Yep, but to Dawg's credit, he is one of the few around thinking about the pegmatite structure and what that might do the cost structure. He got it wrong, but his thinking was heading in the correct direction - Its not just JORC size and percentage grade and whether its DMS amenable. The pegmatite structure does impact the way the pegmatite is mined with incredibly important impacts on not just costs but the timing of when those costs are incurred over the mine's life.
Progression towards that thinking about the way pegmatites are mined and what that does to the cost structure is what Core needs. Core created a big wide and slightly longer pit for Grants. This pit then gets narrower and narrower as it goes down. The pegmatite itself doesn't squeeze in the same way meaning costs start out super high as the wide layers are removed and get smaller as you go deeper.
Core probably had a choice of a starter pit that was then extended in all directions to go deeper or a staged approach. Core went for a full width initial stage that got some ore and then a southern phase 2. As is typical for Core they have had terrible communication around how much of each stage is complete. The communication they have provided is as if a large portion of stage 2 waste rock movements are still to be undertaken and needed before further ore is recovered from the southern stage.
Its clearly not to scale, but Grants is akin to the scenario below. The wide top has been taken out leaving the white area of the pit void. The waste rock to be removed to the sides of Grants gets smaller as you get deeper. While Core could have perhaps done progressively deeper cutback's (the two inner pit shells), they decided instead to go to final pit shape rather than staged width (east-west) based cut-back's.
This is the exact opposite of the over-time cost structure you will get with flatter lying pegmatites. For these the pit will obviously start with the nearest to surface ore. While it may be done in a less staged approach than shown below, you get staged cut-backs where each new layer of deeper ore will involve more earth movements and cost more. The operation may start with ok to incredibly strong strip ratios but they increase with time and with that, so do costs particularly as the haul truck routes get longer. Frequently this can lead to economic depletion of the ore body before physical depletion occurs.
If someone had a lot of experience around sloped ore bodies and not much if any on vertical ore bodies they may well take what they know about how costs change over time (increasing) and apply it to Core. They would look at the costs like Core's A$1,350-A$1,400/t full year guidance (which isn't impacted by ROM build because across the full year the ROM pile basically grew for 6 months and then shrank for six months). With experience of sloped pegmatites their default assumption would be mining costs will increase with time so revenues consistent with higher than A$1,400/t mining costs would be needed and you very quickly get US$1,500-US$1,800/t restart commentary. These comments are being made.
Core has basically enabled this situation to unfold with its Communication decisions:
Core has decided not to report head grades or volumes of Ore mined and through that the ore mining % complete
Core has decided not to report progress towards completing phase 1 or phase 2
Core has decided not to report overall waste ore movements
Core has decided not to present progress cross sections
Exactly why they aren't reporting this is unclear but it may be because the strip ratios involved would look ugly. The consequence of this is the market doesn't have clarity on how much progress exists on completing the waste ore movements and the extent of the blow-out to DFS costs look worse. None of this reporting helps differentiate a vertical having reducing strip ratios over time from a sloped pegmatite having increased strip ratios over time.
A few months back some iron ore experts were passing comment about how they found iron ore companies didn't get these new wonderful lower costs from efficiencies and remained with the same or higher costs in the future. If these iron ore companies had a sloped ore structure this is what you would expect. The implication was an expectation Core's costs would increase and Core would need rather high costs for a restart. This sloped ore thinking could also be behind some of the capex/costs to restart commentary and longer lengths of time to start recovering ore. If you had a sloped pegmatite and had mined out all available ore from that cut-back the next cut-back would need to be completed before getting to new ore.
CXO Price at posting:
10.5¢ Sentiment: Buy Disclosure: Held
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