Hi all, I had a crack at duplicating there modelling, and I get close enough to their NPV's ( and also their IRR). But basically a guess of nothingness, because does boil down on the ramping to production assumption for sulphate and capex spend itself in terms of how.
I did mine life for 20 years, 2 years construction period for spodumene and then another part year for sulphate plant, but simply report the first 6 years (year 7 - 21 same as year 6). First year had sulphate plant ramping up.
A couple of comments:
1. Firstly capex has a US$50 million contingency. So a bit of fat inbuilt.
2. As per my earlier email capex includes infrastructure that could be funded by someone else, which AVZ has also alluded to in the Ann(i.e. roads).
3. The cost estimates do not include the refund of a large slab of VAT btw, which would increase post NPV (i.e presume this is a discussion point in the SEZ)
4. The cost estimates include taxes, without concessions. So any reduction in tax for been in the SEZ will increase IRR.
5. They have overstated company tax payments IMO on page 4 - 20 btw (as post tax doesn't add up - took me a while to work it out btw).
6. Can be a bit subjective the way you deal with taxes btw, especially VAT when reducing prices.
7. Dealing with getting to NPV/IRR, I suspect year 1 production, is close break even as building the sulphate plant in that year.
As to what sulphate is and how process differs to hydroxide, this post of mine explains it, especially he link to 'power requirements' as does the thread itself): Post #:
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Obviously sensitive to price assumptions as i stated in an earlier post. Offtakes the key here, especially equity for Ofttakes - without Offtakes funding won't be available as suspect this will be developed via equity for Offtakes. Using the two ports Lobito and Salaam indicates could be targeting two different geographic markets.
To take an example, if AVZ get VAT concessions (i.e been exempt) and say a five year tax holiday (but still pay export and royalty), post tax IRR increases by just over 10 percentage points. Doesn't increase pre tax NPV (as taxes into play after pre tax NPV) but certainly increases post tax NPV to towards the pre tax outcome.
Hope, it gives the flavour of how the calcs may have been done, i.e. note the word may, but a difficult remodeling exercise and gave up after my 3rd VB (but will have another crack in due course). Pretty sure my model is riddled with errors but got pretty close to post tax NPV and pre tax and post tax IRR (but slightly out on pre tax NPV). So point was to test sensitivities.
I reduced the spodumene price by 25% to US$500 per tonne as well as reducing the sulphate price by 25% at the same time and the model still yielded a post tax IRR greater than 10%.
I then tested the IRR outcomes in the sensitivity analysis on page 13 of 163 of the Ann and got close to those figures as well. the sensitivity anlysis in teh Ann provides okinformation as well, but ultimately it is a question of equity for Offtake Agreements now.
All IMO
