bulk test announcement thread, page-79

My 2c;
This announcement should encourage holders that when they do dig their 'bonanza' copper out of the ground, they will have a plant designed and built to handle that ore, and retrieve at least 90-94% of the value of the metal from that ore.

The main point is that the native copper bonanza zone is grading 2.92% copper. Not the 4.37% copper bandied about previously.

* The chalcopyrite concentrate Cu grade is fantastic; 34.4% Cu is about as good as it gets. You can't take that fact away from Rocklands. However 3500ppm Co is not that spectacular compared to African examples, but if the Chinese want to pay CDU for it at this level, best of luck to them.

* Overall recovery of chalcocite is reasonably good at +80%; often this material recovers less than 60%. However, that is at the expense of a pretty poor concentrate grade of 56% - remember that chalcocite is 79% Cu, so they are recovering 85% of the Cu to a concentrate which is 2/3rds gangue material by weight. Again, if the chinese will pay for it, great; best of luck to them.

* The company has basically written off the oxide as 'thin' and unimportant; this is the first indication, I think, that the oxidised material is proving too bothersome to treat and will be set aside at least initially.

* The grade of the primary zone is 1.27% Cu equivalent. This matches the grade of the high-grade proportion of the JORC resources prepared by both H&S and Mining Associates. Again, we don't know for sure what proportion of the deposit is primary, transitional and oxide.

Regarding the voodoo economics of the operation, which is of great concern to the cheersquad;

There is still no mention of how many tonnes of 'bonanza' material the company has which is classified as transitional native copper and transitional chalcocite ore. Remember, the bulls on here are assuming 3-4 years @ 4% Cu equivalent head grade; there is no evidence for 9-12 million tonnes of material, even assuming that the metallurgical sampling is representative of the grade of all native copper zones.

I remain to be convinced that there's $2.38/sh earnings for 3 or 4 years.

You will also hopefully note that, as I have said, the gravity circuit will be operated only to treat native copper ore and then turned off and made redundant. This means that while it is running, you will probably see higher milling costs than otherwise, though against a higher grade of mineralisation. However, if the plan is to treat 3Mtpa of the native copper ore, then the company will need a HPGR grinding set and gravity circuit rated to 3Mtpa.

Looking around on the web, some gravity circuits of that size range are going for a CAPEX of $20/annual tonne, suggesting $65M or so for the gravity circuit. The capex cost of the HPGR circuit might surprise you all on the upside, as these usually cost an extra 30% over SAG mills - but if thats what has to be done to achieve recovery of the native copper without choking up the plant, then that has to be worn. Again, capital cost estimates pre-DFS are anyone's guess but the rule of thumb guesstimates should probably be on the high side. My research indicates a 3Mtpa HPGR set will set you back $70-80M additonal to a SAG mill.

So, you've got a typical crush, grind, float circuit with a $65M gravity circuit tacked on to run for 3 years, maybe 4. Assuming that 30% to 40% of the value of the gravity circuit is recoverable after obsolescense, that imposes a sunk capital cost for the gravity circuit of $39-45M or so for only 12 to 16 million tonnes of material - $2.84/t just for installation. Then you add the extra operating costs of running the gravity circuit.

The typical estimate is 20% of capital costs as working costs, so your HPGR set will cost you $14-16M pa and the gravity circuit will cost you around $14M p.a. to run in excess of the float circuit (which basically will clean up the 10% of copper not present as native). This is around $30M p.a. in operating costs which need to be assessed against native copper ores which may not be neccesary for all ore types - $10/t operating costs.

Secondly, don't forget you need to run the chalcocite ore through the gravity circuit too - and the native copper is only a small portion of that ore zone's inherent value; this operating cost has to be added on to the opex. Again, probably $10/t there.

Assume a 5:1 strip and your digging costs will come in at around $3/t, for a total of $15 per tonne of ore on ROM. Add $8/t for floating, and $10/t for crush and gravity = $33/t; plus $2.80/t sunk capital for the gravity circuit. You are looking at $36/t or ore (sans overheads, shipping, royalties, TC/RC's) through the gravity circuit.

Now, here's an interesting thing. The native copper ore as it seems to me, has no recoverable cobalt quoted. Therefore, your bonanza grade zones if they do grade 2.92% Cu, will return 94% Cu for sale and 0% cobalt for sale. Gold, well, doubtful anything will get returned from that; it will report to the chalcocite.

So you get 27.4kg of Cu per tonne of native ore, containing $246/t recoverable value. It costs you $33/t to get it = operating cost ~61c/lb est.

For the chalcocite, assuming 4.68% Cu @ 85% recovery and 1300ppm Co @ 75% recovery, you get 39.8kg Cu and 1kg Co or $344/t recovered. This also costs $30 to process, but with the cobalt credit of $30 (@ spot of $15/lb) the credits basically pay for the extraction.

For the fresh, we can strip out $8/t for the gravity circuit opex, and $3/t for the gravity circuit capital expense, for a total cost of $22/t of ore. Again, the cobalt credit would pay for the cost of processing the ore, leaving you with $100/t profit.

If you take the proportions of the sample types presented to the met testing as representative of the 3Mtpa feed through the bonanza grade, it is suggesting that of the 3Mt ore, 75% is native, 13% is chalcocite, and 12% is primary. This means that on average a mix of this ore will generate $300M pre-tax profit - also pre any offtake discount of 20%, pre-shipping, pre-any other capex amortisation, etc.

30% tax leaves you $210M p.a. so, simplistically, that's closer to $1/sh EPS. If you look at it that way, you are already paying a PE of 3.28 at least 3 years in advance of the mine operating - and this is before any of the above hokum even gets proofed - for a mere 4 years of bonanza operation.

Once the bonanza is done with, the operation is back to whatever the remainder of the ore body grades, which is NOT even the grades of the primary sulphide zones as sampled by this met drilling. Why do I say that?

Well, two pertinent points. For a start, the grade of the primary sulphides in these met holes is 1.27% copper (plus credits). This is more than the 1.2%-ish Cu equivalent of the JORC. So you can see my previous belaboured oints about how this met drilling cannot be used to extrapolate grade to the rest of the deposit.

Why? because even if you subscribe to the malarkey that the JORC can't deal with the native copper - which I dispute - this is primary sulphide mineralisation. Surely the Rocklands sulphide mineralisation isn't a unique snowflake that the JORC can't cope with - it is, after all, just another sulphide breccia below the BOCO.

Anyway. Thats my 2c. I think this is meaningless, in the end, because I'm more inclined to believe two JORC estimates than internet conspiracies, but there's good points in there metallurgically, and some bad ones too.

Now, on to the BFS and the Capex estimates!