Giga did in 2011 a scoping study Which got an initial 1.35 B USD capital spending(phase 1 to produce ~24 000 tons of nickel and ~1300t of Cobalt in concentrate) followed by a phase 2 further ~500 million USD(phase 2 to produce ~44 500 t nickel and ~2400t of cobalt in concentrate), at 8.5 USD/lb Nickel price,and 14 USD/lb cobalt price at C:USD 0.95 . It reached an after tax of 725M USD and 13.5% IRR. Which i wouldnt call solid with any assumptions. Now what changed greately since is the canadian Dollar got substantially weaker which can improve these metrics, however they also got last year a 2% net shmelter royalty deal with Cobalt 27 Which will drag their future PFS which they working on right now. In exchange they got 1 million CAD and 1.125 Million Cobalt 27 shares which together today worth a good ~5.5 million, of course if they sell the shares they can only use the proceeds to develop turnagain at least 75% of that money.
Worth to note that if our 2.25 PEA would have been calculated with a 14 USD/lb Cobalt, and 8.5USD/lb nickel we would have ended up at about ~26% less revenue/year and so at after tax NPV of ~1B AUD, and ~17% IRR.
But of course we arent in the same shoes going forward, first because we will produce nickel sulphate instead of a concentrate which i have high confidence will command significant premium troughout the coming decade.
Secondly we much more prone to benefit from the upcoming EV rise which will bring a Cobalt demand rise but also keep and maybe increase nickel sulphate premium beside the rise of class 1 nickel demand. Me personally i dont expect 14UsD/lb price between the time frame of 2022-2032 but rather an average price of the double of that ~28USD/lb at least thats what my comfortable input number into our project and i dont assume that very optimistic scenario, but of course everyone gotta take their stands. Than,of course Giga have about ~50% higher estimated capital spending compared to 2011 numbers. And those estimates been given ~7.5 year ago which lets be honest kinda old, i wouldnt be surprised if in their PFS the Capital spending will go up 10-20% compared to the 2011 results. I think their stage one Capex will be 1.5-1.7 B at the initial stage ~15 MTPA of operation which to be expanded to about ~30 MTPA at stage two for another 550-600million USD. I think their Pay back time will go higher than 8 years thanks to this capital increases,and the 2% NSR of Cobalt 27 Also .
I think we are and will continue to be much more competetive of get our project going,and also in being able to reach much better returns on invested capital in the mine. Additionally in the lasting nickel upcycle we can also possibly expand, and double our processing capacity which is quite handy.
Additionally i do believe as well that cobalt 27 did a steal with the Highland Take over! That company is for my opinion a conservative multiply option for the upcoming Cobalt-nickel market. Of course because it has fairly limited risk it offers also much more limited upside compared to Ardea.
ARL Price at posting:
46.0¢ Sentiment: Buy Disclosure: Held
(20min delay)