Ann: Drilling Commences at Shoobridge, page-80

Thanks for your comments. At times it appears as if Zara is running with a script provided from her bosses/associates involved in shorting Core. She sought their advice on how to deal with analysis that didn't match the narrative she was instructed to push and they said call it all hypothetical. Its childish but mostly correct, if you are trying to guess what the future might hold, it is hypothetical. She hasn't however shown an ability to differentiate future looking comments and analysis of the past so simply calls everything hypothetical.

Regarding Grants
For unclear reasons, Core has become less rather than more clear about the specifics of their strategy over time. After the 2nd DFS Core hasn't released information on physical waste/ore movements or the grade of material being mined. If you go back to the June 2018 pre-feasibility study you find greater clarity on the plan around how to mine Grants. I've included some parts of this in other posts. The table below looks at their mining plan for Grants split into Year 1 and Year 2. Approximately equal amounts of ore are mined in each year (892kt vs 886kt). Year 1 involves mining 8.1M bcm of material while year two involves mining 1.5M bcm of material. 81% less material needs to be mined in the second period for a 0.7% reduction in ore. This absolutely massive distortion between periods appears to have carried through to the DFS and into the mine plan implemented through to Dec 2023.


While the specific numbers have changed, this plan shows Core's intention to have a high 23.9:1 strip ratio (7729:323) when mining the first half of Grants that then flips to a 3.7:1 strip ratio (1192:321) for mining the 2nd half of Grants. Overall the project strip ratio was 13.8:1. Core added some additional high strip ratio ore between the 1st and 2nd DFS meaning the final DFS for Grants was 16.6:1 on a bcm basis and may have been nearer 15:1 on a ton's basis. Before all the high strip ratio mining work undertaken that lowers the residual strip ratio, Grants is modestly below projects like LRS (17.6:1 in the DFS released last year). While the actual volumes increased from the table above, the overall mine design didn't. Grants was high cost to start with, low cost to finish.

Core implemented various approaches to shift costs including calling some early mining costs capex and adding to this capex cost by creating a stripping asset when strip ratios were particularly high. This would assist to smooth accounting costs but not cash costs. All these smoothing mechanism's are now being written off so the cost structure is back to its underlying position - high cost to start, low cost to finish. Cash costs and accounting costs are largely realigned.

What does this mean in dollar terms?
The mining costs per bcm of year one and year two won't be the same because there will be some material in year 1 is near surface and doesn't need blasting, the haul truck route will get longer into year 2 and year 2 may also involve tighter operating spaces towards the bottom of the pit that could impact efficiency. These are factors that often lead projects to have increasing costs over time but for Grants, the strip ratio change more than offsets this. Core has not provided information to enable clarity on these relative cost changes.

If I assume a mining cost of $15/bcm in Yr1 and $18/bcm in Yr2 then the total mining cost on these pre-feasibility volumes for year 1 is $120.8m and the total mining cost for year two is $27.2m. The cost per ton of ROM would be $135 for year 1 and $31 for year 2. If the ROM grade is 1.4% and the recovery rate is 63% then Core needs about 5.5t of ROM for each ton of SC4.8. Core would have had a cost structure involving A$743/t of mining costs in the first year that then falls to A$171/t in year two. Processing, logistics and G&A costs would add to this cost structure. Core has paused mining before "year 2" is implemented.

What happens next?
What I'm expecting to happen is after Core gets their big write-down's through auditors and have released their annual report, they will start to talk more assertively about having found efficiencies in how they will run Grants. Its unclear what way this will be released, but Core will start to talk about their lower, new improved cost structures. The mining cost difference of A$572/t between A$743 & A$171 above will be a key feature in why the underlying improved cost structure for Grants will be much lower after restarting, although management will be management and probably look to take credit for the "savings" they have found even if some were inbuilt from the mining plan.

With any luck, this will shift the narrative from Core needs high prices just to break-even to Core can choose when it restarts aiming to make strong margins on each ton of ore mined in the restart scenario.