QPM

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3.4¢ queensland pacific metals limited

Medium Term Target: A$1+ billion market cap, page-1019

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hotchoc

315 Posts.

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07/12/21

19:07

Post #: 58139102
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Originally posted by stephenc678 ↑

In regards to the long term holder who exited, citing potential for increased capital expenditure as the key reason, I would suggest it’s far too easy to focus on the potential for increased construction cost of the TECH project. It’s easy to forget about what the prices of the commodities to be produced are doing at the same time.

For example the 2 main product offerings from QPM are priced between 20% and 30% higher now than as referenced in the base case PFS scenario (which showed a very healthy $1.47B post tax NPV).
Cobalt $30 USD/lb current (vs $25 in PFS)
Nickel $9.1 USD/lb current (vs $7 in PFS)

If one believes we are just at the beginning of the EV revolution and the prices of these commodities are just at the lower end of where they are likely to be in coming years when QPM is expecting to go into production, then the NPV potential of the project remains an extremely compelling reason to invest here, even if the capital cost is expected to rise more than insignificantly.

The below analysis compares the PFS outcomes (pre expansion) to a current state outcome, and a future state outcome where nickel and cobalt prices are a little more bullish. Please DYOR as always, these are my own calculations and assumptions and aren’t to be relied on, just wanting to demonstrate why capital cost isn’t a major concern for me.

Assumptions in the current and future scenarios being:
1. Operating expenses are exactly triple what was in the PFS (~500K tonnes of ore imported in PFS vs ~1.5 million per latest QPM presentation).
2. Product volumes are per latest QPM presentation.
3. CAPEX at a likely maximum case.
4. No revenue included for magnesium, I.e. assuming all is recycled/reused in production.
5. Similar 30 year project life and similar finance model assumption to PFS (Post tax NPV calculation discounted at 8% and shaded the EBITDA figure by 27%).

Key takeaways for me being, even assuming something of a capital cost blowout from the PFS estimate, plus exactly triple the OPEX as was presented in the PFS (likely would be lower given economies of scale) and even assuming just the current commodity prices, the project still returns an AUD $2.7B NPV.Being a little bullish on the nickel and cobalt prices alone the NPV can very easily reach AUD $4B.

Expand

Could you please explain how did you get the following:

Nickel 5,953 tpa
Cobalt 657 tpa

I've gone thru the PFS and can't find the above number. The numbers i can find are as follow.

I understand there's a difference between dry and contained as per QPM's Oct21 presentation. Am i right to say QPM's PFS used tpa (dry) for the nickel and cobalt sulphate?

I am working my way backwards (using ratios) from the Oct 21 presentation to pin down the number of nickel/co (contained) in the PFS but I seem to be getting different figures from you. Can you please help ?

Ni 5,866 vs your 5,953
Co 697 vs your 657

Last edited by hotchoc: 07/12/21

QPM Price at posting: 18.0¢ Sentiment: Hold Disclosure: Held
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0 Great analysis

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Medium Term Target: A$1+ billion market cap, page-1019

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