The Kevitsa mine inside the Arctic circle in North Finland is an interesting comparison. FQM are making money even though the concentrate has to go 425km by frozen roads half the year, to the nearest port. Working in icy conditions would be particularly difficult, but they do have cheap grid electricity.
My opinion is the cost of power will be a bigger issue than transport in the desert, yet what has changed in the last 10-15 years is the price of both solar and wind power are much cheaper now offering a real alternative to the trucked in LNG that is likely to cost 27c/kwh. (I get that number from the KGL PFS on the Jervois development/plan in the eastern NT). For KGL power is the biggest cost by a long way, making the 1.1% Cu with silver,zinc,lead and gold byproducts only just viable, yet not funded.
Using solar and wind power, means a different way of thinking of mine development, as the cost of power is mostly in the capital set-up, meaning the longer the mine life the lower the cost of power.
Working out any NPV or DCF on a project, usually only takes the first 7 years or so into consideration as the value of future money past that point is very low, given the interest rates used in the calculations. I would argue that low rates should be used as the cost of money is very low at present, and rates often used in these calculations are just wrong (ie 7-10%). If you look at money from 7 years ago, it certainly has not lost it's value at 7%pa. In fact a million from 7 years ago, would still be worth near a million today.
2-3% are the appropriate numbers to use for NPV and DCF projected forward for mining operations, now we just have to convince the money people. Any error for inflation is taken care of by the value of the commodity produced rising in price.
CZI Price at posting:
13.5¢ Sentiment: Buy Disclosure: Held
