Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Hi CBS,
It mitigates to a point but the so called, best in the business actually aren’t that good imo. They all fail in the same areas. It’s endemic to an industry that makes such large profits that the build overruns don’t seem to overly bother them. Obscene profits dictate a CBF attitude.
It’s interesting watching g the big American EPCMs working, they have processes across the board to get the job in and claim success after success but at the end of the day if you analyse the actual delivery it’s all about blame and who carries the canfor the delays. There needs to be a seismic shift in delivery, Europe is edging forward in some areas but overall infrastructure remains fraught. Those areas are also not mining, but things like major transportation projects. Look at nuclear - they haemorrhage cash like a severed artery does blood. V
TDT
I have worked on an O&G plant too and that was blown out massively. What I find on mines in general, regardless of mineral, is that the same problems go on over and over. One of the issues is the lack of construction capability in turnkey operations (I.e.not civics and structural). Systems companies are notoriously bad at delivering and so one eyed they don’t see the integration issues. This causes havoc across the board. It’s the same in many industries. Culturally the major companies in the lead roles are civil based and they can’t/won’t make the transition to turnkey Systems because they are lazy. This is a problem in many countries too. Lazy management at the top that make too much profit from digging holes to give a ****** about losing 10% of their overall profits by doing systems properly. That way they don’t have to change culture and buy in specialist resource. V
Cost Overruns these are endemic in Mining and funding must take into account that the industry invariably underestimates the final TOC. Also the projects are run by companies that are actually not very good at running infrastructure projects. There is a gap in delivery between Civil and Structural and the ‘System’ which is what a mine is. Never the Twain shall meet springs to mind. V
I think you are looking at chalk and cheese CBS.
A quick look over Nevsun shows production from Eritrea which is not insignificant, and explains $150m to a point. They can and should ignore that offer. 13% over the $4odd value they have now is not good.
Payback on new mine only 1.5 years and they can put down investment from their own funds.
Again if they are clever about that mine they can stage production in across funding based on current operations and let early production take up slack. They can also target very very high copper target (presumably) and chuck in a bit of high grade gold (if its in a similar location - I would bet it is) .
Jurisdiction is Central Europe so no logistical nightmares, Serbia is not Siberia. Well nearly in spelling terms lol. That PEA and headline report looked pretty fundamental to me. Lots of effort in that and they have a main report to back it up. Impressive. Maybe that’s why they are producing? V
Hi CBS,
Good questions, DFSs didn’t budge the price hardly at all, never mind PFS. However the AIM seems to be a bit of a lottery on price manipulation, pump and dump etc. there are more investors for one. Lots more. So would I predict no movement? No not on that market, if it was ASX I would be a bit more circumspect. Certainly I would be out after day one if there is a pump on price and get back in when sanity prevailed again. It would be too tempting.
They are having trouble because the banks and regular mine financing funds are wanting their pound of flesh in the deals. It’s a really tough market to justify heavy outlay on a mine at the moment. However, the market is beginning to heat up again so this will be a couple of years in the making.
Will it go to the heady days of 2007 again? No. But it will significantly heat up again. The stupidity of the banks has been addressed and they too have some way to go to get back to a proper equilibrium with regards to loans of this type. In the interim it’s tortuous.
Overall I am now following the evolution of a minor with respect to investing. Get in early when indicators look good and prior to results being announced. Dump on exploration and JORC announcement excitement rise, hopefully near peak. Back in a few years later when the hard work studies are done and price is low and ride the wave to production. Out again at nameplate as the price erodes quite quickly. I pick my investments based on where they are to balance them now.
AMC unfortunately for many is now in the study trough. It’s time to wait it out or lose for many on that basis. There may be a blip as per the mining license and I certainly wouldn’t rule out a pump and dump on PFS but there is a long wait after.
Hopefully, the funding by then will be a bit easier. But in the interim and if it’s any consolation, everyone is doing it tough.V
Hi CBS,
I can see why you would be confused. It doesn’t make sense. Off-takes when agreed in full for the take, whether in raw, concentrate or metal form are a bargaining chip for gaining the elusive funding. They give you a major card to play with. Also if you can guarantee to the bank that the ‘take is fully covered’ it gives a huge confidence factor.
I would look at the off-take here simply as if they can guarantee, contractually, that somebody will buy the output, whatever form it is, they can borrow easier/and or more depending on the terms of the deal.
To me there is a sanity in staging here, get the mine part running and with a program of ramp-up in outputs. Do the research, D&C costing across all options and plan accordingly with respect to concentrate, matte etc and the processing and refining thereof. That should be part of the DFS anyway if they are going about it in the right way.
