A lot of the cost base will be fully variable, for example Logistics is 1/3rd of the operating cost and will be paid on a $/t trucked basis - therefore we are at very little or no risk of blowing out PFS as a result of the contract here.
I don't know for sure, but I suspect the same for mining costs as we are using a mining contractor (say another 1/3rd of our cost base) - there might be things like stand-down rates and minimum hour machine charges which could be a burden until production is at 100% but the majority will likely be paid on a $/TMM basis.
That leaves processing & G&A - processing will be semi-variable, power/diesel for example depends on how often & hard you're running the plant. G&A is likely to be mostly fixed. So lets say 1/4 of the total cost base is fixed and 3/4 is fully variable - so until we have hit our nameplate production we are exposed to that fixed cost.
Using our PFS numbers ($4.06/dmtu) even at only 75% production we would cost ~$4.40/dmtu (+/- 10%) based on my logic above that 75% of costs are variable, meaning we are still profitable against the PFS and current Mn price. (I took $4.06/dmtu from the original PFS doc, i think costs reduced in the latest update).
Once we hit nameplate production, the exposure to those fixed costs disappear - so from that point on I would expect to see us on or near the PFS costs. I would have said 3-6months for that, which is kind of now (announcement JB???), so September quarterly is likely to be a little higher than our 'BAU' costs (but I believe still profitable) and December quarterly probably the first real look in to how close we are.
E25 Price at posting:
$1.86 Sentiment: Buy Disclosure: Held
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