If any one wants some decent info regarding economics the below post details how i computed the comparison table and the assumptions.
"I'll reply to myself as no one else to bounce ideas off. Hopefully this next post is of value as i spent a few hours putting it together and i think have made a material comparison across a few projects.
I found myself frustrated that different companies seem to report different opex and revenue costs. Some were in terms of the concentrate, some as the total contained tonnes. Basket prices in US other in AUD.
all using different costing inputs etc etc etc.
So consider this a V1 of a comparison across a couple deposits.
My main intention of compiling this table was to:
a) work out rough opex and revenue of Makuutu
b) test those assumptions across other projects by comparing operating costs against concentrate levels and basket pricing
c) show how extremely economical makuutu is and compare it to what all the other companies are calling low opex, low capex operation. It's really all a load of fud.
But first a few notes;
1) I'm aware i'm missing a few companies, if people are holders and have a list of the info I've detailed reply to me and i'll add them in
2) Some of the figures will be outdated. I tried to source most info from PFS and DFS's as they are generally a reliable source. If figures are outdated please let me know and i'll be happy to correct.
3) basket prices was calculated off water i could find for each company but using same pricing so should be atleast comparable.
4) i'm aware browns range is dysprosium, but i included it for purposes of row 37. (will explain)
5) All of the other companies will have revenues based on DFS's which are probably using inflated figures as they were compiled when pricing was higher. So essentially i don't believe the margins are as high as they currently are.
Ok so what the hell are we looking at and where are the key figures?
Well as far as i'm concerned all i care about is annual profit, operating margin and capex.
Why?
-well annual profit gives an indication to what a market cap could be on a P/E ratio.
-Operating margin gives you indication to just how much the price of rare earths could drop before you go underwater
-Capex is how difficult it's going to be to get that profit. Larger capex - less likely to occur or massive dilution to achieve.
So let me explain a few things from top of the table to the bottom.
-Grade is in Parts per million should be easily able to convert
-basket pricing is as per the above table. AUD was then converted to USD. the percentage figure and dollar value was just to display hypothetically what your basket is worth at the proposed concentration target to indicate how much concentration effects profitability.
-life of mine worked off studies, ones without studies when deposit/through-put (makuutu won't be that high as not all material will be mineable, also other deposits will have longer mine life once they do more drilling.
Ok lets get down the nitty gritty. the concentration which will require people to concentrate if you're not familiar took me a while to get my head around this but i'm good at explaining stuff as i'm quite simple and like simple explanations.
Average Concentrate Production:
This is essentially the "junk" that comes out the back end of your plant. Don't worry about what's in it, how much, what product. you chuck x amount of dirt in you get y out.
Concentrate %; (not to be confused with recoveries)
essentially how much of that stuff is actually a rare earth concentrate. So if I produce 1T of 'junk' at 50% concentrate it means half is just waste/dirt/not stuff you want the other 50% is a rare earth concentrate (for lack of better description)
AVG TCT tonnes (Total contained tonnes):
Basically the mass balance of the useful stuff that comes out on an annual basis
Assumed NdPr or Dyp:
This is typically the marketable product and thus i (for this exercise) have assumed that the contained NdPr will be linearly related to their basket ratio. When i say assumed a few PFS detailed exactly what NdPr quantity they will produce in how much TREO. So given the NdPr in terms of % of basket is very similar (20-25%) those that havent done met testing i have assumed they would produce a similar ratio of NdPr to TREO concentrate.
Ok lets use an example just so we're all clear. And i'll use lonjongo as it was all info from a relatively recent PFS. (figures may have been rounded for ease of calcs)
So essentially they're proposing to produce 56,000T of concentrate at 35% concentrate level.
Basically meaning only 19500 tonnes is actually rare earth concentrate the rest is junk. (that why low concentrates don't sell for much as who you sell it to has to crack it, process it even further).
of that 19500 tonnes around 4200 tonnes is NdPr. which although 20% of tonnage makes 75% of you basket. (hence why we're using NdPr here)
Cool - so with that let skip down to actual revenue figures.
I essentially got sick of all the various comparison so i done a simple calc.
line 40 revenue/concentrate tonnes
line 41 revenue/TREO tonnes
line 42 revenue/TCT NdPr tonnes
So for lonjongo this aligned very closely to the PFS so for others it seemed to make sense. This get's rid of the basket pricing BS and is just straight up how much stuff you making how much you getting paid.
So who has the best. well Makuutu and Biol. Note these are calculations and i'll explain how i got there in the end.
who has the worst. well that's lonjongo and rainbow. But! before you jump to conclusions you need to refer to the opex costs. Just because to sell something for a low price doesn't mean it's bad it depends how much it costed to produce it. Low and behold lonjongo has one of the best opex cost's (refer to line 35).
Now I need to make a comment about the low concentrate costs (line 33).
This is how companies can be quite misleading. ARU has a 512/t cost of concentrate. WOW! everyone will say 10 times cheaper than makuutu. Ahhh well yes if you produce 300,000 tonnes of crap (5%) concentrate of course it's going to look good. Imagine pumping pure water through the plant. concentration levels at 1%. You $/t to do it look great but really doesn't mean much. Need to compare apples to apples.
In terms of what revenue makes the most sense. IMV it's lines 34 (for opex) and lines 41 (for revenue). These are the 2 figures that most companies seemed to refer to.
