Exactly what happens when a graphite mine tries to maximize NPV in the funding stage to fool the gullible.
The real measure is the rate of return on investment. Which is why WKT achieved debt funding, and the German bank is not coming to the party.
Here's Spid's interpretation of risk:
100 mil on a project with IRR of 42% is LESS RISKY
than a project that requires 40mil with an IRR of 119%.
Talking about rose tinted glasses.
How did the 'largest producer' get there? By trying to force economy of scale on a subpar deposit and assume 'bigger plant' will deal with the volume and produce consistent graphite output. Is there any difference in the discount rate used to calculate a post tax NPV of 450m NVP project vs a 300m NPV project that properly account for risk? The answer is no, off the street 10% is typically used. This number in no way accounts for the differences in construction, technology, ore body and market, and financing risks.
Multi-stage project should be a warning sign for investors. It means the first stage numbers will look ugly with respect to return on investment. It's only the latter stage that might, make money, assuming some linear or better cost curve. The large producer proved cost curve is not always linear and 15,000 extra tons may not save the project if cost cannot be quantified. To bad the government loan is subject to a successful stage 1. What are the projected numbers for stage 1 alone without the extra 15,000 tons of dressing? Will it be enough to convince WA government it is going to be successful?
Spid can you do the math to extrapolate the estimated mining cost and processing cost from $1000 free cash margin? How much would large flake graphite price need to fall, or cost to increase to be in the same predicament of the 'largely not operating mine'? With a strip ratio of 0.4:1, the ore had to be grinded to fine dust to liberate the small flakes. They wish they had large flake graphite that doesn't need to be obliterated, but they don't have the resource, WKT does. Did you know their post tax IRR was at one point predicted to be 71%? How much margin of error do you think your 42% (That's assumed the 15k tpa dressing) project really have?
WKT did the exact opposite of the 'large mine'. Did not waste money on extra drilling to expand the resource (there's enough graphite in Lindi and strike is open in all directions, even somebody's favourite smaller flake variety). Did not plan to process all material so a smaller plant with simper operation targeting specific product spec is required. All leads to >US$1000 free cash margin, and IRR of 119%. Numbers accepted by a bank's due diligence.
(20min delay)