Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
I don't see anything wrong with anyone's maths... you're just calculating different things.
Steve - Perhaps it would help if you could explain why you think it is important to separate the Cu Eq figure in the new JORC, into the separate copper and gold components? Is it just to allow comparison to the earlier JORC (2018) or are you implying there is something more sinister behind it e.g. Xtract trying to hide something?
It is worth noting that the buy-back clause refers to contained Cu Eq, even though AA's own JORC (2018) had the copper and gold quantified separate. If anything, it was surely AA that prompted the use of Cu Eq as the measure?
Anyway, enough of this for today. There is beer to be drunk and football to be watched. Evening All.
The curse of the CB interview strikes again.
Freck - It is not CB deliberately being misleading. He interchanges Cu Eq with Cu a bit like he does Bushranger and Racecourse, which are different things too. At the last interview, he also referred to the resource in ounces instead of tons. I find the inaccuracies somewhat niggling but I don't think it is going to change any time soon and I don't think we should read too much into it.
Cela - I don't think it would help for CB to state that in his opinion, this is absolutely economic... although you might argue he did with "the decision to mine is taken!" comment in the previous interview.
He has previously told shareholders (although carefully not in an RNS) that he expected 2mt of cu eq at Racecourse... without Ascot. Given the recent JORC, that brings into question his judgement/honesty. Reassurances from CB are sadly not enough at this stage.
I didn't find CB's rebuttal quite as outrageous as others. The last two interviews resulted in a complete SP battering so zero market response seems like a result... hopefully this is absolute bottom with zero value for Bushranger at present.
I personally think Steve did a difficult job coming up with a useable model/calculation given the lack of consistent data. I don't agree with his negative NPV conclusion though because I would go with a much low opex (for reasons previously explained) but, as iceberg said, the model is there for everyone to play around with and to challenge his calculations and assumptions... so thanks for that Steve.
On that note, it would be good to hear the views of iceberg and other shareholders with more knowledge and experience. The capex and opex assumptions seem to me to be the weak points in Steve's model (needs a lot more information and data to be much more than guesses) but it would be good to try and form a collective view (or range) and feed that into the model to see what it does to the NPV.
One last thing. I do not think the demonisation of Steve would be complete without an honorary name change. Henceforth, I propose he is know as Steve666. You devil, you.
Steve - I still think it is the opex figure that is the problem with your calculation. Opex is all the operating costs and not just the cost of extracting and processing ore. Your assumption that a doubling of ore will mean a doubling of the opex is too simplistic and cannot be correct.
For starters, the opex figure used in the conceptual open pit study will have included the cost of removing and dumping waste dirt (to get at the ore) from the pit. If you reclassify waste dirt within the boundaries of the pit as ore (because you lower the cut-off used in the original JORC or find new ore), then the cost of removing it for dumping (already accounted for in the opex) needs to be subtracted from the new cost of removing it for processing. So to calculate the new opex you need to know how much 'new' ore sits outside of the conceptual pit (if any), what it will cost to extend the pit to capture ore currently outside of it (if needed), and the cost difference between the processing and dumping of dirt. And there will be countless other variables that neither of us know about or understand because we are not mining experts. Neither of us have the info/data/experience to recalculate the opex and the assumption you have made to try and plug this knowledge gap is not sound. TBH I think you'd actually be closer to the mark assuming no additional opex rather than a doubling of it. But now I'm guessing. We simply won't know until the new modelling study is back.
Steve - The pdf map you linked to to evidence that the new JORC covers a much larger area is just another example of inconsistent/missing information that makes it impossible to assess the viability of a mine using the data we have.
Have another look at the most recent map and compare it to the one released at the end of phase 2 - links below. On the most recent map it looks like the new resource area is much larger but only because they have changed the size and shape of the inferred mineral resource (2018) area, which now appears smaller. Put the maps side by side and the new resource area is actually almost identical to the old one. Does that mean that we have 1.1mt of Cu Eq sitting in the same size conceptual pit? That would be great but I think it would be a dangerous assumption! Perhaps even Xtract don't know until the new modelling comes back. There are just too many unknowns.
This is why I was so dismayed when they released the new JORC without the modelling to confirm it has bankable value. They should have known that announcing a new resource estimate much lower than CB had led us to believe, would result in investors inevitably questioning CB's judgement/honesty re the viability of a mine too. And, boy, has the SP taken a kick-in because of it.
Steve, I completely agree that we need XTR to provide a side-by-side comparison of the new vs original JORC using the same parameters in both cases and to do so asap. And CB needs to wheel out the Oz team to present because I think there is still a lot of trust in them. What a mess.
Latest map: https://www.rns-pdf.londonstockexchange.com/rns/2677H_1-2022-11-22.pdf
Old map (end Phase 2): https://www.rns-pdf.londonstockexchange.com/rns/9166U_1-2022-8-4.pdf
Steve - In your calculation you make the assumption that "operational expenditure (opex) is pro-rata for the ore tonnage mined". But you can't assume that. For starters, all the new ore that has been discovered within that boundaries of that first conceptual open pit, is going to be recovered without any increase in the cost of digging the hole isn't it?
