Different managements will take much different risks in their assumptions.
The credibility of management has to be carefully considered, and their assumptions in these studies must be scrutinized and evaluated.
We can calculate to any decimal point we like, but the fact is that important assumptions must be made to arrive at these studies, and they are inherently subject to big variations for all kinds of reasons.
I am not singling out any particular management group, nor am I saying that the managements deliberately mislead us; but it is human nature, that when they are trying to raise money, that they will
make their project look as good as possible, within reason.
Some will take greater liberties than others.
One study I saw charted a dozen or so nickel projects with the production plotted against nameplate and capex plotted against initial planned capex. At the time of the study, not one of the major projects in the study had ever achieved 100% of nameplate, some were abysmally short; and the errors in the capex estimates were positively laughable.
If Ramu got to nameplate in 2017, good for them; but it doesn't change the general picture. I am not trying to slam HIG, or denying their success in achieving nameplate in 2017 on ore processing. But give me a break, they started construction in 2008, so it doesn't exactly blow up my observation that 10 years after construction started, they achieved their production nameplate capacity for the first time.
And I am not going to bother doing historical research on what they said capex was going to be in a study
done in 2008. If they came in under their BFS capex, more power to them. But I am pretty sure you will find that there is a tendency to come in over on capex, compared to the forecasts made when the miners are trying to raise money.
**
To the present topic, CLQ. I trust CLQ management. For the most part, they are very careful about what they say. And they tend to do what they say.They have given guidance on Sunrise, and they have said a BFS will be published this month.
The previous delay in the BFS date was a jarring deviation, but there appeared to be good reason for it; and no one is perfect, or able to predict the future and all circumstances with certainty.
So with this in mind, we see a new process that has a lot of uncertainty, and we must be realistic about the
chances that it will disappoint to some degree.
But when I see $14 cobalt prices in the assumptions, and a C1 cost under $4.00 for nickel before by-product credits, and I see no scandium at all in the figures, and I know a billion in LOM platinum is going in, and I see lots of potential catalysts being mentioned in dicreet but unmistakeable ways, I feel that CLQ is being pretty conservative.
They are giving themselves a big margin of error in the worst case, and huge upside in the better and best cases.
People have habits and tendencies. RF has the habit of delivering on his corporate promises, and a tendency to achieve remarkable things. In the last few months, RF has overdelivered on progress at three major projects that are each larger than Sunrise. His companies surprise to the upside.
I am expecting him to do the same, on Sunrise, this month.
I could be disappointed, no doubt about it.
But I think the odds are in my favor, and I have a large bet on CLQ.
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