1 - Ivanhoe are putting up hydropower, rail and roads in the vicinity, it is best to go infrastructure light stage 1 now and benefit from this Ivanhoe expenditure later when we have a processing plant that demands it. For stage 1 we can do with diesel generators / solar hybrid.
2 - Execution risk is far lower on Stage 1. The TGS experience is still fresh in everyone's minds, they made money hand over fist in their stage 1 with DMS and only faltered because of a terrible execution on stage 2, and went into spiralling debt because of it. Finance will be easier on a low risk build.
Re Stage 1 cobalt value. The value we get paid for cobalt reflected in the feasibility is a quote from one SXEW plant in Lubumbashi, at the time it was the only plant looking for feed if I recall correctly.
There are two new ones coming up in Kolwezi (no mine attached, just a plant), Metorex very recently realised their mine plan was all wrong and are also buying ore to feed their plant on market, artisanal sources can only go down to 30m before water prevents any further hand extraction, the market is very tight now and is going to be insanely tight from 2018, 2019 and beyond. We will be paid much more for our cobalt content because of these factors, I'm fairly confident. This improvement costs nothing, just needs waiting for the offtakers to compete.
And there's nothing stopping us from overlapping Stage 1 and Stage 2 and bringing in the extra revenue on top of Stage 1.
Finally on the question of why release it as it is. To negotiate offtake. You can't go and negotiate offtake properly without an ore reserve and all the parameters to prove you can supply product. Yes you can get a useless MOU, but that has no details or binding commitments. Now we are in a position to make binding arrangements.
I hope we hold out for another 6 months, they will have to pay up, Apple, Tesla etc are demanding from the cobalt chemical producers to cut out artisinals 100%, where are the new mechanised mines, free from legal issues, or flooding, to help with growth?
Ok enough call the management they can fill you in, and they want/like to hear from you.
NZC Price at posting:
24.0¢ Sentiment: Buy Disclosure: Held
