My 'guesses' at how things went so wrong. LG was clearly the manager driving the project with the final say on design, assumptions etc. Nobody had anything good to say about him, but it was agreed he was the hands-on alpha running the show. Companies get advice and 'options' from technical staff/consultants, management decide what to accept/reject and the Board signs off. When I write MM below, it's shorthand for 'management'...
DMU's As @VinceS2 previously noted, the choice of heavy sled-mounted DMU's in soft sand was a cheaper option than track-mounted. From the 2019 DFS "The technology proposed is industry standard and comprises two Dozer Mining Units (DMUs) that are fed by dozers pushing within a 100 m x 100 m mining block. A third unit is track mounted and fed by excavator (Excavator Mining Unit or EMU). . It also doubles as an overburden mining unit when it is not being utilized for mining. "... MM decided the cheaper option was all 3 sled-mounted DMU's. Dragging heavy DMU's around is slower, less flexible and more downtime.
DMU failure and breakage from Piacentini build well documented. Poorly trained operator error also part of well documented staffing problems. Suggested they even let one DMU get flooded bottom of pit, whatever, very poor DMU performance to WCP.
Tailings Management DFS had the tailings (sand and slimes) co-disposed into the pits via a Tails Stacker as per 2019 DFS picture below. MM decided to reduce capex and just pipe the tailings at ground level and spray it into the pit void, not via high tails stackers. This typically causes the tailings to spread thinly over the pit floor instead of stacking with a high angle of repose. This could explain why tails water quickly spread over the entire pit floor, reducing the efficiency of drainage, causing water mounding, and ultimately suspending tails disposal earlier than if tails were stacked high via a stacker (especially if tails were too wet). Time lapse sat images show rising ground water LHS pit Mar to Apr, then a bund wall built to prevent spillage as they tried to fill it with tails May and Jun (still the same Sep and 28th Jun). Middle pit mounding water half way full mid-May, not much changed but addition in-pit bund wall between May and Jun.... or in fact until 16th Sep.
Taken from 2017 EPA release, the sand thickness plan shows the approx centre of highest sand dune down the Coburn Amy Sth deposit, and areas of max water mounding risk in the thinnest, lowest areas of sand thickness. Thinner sands mean less sand for tails water to drain into, lower elevation pits mean more surface aquifer water head potentially running into the pit. So far only mined the thicker sands, even western pit, areas of more concern further south. Will need to keep sump pumps and close eye on tails water management not to breach environmental permits...
Mine Plan The old saying goes, "no battle plan survives first contact with the enemy"... and so it usually is with mine plans. In my experience, it's the quality of the mine team to identify early problems in geology, mining, processing, recovery etc and then implement the right changes to keep running at close to nameplate and making money. That can mean substantial deviations from the original mine plan, short term losses or quick fixes like high-grading while those fixes are put in place.
Due to the crisis at Coburn, the mine plan has swung from east-west strip mining moving south over time to now mining southwards down the east-dune only.
The reasons for this imo include:
Thick east-dune sand minimises tailings water drainage-mounding issues compared to thinner lower sands out west.
Almost no overburden on this part of east-dune, saves considerable cost and staffing to remove overburden and access ore out west
Very thick ore in east-dune means minimal DMU shifts, reduces downtime and increases production efficiency
East-dune moving south is closer to thew plant, reduces pumping costs
Down side is east-dune is lower grade than the deeper stands out west.
Oblique MRE grade model sections below showing the 'back-dune' ore of the east-dune as thick lower-grade (light blue) and low overburden (purple) compared to the thin, lower but higher grade dunes (yellow-orange) out west (ie Stage 1 sheet dunes continuing right across Coburn deposit). The years below are '+2' on the Yeras on above Mine Reserve (ie Year 5 mine pits are Year 7 below). Gives an idea of the grade to expect if/as they continue down the east side next couple of years to try and make bank, repay debt etc. If and when they get everything to nameplate, then pay for overburden removal and get back into the west higher-grade ore as they will have to sooner or later. Survival to reach 'later' is the first order of business...
Top 20 Holders mostly selling since 30th August...
LHS is 30 Aug Ann Rep top 20 (LHS). The share price started falling from 18c end of August, coinciding with a drop in many top 20 holdings compared to STA's website Share Registry top 20 (RHS).
NDOVU bought 1M in the CR, but over September sold 4M. Anchorfield sold 2M Brazil Farming sold 9M Kenneth Hall (Hall PArk Ac) sold 4M Perth Select Seafoods sold 2M
Funds that sold out of top 20 include Washington Soul Pats (was 13M) Artemis (was 7M) ECapital (was 6M)
Morgans nominees sold down 27M, although nominees are hard to judge as many holders use them. Massive jump in HSBC Custody Nominees up 195M to 228M... similar to the entire CR amount
Top 20 individual holders and specific funds all bailing over September is a huge red flag obviously. Many probably took up the CR placement end of July given Aug 23 holdings were higher than Aug 22, but they all had a change of mind end of August and started selling down... same time as the share price started crashing .
I've been banging the drum that Luke moving from monthly to quarterly reporting over this CRITICAL recovery period looked like a protection racket for large holders and brokers to get updates ahead of the market. Given the market hasn't had any official material update, but the long-term Top 20 holders on Luke's phone speed dial all turned tail in September (but held firm over August in case the recovery went well) very strongly supports my fears of a deliberately uninformed market and special treatment for special investors (insert Animal Farm quotes here). The facts seem to point at better informed investors not liking the pending downgrade coming in October and handing off to ignorant retail bunnies at the table... as usual for the ASX.
Of course, at 10-11c that downgrade has already been priced into the risk-reward equation and maybe it's no longer a sell? Maybe they sit our east on the thick ore east-dune next couple of years, spend the capital on right equipment and fixing the WCP, MSP etc and then get back to mining the entire orebody, overburden and all. Meanwhile the operating costs will become apparent, even without moving overburden, staffing will get filled, problems rectified and the REAL sort of cashflow margins will dictate STA's value moving forward.... depending on product prices in AUD outside of STA's control.
I lay down with a dog and got fleas. The downside to following a stock even when posting negative opinions, is that sooner or later you start thinking wow, maybe it's dropped enough to be a buy now, even though you only came on to warn it was in trouble. Relentless positive spin by management doesn;t help, but ultimately, I'm here to punt stocks and like some form of Stockholm Syndrome sooner or later you end up hostage to sympathy with the bastards...
Sigh... GLTAH
STA Price at posting:
10.8¢ Sentiment: None Disclosure: Held
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