in equipment breakdowns (the mining fleet is pretty old, its being upgraded but that won't be concluded till 2022), and uncertainties in grade delivered to the mill (they are underperforming planned reserve grades, probably due to the lack of development). So yes of course there is risk, its all in the disclaimers. If you are telling people there is "no risk", you are naught but a con man, plain and simple.

The question is simply is the risk proportionate to the reward. Is the upside greater than these risks. And are you prepared to justify an investment under those conditions. I would say in this case I probably could yes. They will achieve 1350tpd run rate again later this year, so long as they don't hit stumbling blocks that cause a need for access to further finance. Ore sorting will be brought in, eventually, hopefully in 2022, which will bring them to 2000tpd+. At that point their costs will be significantly lowered from having to truck less waste, and economies of scale. And then there is additional upside particularly in Ming North and the Upper Footwall Zone, which hopefully can be brought forwards in the mine plan as its higher grade.

But none of these things will happen overnight. It will be a journey, and it might not all be one-way. Because of the hedge, and the current output level, no matter what happens to the copper price currently, the company cash position for the remainder of the year will be tight. That in turn may induce delays in the 2022 ore sorting implementation, unless alternative funding can be found.

"The timelines were too optimistic and I think we have sorted that out to most people's satisfaction."

I retain that a 5-6Mtpa production rate will not be reached in Q1 2021, that is totally impossible, but I don't think zoros has retracted that part of the timeline.

I don't think we'll see a 2Mtpa+ production rate until 2023, because you haven't factored in the time it takes to set up stoping (or caving) operations after hitting first ore in development (which I think will be Q2 2022).

"I am not here to do people's research for them , I don't mind sharing my knowledge but that's it.
If you want to find out what SB said go listen"

I remain unconvinced he ever mentioned "Bord and pillar" was ever mentioned.

I believe start-up may well be on SLC, following a Carrapateena type development model. If not then SLOS.

Time will tell who was right, no point arguing about it as you say.

"You better listen to Sandeep talking then cos it came from him to start with"

Show me a clip of Sandeep saying they will use "bord and pillar" at Havieron and I will take that back for sure... this is a mining technique used for flat lying or thin seams, usually coal, potash and the like - or MVT-type zinc/lead deposits, certainly not a 70m deep zone of high grade gold though.

"Not a Roadheader what's this in Revision 3" - I never said they couldn't use a Roadheader, I said that Roadheaders (Sandvik MH620) have been used successfully in Nevada by Barrick Gold... on their decline projects at Cortez and Turquoise Ridge. But not in Australia on decline development in recent years, so the aussie mining contractors won't be kitted up for this. This would seem a good project to use them on though if the Permian strata is soft enough (UCS > 80 MPa preferably, although lots of factors relevant too).

My point to you on this was you seemed to be conflating Roadheaders and Drill rigs with the reference to a "single drill road-header".

This is a Roadheader; https://www.rocktechnology.sandvik/en/products/mechanical-cutting-equipment/roadheaders-for-hardrock/mh621-roadheader-for-hardrock/

This is a drill rig/jumbo; https://www.rocktechnology.sandvik/en/products/underground-drill-rigs-and-bolters/tunneling-jumbos/dt1131-tunneling-jumbo/

Other suppliers are available, for drill rigs anyway.

"The target is a very High grade pocket maybe 70m thick and deep, it is bordered on the east by the Dyke and tails off to the west behind it is a non mineralised mafic intrusion between 50 and 70m thick.
I've been informed by another mining engineer that Board and pillar will be the scenario here"

I can tell you right now, bord & pillar (or room & pillar) would be the last mining method used here... that simply makes no sense whatsoever. How can you extract something 70m deep with bord and pillar... you have 70m deep pillars? Why on earth would you do that. Either this "mining engineer" hasn't thought about this very hard, they are a coal mining engineer who has no idea what they are talking about in relation to this deposit, or they are using "bord and pillar" to mean something very different to what it normally means...

Correction:
*Who "in the know" is claiming its even possible to reach a production level of 5-6Mtpa in Q1 2022? Nobody that understands mining would make that claim. End of.

"SW - I respect your credentials.. So can I ask that you respect mine when it comes to research. This is not my roadmap. It has been built by those who 'know', or atleast are closer to the hub than you (and I ). I simply facilitate that map."

Who "in the know" is claiming its even possible to reach a production level of 5-6Mtpa in Q2 2021? Nobody that understands mining would make that claim. End of.

"Why did you choose to hang your (plastic) hat on the SLC choice (which you say is not feasible) and completely ignore the Stoping option going fwd (which is feasible)?"

