Yeah, I get what you are saying, but if you break it down, the numbers are not actually that bad.
In saying this, I have made a number of assumptions for my calculations, but anyways, here goes...
FEX are making about $50 AUD/t, BUT...
They had to acquire the other 50% of the transport joint venture they originally created in order to make those gains. This contributed about $10/t, or 20% of their margins. It is done, and it has been positive, so that is a win in anyone's books.
The margins really start to suffer when the IO price nears or goes under $100USD/t. This will absolutely apply to AKO, but that $20 AUD/t margin is a very comforting buffer.
2Mtpa. In my forecasts I suggest we will ramp up to 2Mtpa over 2 years. That is a long time when you think about it. I think by the end of year 1 we should be close to 1.5Mtpa, and then scale up to 2Mtpa by the end of the next year.
With relation to the number of trucks / trips per day to achieve 2Mtpa, Orior capital suggest it would require 150 trips at 40t per trip.
Over a 10 hour day (7am to 5pm for instance), that is only 15 trucks per hour.
40km/h is 666m per minute - more than half a kilometer per minute.
A 5 truck convoy (assuming they move in 3 x 5 truck convoys per hour) would only be about 150m - 200m long, so that is about 20 - 30 seconds of truck noise driving past someones house every 20 minutes. Of course, you have a return trip, but the truck would be unloaded and should be travelling quicker.
If you extend the day and reduce the number of trips per hour, the interruption is less per hour.
Can we get more than 40t on a truck by using a "dog" trailer? I'll leave that to the transport experts to figure out.
DSO GradesThe grades for the DSO should be above 64% across the whole of the DSO resource.
Looking at the results from the early drilling campaigns:
https://uploads-ssl.webflow.com/5ccd17e20b9ef27ff6eca4b1/616e25548a118c0d4b469c78_2021-Oct-19-AKO-JMM-Announcement-Final.pdfhttps://uploads-ssl.webflow.com/5ccd17e20b9ef27ff6eca4b1/6181d4ba19cacb49dc0367a1_2021-Nov-02-AKO-PGB-Announcement-Final.pdfThere are holes with very high grades. There will be a lot more detail the the MRE is released, and this will allow the geologists and the company to form a much richer understanding of the initial DSO resource which will allow for a strategic mining plan to be created.
Paul has disclosed in all of the recent announcements that there will be
"a selective mining process to target the high grade DSO material", and for me this implies they will blast and dig everything, but only process and ship the highest grade material, whilst either blending the really high grade with lower grade material to create an average of 65% or potentially stockpiling the "lower grade material" - or a combination of blending and stockpiling.
As you suggest, and as stated in this announcement from July 2021, crushing to 2mm and processing with magnetic separation will produce a 64% material.
My understanding is this is across a large majority of the resource, and it should deliver very healthy margins.
https://uploads-ssl.webflow.com/5ccd17e20b9ef27ff6eca4b1/60f613b69e23d07d3b6b4c58_2021-Jul-12-AKO-PGB-Announcement-Clean.pdfHumilityI 100% agree, and I would take a 3 year ramp up using $100m over a 1 year build using $250m if it meant we end up with less than 130m shares on issue.
The thing to be mindful of though is if the company signs binding off takes, it could result in 1 of 2 non dilutive capital injections:
- A pre payment with a 10% - 15% discount
- The ability to secure loans at a 10% - 15% interest rate
In that case, let's take the money and get to 2Mtpa as quickly as possible as it would mean larger margins and faster pay back.
There are a million ways to skin this cat.
The first set of hurdles is to get the MRE release and SS updated.
Then we need to raise and commence the PFS.
Then we need Base Resources to get their mining license approved, and for us to get ours approved once the mining code if formalised.
As you said in a previous post, and 35%+ IRR is going to make this project attractive to investors.
The grades are going to make this attractive to customers.
Striking a balance between debt and equity is something for Paul and the board to figure out.
Final NoteI am glad we are on the same side, I appreciate the discussion and I appreciate having my assumptions challenged, and I hope that my response isn't taken as a "I don't believe you", but more a "have I got my understanding correct because it is based on this information?"
I don't like to be wrong, but I am more than happy to be corrected
(20min delay)