RE: This is the weirdest board of them all!22 Mar 2021 14:19
Potatohead
Do you remember Mirabela Nickel? RY used to regularly mention this project in presentations because it mirrored, in some respects, Kun Manie. The mine was called Santa Rita if memory serves me correctly. That was a successful operation until the collapse in the nickel price happened. The operation was shut down as the banks called in their loans and investors lost everything.
A couple of years ago now Appian Capital bought the mine from the administrator. They didn't rush in to restarting it straight away deciding, quite wisely, to wait until the nickel price recovered. They also spent some time looking at the original operation with a view to optimising the mines potential. They've now re-started operations at Santa Rita taking advantage of the improved nickel price plus the optimisation opportunities the mine had.
Why is this relevant to Amur? Amur has always been an operation that was never going to fly at $4/$5/$6/$7/lb. nickel. It was always going to need a much healthier price before funding bodies were going to find the risk acceptable. Keep in mind that the risk profile for a funder and the level that the price of nickel needs to be at and the ability of the mine to turn a profit are not the same thing. Funders look for a very healthy margin between break even and the level above which funding becomes doable. Amur, with their 320km haul road, high stripping ratio, isolated location, relatively poor recoveries, high magnesium content (have I missed anything) needs a nickel price that's a good bit healthier than the one we are seeing at the moment. You don't/can't develop/sell a mine unless you're going to turn a profit after all the costs are factored in and the bankers margin of safety met.
That brings us back to your "If this really is a non-starter. Why didn't RY tell LT holders years ago." Amur listed on AIM in March 2006, 15 years ago. Nickel was on the verge of its run up to $50,000/tonne+ back then. The ride ever since has been a bit of a roller coaster. During that time Amur has continued to prove up the deposit increasing it both in size and grade although neither of these two variables have increased anywhere near as much as many had hoped. RY has kept the show on the road in the hope that the drill bit and the price of nickel, amongst other things, would do him a favour. He would never and neither would any other CEO, come out with the sort of stark statement you think he should have. Kun Manie has dipped in and out of profitability several times these past few year. It may well be that at some point in the future RY runs out of options and the funding dries up but if it does that will be the market calling time. Its RY’s job to keep things going as best he can. The cynics on here will tell you he’s doing so out of self-interest and that may be true but I’d much rather that than see him call time only for somebody else, like Appian Capital for example, to reap the rewards.
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