It'll be quicker to bring online SLOS than it will SLC. I'm objecting to you claiming its possible to bring SLC on line for Q1 2022, they'll be lucky to even be developing in the orebody by then, never mind having brought a Sub Level Cave online... which will take at least another year. If you read my posts you'll see that I envisage a progression from SLOS to SLC, then on to BC - over a period of several years, matching the optimum return on capital options for this orebody. Equally it is not impossible they will skip SLOS, and run a SLC for 5-6 years on the crescent zone, before moving to BC the deeper breccias. The question is just how desperate are they for early production from SLOS, and how much lower grade mineralisation around the top of the crescent zone do they sterilise by doing that rather than SLC.

"From that very statement, you say early results are irrelevant...and then end by saying initial stoping will be "very profitable". The stoping is happening in Q1 or Q2 2022....that is not far off....make your mind up..is it relevant or not? I believe everyone here wants to know that in well under a year from now (and using your words)....stoping activities will be "very profitable"."

What I'm doing is running NPV modelling, zoros. My point is, whether the stoping commence in Q1 2022, or Q1 2023, doesn't make much difference to the NPV of the Havieron project overall, which in turn is what is driving the market capital and thus valuation of GGP currently. The biggest variable in the NPV modelling presently is not the commencement of production, but the extent and profitability of the breccia mineralisation which comes in 2028 onwards, and that won't likely be fully known until a definitive feasibility study is completed in 2022.

"GGP is now moving fast ( 7.5metres a day ??? ) towards real hard , factual , progress to becoming a mine , and it is getting interesting."
"We must get you all together for the next Stag Convention, ( probably around mid September ) when the MRE's, the PFS 's, the inferred and the indicated have been disclosed, the decline has reached 450 m , the spiral is well on its way, some early dirt is being processed at Telfer, ............... and the SP is starting to reflect the values that we all know exist ( me ... I reckon we will be bumping 40p )."

There won't be any "dirt" processed at Telfer until 2022. The decline itself is 2800m long, to reach the top of the orebody @ 420m depth. So at your figure of 7.5m/day, that'll take a year. It might take a bit less than that in practise, if things go really well, but nonetheless, there won't be ore being processed this September!

"SW, you are going by standard mining timetables .. Newcrest have blown those times out of the water, so I will take your figures with a pinch of salt, more inclined to believe Bamps and Zoros will be closer to the mark than you. Telfer is dying on its feet and needs Havierons ore desperately. NCM know that !"

Havieron's ore is much higher grade than anything they are mining at Telfer, by an order of magnitude. They will be desperate to get it into the mill I agree. That doesnt mean they will break the speed of light. They won't be running at 5-6Mtpa on a sub level cave by the end of Q1 2022, thats just a fact. You can believe zoros if you want. But that is not possible. Thats all there is to it.

I would say having digested that, with all the other info available, the decline could theoretically be completed to target depth (420m) somewhere between April-August 2022, if everything goes smoothly. (which is very rare in mining!) Production in 2022 will be < 1.0Mt, with the first SLOS stopes coming online earliest Q4 2022, realistically more likely in H1 2023.

It's kind of irrelevant really to get too hung up on the short term production though. Whether it starts in 2022 or 2023 is largely immaterial to the inherent value. The initial stoping production will be very profitable, for a few years, whilst the caving infrastructure is developed. The initial grades are excellent, likely 6g/t +, and so you only need a couple of million tonnes of that per year, to double Telfer production. I agree with the SLOS->SLC->BC methodology as the likely progression, with 2-3 years of SLOS to develop the SLC, and then 4-5 years of that to develop the first BC. The initial SLOS and SLC stages for the first 20Mt of production approx is clearly worth around $2 billion NPV, which underpins GGP's current market value. But its hard to really ascribe a clear value beyond the SLC stage, based on the information we have at the moment, it could easily be anywhere between $1bn and $5bn additional NPV. 30% GGP. So its definitely worth around 15p, but it might be worth up to 50p. Its probably somewhere in between... but thats a decent risk profile to be fair at a 20p entry. All considering this is solely based on Havieron and ascribes no value to the possibility of additional discoveries. (Also all based on $1800/oz gold, which could rise or fall).

So the resolution of where exactly in between 15-50p, depends on the additional value through the resource growth in the breccias, and feasibility studies regarding bulk mining costs and how that integrates with Telfer. Thats the crux of the matter here. What exactly are the breccias worth per tonne, how much of them is there, what are the mining costs for bulk caving in this specific orebody, the transport costs to Telfer plant, and how does this integrate with available processing capacity. The margins are much thinner for this than the higher grade material, so the precise costings are crucial. Thats beyond my expertise (and probably anyone else here) frankly. We won't know the answer of that fully until the full feasibility study in 2022 in all likelihood, as the PFS due later this year will cover the initial mining stages only.

Hi Bamps,
Thanks! Are you reading the "Havieron Stage 1 Mining Proposal" by Tara Garrood, Revision 3? Just to make sure I'm on the latest info...