Factor in an off-take,I.e.do a deal then initiate the plan around what you can get and afford and stage to the objective. Without crippling the company with mega dilution. Deals are always easier with a signed off-take in full.
And I agree with you post below. funding at the moment, across the board on every commodity is a pain in the asss. I have a few minors on the go and they are significantly more progressed than AMC and are all struggling for finance. Two of them have world class assets as well.
I agree, I stuck with this share for a long time and voted with my feet when successive deliverables weren’t met and a plan set down was wiped clean overnight.
My general view is to question everything and everyone who holds any form of my cash.
What evidence do we have that AMC are up to snuff? Care to list the evidence of why we are doing so well Noloss? Try to be objective - milestones achieved versus milestones not achieved. I’m interested to see your objective thoughts as we don’t get to see them that much. V
Hi Mike,
There seems to be no real company objective in my view. At least one that has not been relayed to us the punter.
I still resort to my comment last night (your morning today) that they seem to be accruing information without having a proper channel apart from lumping it with a ‘study’ of one kind or another. The ‘study’ varies from PFS to DFS to BFS randomly.
My view is still that they have misread the market and the jurisdiction they are in and are struggling. What evidence is there contrary to this? Reading back through regulatory notices leads one to suspect they are winging it.
Well let’s see from here if they can provide a bit of backbone to the plot? They need to do something as going concern will be a real problem soon enough.
As for apologists - I ignore them more than derampers. Some have dangerously misleading views on shares. V
Thanks for the response BF80.
I agree not immediate concern, but one assumes the deal was struck in good faith to take full capability of the $10m. This is now in jeapardy and has set a trend. They have actually stated that they are trying to renegotiate, as you commented on below, you wouldn’t have taken the loan out if you had no intention of utilising it, as the higher the loan, gnenerally, the more punitive the returns are.
Issuance of interim news needs to happen now to give the SP a kick. Equally, negotiations on furtherance of the current deal or a new deal with a separate entity also have to take place. One doesn’t want to be in the position of ‘last minute’ deals. 12 months goes quickly. V
The two paragraphs of interest via the RNS are:
At the date of the approval of this report, the Group had not met the required milestones for receipt of the next advance of US$2 million. The Directors are currently in discussions with the investors to amend the terms to allow drawdown of the remaining amounts under the convertible loan facility however, the outcome of these discussions and the timing of the additional funding is uncertain.
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The Directors have reviewed the Group's cash flow forecast for the period to 31 December 2019 and plan to continue advancing the project to DFS stage in 2018-2019. Should funds not be forthcoming in a reasonable timescale the expenditure plans could be adapted to prolong current cash resources. However, should the revised terms not be agreed and the repayment of the US$4 million initially advance is required, additional funds will be needed within twelve months from the date of the approval of these financial statements.
The statement reads, for the hard of understanding, that if a new deal cannot be done they are no longer a going concern. That’s about as risky a position you could be in. Cue price shift - negatively.
Schach was actually right in much of this. Yes, he doesn’t put it well but you can’t really argue versus the statements above can you? And as for ‘accountant speak’ - yes it is - they’re the ones who generally tell you that you are insolvent.
As it stands currently there needs to be a financial solution. Because if there isn’t the company is going broke. Do I see that wrong or is it written in the five paragraphs under going concern? V
If you look at the general requirements of a PFS:
The results of a pre-feasibility study may be the first hard project information that is seen by corporate decision makers. There is a risk that the findings are committed to memory and announced publicly so that it becomes difficult to dislodge them with subsequent information. In such cases, the pre-feasibility study is the real decision point, with the subsequent feasibility study being seen by management as a necessary step along the path that has already been irrevocably committed.
For these reasons the pre-feasibility study must be prepared with great care by experienced people, and its conclusions heavily qualified wherever necessary. Assumptions should be realistic rather than optimistic because it is very difficult to bring management and markets back to reality in the event that the final feasibility study is significantly less favourable. The main features of the pre-feasibility study are:
Mine design based on a resource model.
Best alternative selected from a range of alternatives.
Preliminary studies completed on geotechnical, environmental, and infrastructure requirements.
Bench scale metallurgical tests and preliminary process design completed.
Cost estimates based on factored or comparative prices.
Usually result in an Ore Reserve estimate
Study accuracy 20% to 25%.
Ready to proceed to final feasibility study.
The timescales here are much longer than the actions above would take. Materially longer. However, those are general guidelines above and apart from AuIMM There isn’t a benchmark for what is in or out of a PFS so its a bit like the proverbial string length.
My view here is that BoD have realised there is a dearth of opportunity with respect to funding across the board / across the world. Banks are really playing hardball. That is a fact and no end of companies can attest to that. In fact it’s pretty ruthless at the moment.