Ok, so lets talk about the final line. If we make the assumption that as NdPr produces with 75% of revenue attributing to the amount of tonnes you produce it's logically that everyone's $/t for that figure should be similar. Which looking across the board they all appeared to land in the 50,000-80,000 p/t. (Browns ignored as dysprosium)
So essentially what it tells me is that rainbow either has dodgey revenue figures (should be higher) or it's getting bent over the barrel on its price. Interestingly, and what i consider extremely interesting is that the lower grade concentrate producers all seem to get a lower $/t. (ignoring ARU as it's revenue are a little high as it generates a bit of money from by-products. This would seem to suggest that regardless of how many tonnes you produce of NdPr annually. You're likely to get less revenue per tonne if you sell a low concentrate. Which is as i suspected in previous posting that grade of concentrate is not linear. meaning double the grade doesn't get double the price it's probably closer to 2.5 times the price etc.
So let's pressure test those figures. Namely lets compare Makuutu to lonjongo and HAS.
makuutu's revenue (for each tonne of concentrate) is 4 times higher. Does that make sense.
Well it's basket is almost double about 1.8 times higher, and it produces a 90% concentrate instead of 35%. So 2.5 times. So even linearly it makes sense. i.e. if PM8 managed to produce 90% and had double the basket it's price would be around the 20,000/t.
makuutu compared to HAS. So it's a little higher. well it's got a higher basket price, and its concentrate is 90% not 57%. Now i thought to myself HAS has almost 40% NdPr compared to 20% in makuutu so i thought it should be higher. but then i thought about this.
1T of Makuutu junk at 90% concentrate has 900kg of TREO. at 20% NdPr it has 180kg
1T of HAS junk at 57% concentrate has 570kg TREO. at 40% NdPr is has 226kg
So essentially for even 1T of saleable concentrate HAS would have 40kg more of NdPr but Makuutu would have 370kg more of all the other rare earth. Hence why i think as per row 40 makuutu should have the best price of all. (Aside from biol who has a better basket than makuutu).
Almost there, finally to get this revenue i had wanted to test how i could get that revenue price but link it back to basket price. in row 38. I took row 40 and divided it by the concentrate level. what does this mean.
Theoretically, row 38 is what everyone revenue would be if everyone produced a 1% concentrate.
But those figures are still out of whack because of basket pricing right. A better basket would mean someones 1% would be worth more than the other.
So i normalized all these baskets against lonjongo. (Why it had the lowest concentrate price (aside from rainbow which i didn't trust) but i wanted to normalise everything back to the lower value to see which were possible inflated. (Conservative calc really).
So row 37 takes the basket price of the company as a factor against lonjongo. I have highlighted the ionic ones because they are the only raw inputs i put in. Ok.
So we have lonjongo at 112 and HAS at 186. Basically this comparison should be the same. as it's 1% concentrate equivalent and same basket price now. So either HAS is overpriced their revenue, lonjongo is conservative (makes sense) or as i said earlier higher concentrate get higher premium.
Now the yellow highlighted cells are the only variable i made a guess on which determines the revenue. So as i said, if you look across the board they vary a little. But i guess you could plug in anything between 50-200. I used the average so around 120. When i done this that's where i got the 18,000 in revenue per tonne of concentrate. As i explained above, this makes sense in comparison to both lonjongo (2-3 times the concentrate double the basket) and should be similar to HAS.
To be honest i feel that Makuutu and Biol could be even higher, because no reason why they should be even higher than HAS as the basket is better and so is the grade. So should be a premium not a discount.
Finally, on the opex costs. Biol was taken from their DFS. I assumed makuutu to be the same. But is probably going to be cheaper. Higher grade, more uniform, lower strip etc etc. Also throughput was assumed from other ionic clays. Tantalus and some from china. Biol is restricted with throughput as its deposit is not uniform. It's little satellite deposits.
Okay so wrapping up, people can critique the hell out of this but even if i halved the revenue of makuutu its still a $4USD margin on 5000TPA. I think 10-15USD is probably where it lands. But that's what the SS will prove i've just tried to validate some stuff and this exercised really cleared some things up.
But yeh there you have it. Makuutu to generate around 50M USD p/a. and it's MC 11M. How much to get this running well 30-50M USD is my guess. And it can be done in stages. Meaning no debt. Not sure what the other hard rocks think "low capex" is but its half the reason why these projects don't work out $300m+ is a lot of cash and your cash blowouts are outrageous. IMO LYC is cooked. How much as been spent on that project and with deteriorating deposits i'm wondering if it wil have to increase through-put to offset decreasing prices. Most rare earth projects are intrinsically complicated. So many variables and alot of development usually 10years from discovery to production
Ionic clays: Well they're proposing to wash clay with a salt solution. That's it. The chemistry is not overly complicated here.
Anyways, that's a serious amount of effort and time i've put in here so now that i've accumulated a significant position i'm happy to release more of my notes and thoughts.
I welcome feedback and am happy to have things challenged altered etc.
@Paul7890 tagging you mate as you're good for honest opinions and i respect your view. btw PM8 is the only other project i reckon worth a stab from rare earths perspective.
Scarpa, apologies to keep tagging you, but i was hoping to get your assistance in determining some NPV and IRR for Makuutu. I'm happy to give you more info as required. And honestly not looking for anything robust, just a back of the napkin sort of thing. If what i'm stating is correct that it will generate more than the capital in a year or 2 i imagine the IRR may be above 100%. Also i assume it wont be 5000tpa from year 1 probably 1000tpa increasing YoY with initial lower capital required. Then funded off profits. Anyways i know you weren't interested but tagging again for your help. Would seriously love someone else to talk to here hahaha, resorted to calling management for critical feedback.
Okay that's me done... Looking forward to getting 8 likes for the post which is maybe 1 like p/hour of effort. I should just post this stock is going to $100 on an APT, A2M or MSB thread, but then i probably would have the G/A ratio i do. Which is something i think much more important than likes."
SF2TH
Post #:
44834389Has updated table.
(20min delay)