Bamps21;

"The Decline plan has been aimed at our highest grade zone, Stoping will or can practically start as soon as they are given the all clear ."

Stoping starts once they have put levels through the orebody at the upper and lower limits of the stope, as well as "sublevel/s" in between. Hence the name... SLOS... sub level open stoping. These are going to be big stopes, even at 2Mtpa production, they will take at least 4-6 months to develop from hitting the orebody at a minimum to the first production after putting through the initial raise slot. I'm not sure what width the orebody is at the top, but its likely to be wide enough to warrant transverse stoping I imagine, so probably 6-9 months to bring the first one in.

"Production then
2022 less than 2m tons
2023 2m tons
2024 less than 6m tons
2025,26,27 6m tons"

This is optimistic, but not impossible. Depending what "less than" means exactly. But yes, sure, at least those numbers are sort of plausible. I was merely objecting to the roadmap update saying "Q1/22. SLC (5-6M tonnes/yr) commences @ main ore body." - which is absurd. That would be totally impossible, and to even come up with that suggestion shows the author (zoros) doesnt understand the technicalities.

" So Q1/22 is a possibility. However, my roadmap shows Q2/22....same as Bamps prediction. So you are outnumbered SW."

I may be "outnumbered" - but I am a qualified mining engineer, with experience working in decline and stope development in Australia as well as other places, so maybe my opinion counts for more? We will see.

Your "updated roadmap" said and I quote; "Q1/22. SLC (5-6M tonnes/yr) (or Stoping (2M tonnes/yr)) commences @ main ore body."

This is the key stat I objected to in your timeline. If they are SLC at 5-6Mt/year from Q1 2022, I will eat my hat. And yes I mean a yellow hard hat made of plastic. So are you going to modify that?

"The decline was estimated @ 3000m by Sandeep in february of this year. I have since changed it listening to others...to 2800m. Where have you got 4200m from???? Way out."

I am talking about 4000+ total development metres, including mucking bays, ancillary, etc - not just the decline. Which is what lateral development rates are quoted in. You quoted the Byrnecut 700m/month record development rate record, but you dont seem to understand this is not in a single heading decline, this is total metreage of development by a single jumbo / drill rig, moving around between multiple headings.

CK; "For me the deal I want to see is $20 million CAD for a 20% share of little deer, with $30 Million to be spent earning into 50% over the next 3 years, with the costs of development after that being split 50:50."

I've been doing a bit of research on Little Deer, this really is a "forgotten" asset, which was bought out of Thundermin Resources over 5 years ago, and not much done on it since. But yeah the resource is pretty impressive, 6Mt @ 2.2% copper, roughly 2:1 ratio of inferred:indicated. In the current market, absolutely it needs to be looked at for sure. The 2011 PEA showed an after-tax NPV of C$87m, IRR of 22%, for a capex of C$110m @ $3.75/lb copper (and a less favourable exchange rate). Some opportunity for improvement hopefully there, these numbers aren't blowing anyone away, and no one is going to run a PEA at copper prices much higher than that even with the current spot.

However I think your value scenarios for a sale are more than a little optimistic. I think C$20m for 20% is... never say impossible in mining, but, extremely unlikely. With the earn-in to 50% for C$30m you are valueing the asset at C$100m, and I just think thats way too much for a transaction in these circumstances. I would say based on what we can see, if the asset was fully permitted, ready for development, feasibility study completed - then yes C$100m would be sensible. But its not. Its mainly inferred resource, so the first step is drilling it out. And then feasibility studies. It probably needs a few million spending on it to realise any potential for that kind of valuation.

But no one will give you a few million with so many risks, for nothing. If you wanted C$10m to bring in enough cash to drill it out and bring it to the feasibility stage, as well as some spare cash for Ming, I think you'd probably have to give away 50% of the project up front. Or an earn-in of C$6m expenditure for 30% might be possible. Either way you are looking at a valuation of the asset in this type of transaction, around C$20-30m, not C$100m. So in an ideal world, RMM would do that work, to avoid losing all this potential value. But they have no capital, and they are already under huge pressure not to dilute anymore.

For more info, this is the old Thundermin filing page where you can find a copy of the PEA (nov 1st 2011), etc; https://www.sedar.com/DisplayCompanyDocuments.do?lang=EN&issuerNo=00011375

So yeah, very interesting project, probably valued at near zero within RMM currently, and definitely worth more than that. I agree with you its a quality asset, and should be progressed, but I'd hold onto it until their financial position improves if at all possible. If Ming works as planned, albeit a big if in mining, then RMM will go up, and they can raise for LD drilling at lower dilution. On the flip side, if Ming stumbles, they might have to sell LD, from a more desperate position. Its a real dilemma, but a good one to have I suppose.