Seems to me it’s a case of marking time, I think the PFS is ready but to what end if submitted to market? DFS still required (depending on required input from where the PFS ends) but funding will be a *****, we know the limitations, jurisdiction issues and other negatives as much as the positives. To me low cost additional information accrual is happening. Slow but surely to get to a DFS level.
So I tend to agree with CBS, there is no rush imo. V
Actually you are both right ironically. The individual batteries are as per TDTs post. below, however, These are bundled to make a battery pack. For instance the Tesla S is about 540Kg and comes on a tray formed around the chassis. Thus, and as TDTs 6 year old daughter could probably tell you, individually the battery takes x nickel whereas the battery pack takes y nickel. So apples and oranges really, as my 3 year old spider plant could tell you. Can you both give it up now because it�s tiresome. V
Hi Sans, The following from March this year by Wood MacKenzie pretty much sums the market and highlights the good and not so good in the news today: �In 2016, average C1 costs fell 14% on 2015 levels to $3.13/lb. This drop in costs was helped in part by the declining nickel price which led to lower ore purchase prices and treatment and refining charges, a continued weakening of some currencies but also by true cost reductions at the operations themselves. Rising by-product metal prices helped to continue to drive C1 costs lower in 2017 to an estimated $2.65/lb. We currently forecast C1 costs to remain pretty flat into 2018, with higher nickel prices (raising ore purchase prices and third party TC/RC's) being offset by higher by-product metal values�. Before everyone tallies their costs realise that there are C2 and C3 costs to add to this. For instance in 2008 the C1 costs were $3.21 rising to $5.34 at C3. Those were industry averages by the way. The good news is that the company is ahead of the curve on C1. The statement above however, shows that the average across the industry is also flat overall. On nickel alone this is a healthy profit, especially if the nickel price continues to rise. There are still a number of factors across many metals that could skew this price as commodities have taken a bit of a pasting over the last few years and most predictions by experts have been over the actual. The down side, and what we have known all along, is that the production by toll smelting means you generally forego the other parts of the take, i.e. Cobalt, PGMs and any other things you get out of he ground. In copper terms this is not insubstantial. Low grade matte also means some loss too to get to final product. So it�s swings and roundabouts. It is easy to make blithe comments about where the Industry is going with mines in care and maintenance and production receding currently but as stated a few things can change this. My thoughts overall is that this is generally good news as it currently sits. My view is skewed by Capex which is proving tough for lots of miners across lots of commodities even here in Aus and other safe jurisdictions across the globe and with significant resources in world class terms. (I invest in two of them). That may be the general hold point. The Chinese are equally assessing what, who and where they loan to. Blithe comments regarding this are also not helpful. The fact is the banks are not the same for loaning as they were in he heady days prior to the gfc. Those affects are still being felt. Good RNS though if accurate. Hope that helps. V
https://www.srk.com.au/en/newsletter/focus-geology/jorc-and-chinese-resource-classification-system-srk-view This may help TDT. It�s an SRK version of how the Chinese view resource capture and estimates. Note the Chinese have a new system which would be applied to AMC and this is broadly inline with JORC as it has been accepted by the international committee. I don�t confuse the exploration from mine construction with respect to funding. But I look at where their money has come from to date and who is involved directly with them to date. In your 3rd paragraph you elucidate the issue with the PFS. That is what we were discussing from the outset, the fact that the company has lost its way. If it was down to funding they should have been looking a lot earlier and also they had stated they were going to do a DFS. Then there have been a multitude of RNSs regarding all kinds of issues such as the road, which seems to have gone backwards in planning and then the �golden silence�. I think you are right in respect to funding issues but they need to get a coherent story going because the rest doesn�t stack up. V
Hi TDT, It�s dofficult to take non-Western view of things when their financing has continually been addressed by Western Financial bodies. Also their outputs conform along the same lines - standard reporting. When they differ from that path I will reassess but looking at others in that neck of the woods they follow a similar path on reporting and financing. I agree grade is king and that may be where the problem is. To actually get the show on the road you need a lot of collateral. My thoughts are that the PFS is pointing out that perhaps that collateral is not off set enough to support funding, it�s not a black and white decision and the banks will factor in immense risk, especially politically. Maybe that is why the balancing has been fronted earlier to ascertain the true outputs prior to other Works downstream. I would agree that they were doing a good job. But over a couple of years it seems that they run he business like headless chooks. My own views on program and reporting go way back and that is one of the reasons I pulled out. I would like to see how the project goes when the price of Nickel gets stronger. Then it may be a different ballgame but at the moment it is all a bit risky. V