RE: BUY OUT4 Apr 2021 20:49
To give some substance to why FatherTedFecks suggested alternatives were not as good as he thought (assuming he was genuine in his suggestions), here is a repost of something I posted a couple of weeks ago in response to a question about whether the 0.33% grade was sufficient.
"There are two major categories of cost; capital and operational. The first is buying the equipment and building all the infrastructure you need to support an operational mine. The second is the cost of actually running the mine. Let’s assume for argument's sake that the operational cost of extracting 1 ton of metal is $1000 and the metal is worth $2000. If the capital cost is $100m. you need 100,000 tons of metal to break-even. Beyond that, you can make a profit. A third 'cost' is the level of risk. What is the chance that some external dependency is going to cause delays or prevent the mine operating?
Capital costs are hugely affected by the location of the mine. If you need to build a railway or a road to a mountain in the Andes, that is very different than being a few miles from the main highway to Sydney. Equally, you need to get the metal or ore to the consumers. If you are near a major port for example, that helps a lot. The ore needs processing, so you will need to build the necessary plant, unless there is one nearby that you can use.
When it comes to the actual mine, digging underground to reach the ore is hugely more expensive and risky than simply digging a large hole in the ground. That is why near-surface ore is a LOT less expensive to extract per ton. Also, even if there is a high percentage intercept at a few hundred metres, that means you have to dig through a lot of dead rock to reach. When you look at the average ore percentage per ton mined, you can't just look at the ore-bearing rock - you need to consider all the rock you need to get out of the way first.
The great thing about porphyries is the consistent grade. You are continually extracting rock that is valuable, which means consistent income and consistent offtake.
Risk is another major factor. If you have unstable governments or social conditions or anti-mining lobbies or legal challenges, it can make the mine too risky to build.
In this case, it’s not that 0.3% is amazing grade in absolute terms but it is amazing relative to cost and risk You have a huge amount of ore, which massively reduces the impact of capital cost. You have near-surface ore, which means it can be extracted via a much cheaper open pit. You have existing nearby infrastructure and transport links and a port. Finally, you have a very friendly jurisdiction, which takes away most of the potential risk.
All-in-all, that makes a very good investment. Great potential returns with minimal downside"
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