Without knowing exactly where the new ore is sitting and at what grade, how the pit design might change and what it all means in terms of strip ratio, how can you even begin to assess the economics? IMO you simple don't have the data, tools, experience or skills to make the claim you have. I have always respected and appreciated your contribution to this BB but I think you've got this one wrong.
Ella has highlighted the main weak point with Steve's calculation i.e. understanding the strip ratio and how much waste material has to be removed. Remember, it isn't just the ore containing copper that is removed. Xtract has identified ore during phases 1 and 2 that they previously thought was going to be waste. Instead of digging it out and dumping it in tailings, that ore will now go to the processing plant and be turned in $'s. This makes a big difference to the economics of a pit.
Without all the data, and sophisticated modelling software to process it, I don't think it is possible to do the calculation. I am certainly hoping that is the case!
Joeman1 - I agree that the modelling work is needed asap to prove that the discovery is economic to mine. I don't know what CB was thinking releasing this news without having the modelling report to go with it and prove we have a valuable asset that someone is going to buy (even if not for as much as we had hoped).
I got the impression that they want to tinker with the modelling/study when they get it back to see if Ascot could be included in one open pit. That will mean more delay and is not acceptable. They need to release the study showing RC is viable and then say they are now looking to see if Ascot can be included as well to further improve the economics.
What a mess.
howezap - That may be what he meant but there was no 'pre' prefix used.
Gixxer - Good question re getting out from under the foot of AA. That surely has to be the decision to mine but I've just re-listened to the podcast because CB said we couldn't formally declare a decision to mine because AA would want to them to "Show us the figures, show that you've got a feasibility study, show that you're moving towards financing etc, etc". If all of that is required before even triggering the buyback clause/process (and we are back to guessing because none of us have seen the terms of the contract) then we have a way to go yet before we could get this onto the open market.
CB needs to set out the steps for triggering the buy-back clause and provide a timeline that can be reported against. People simple don't trust them to just get on with it now and that means we need more visibility of what is happening.
Andrew - I roughly calculate that for every word spoken by CB in those interviews, it knocked £5k of the MC. Where's a dose of laryngitis when you need it?
In all seriousness though, this come back to a point made multiple times by multiple investors here... CB is too stretched to do the PR properly. And it isn't just CB that I've got the hump with... don't other board members have a voice? Why wasn't anyone advising him that putting out a lower than predicted resource estimate would be a disaster without having the modelling to at least prove it is commercially viable and a that a payday is not far away? Or telling him not to keep overstating the likely size of the resource and to focus more on making the case that it will be commercially viable whatever the size? It's a collective shambles.
The Bushranger project does have 'scattered' resource targets but that isn't a bad thing.
Go a bit further along the Lachlan Belt and take a look at the 'scattered' resource at Cadia. The operation started there with an open pit at Cadia Hill and later two underground mines were added. And they are still exploring and still expanding after 30 years.
The announcement that Racecourse contains 1.1mt of copper is only a disappointment because we had been led to believe there was more. However, the open pit being proposed is a very similar size to the one at Cadia Hill and the resource estimates aren't that different either - Cadia Hill (more gold than copper) had an estimated 6.8m ounces of gold and 0.5mt of copper (at 0.16%) when they started digging.
I still think the Bushranger discovery/project can be commercialised but we obviously need the modelling to confirm that. Which is why I can't understand why CB would release this resource estimate without waiting for the modelling to prove it can be commercialised and is sellable? Knowing it is commercial and a sale likely, would have softened the blow of finding out we weren't going to get as much as we hoped) for it. Investors would have held tight and the SP would have gone up as others tried to get in on the action. Instead, we have a breakdown of trust, fleeing investors and a crashing SP. I think we can all agree, this has been a PR disaster... with the "acquisition mode" announcement today the icing on bloody cake.
JS - Looking is OK... touching is bad. He needs to earn new projects by delivering a Bushranger sale.
I think it is fair to say there is little/no investor appetite for embarking on any other treasure hunts before the Bushranger project is done. He needs to settle very jangled investor nerves by going on record that there will be no new projects or raises until Bushranger is done.
Hi howezap - Unfortunately CB's words of reassurance don't seem to have reassured!
If he has been keeping some good news in his back pocket for a rainy day then now is the time to get it out... it's f#'king ****ing it down out here!
I don't think it was a good move to try and gaslight the market/shareholders by blaming the negative reaction on their lack of understanding.
It also wasn't helpful to say the decision to mine has been taken and to then have to admit they are not in a position to formally declare a decision to mine to AA. He needs to clearly set out the steps that are needed before a formal decision to mine can be declared and provide some timelines that can be reported against.
I also concur with Andrew444... any future projects must surely be financed by existing projects delivering a ROI. And, ideally, he needs to give us a ROI from the sale of Bushranger before taking on any new projects. We need some jam today, not more jam tomorrow.
Dibs - There are also approx 50 mid-tier miners in Australia.
Time for the salesman to earn his crust.