Great article Kickass, I thought I'd highlight a couple points that I can't help but read and re-read;
1. The mine is based on "just 20% of the project area", resulting in 22.7 m.t @ 9.8% for 2.223 contained graphite;
2. The study is based on 15 year mine life, after life being 10 years (this doesn't however take into account the inverse nature of graphite, i.e. the deeper you go the better/more profitable it usually is);
3. Submitted Environmental and Social impact study and completed test work drilling;
4. All consultants involved have expertise and experience within Tanzania;
5. GR Engineering have aligned itself with KNL by accepting part payment in KNL shares showing "clear signs of confidence in the project"; and
6. Capex $56m, operating cost per tonne $489 verses $1258 expected realisation. NPV $213m with pay pack period of 2.5 years and life of 27 years. Strip ratio of 1.3 to 1 for the first 10 years, 2.2 to 1 thereafter (the cost per tonne should be revised further given the recent infrastructure and power-grid upgrades just announced by the government).
The article doesn't touch on a couple golden rules within the industry, including;
- Clients/off-takes (1 in place, another expected shortly, possibly SGL);
- Mine depth (important in preservation of flakes, KNL maximum depth 50m);
- Merelani has the potential to double the NPV;
- ROE, we're invested to make money, not be the biggest for boasting purposes, and ROE with every $1 placed in KNL verses almost all other listed play, will in time, I believe, prove the best place to park graphite focused dollars.
The article also doesn't touch on geopolitical tensions/reliability. I actually believe the contracts KNL has and is working on with European companies will prove, in time, to be worth a premium because of the reliability of paying customers plus stability in market. (China is currently terrified the protests in HK will spread to the mainland, plus they have a questionable record with bill payments).
There's more I've no doubt forgotten, but couldn't help but spelling it out again, more for my benefit than anyone else's. Sometimes I find it timely to remind myself why I'm in the game, ROE, and KNL promises to deliver stellar returns over time, not week to week.
