Here is my rough summary of the podcast. They had a fund manager from Datt as well to confirm their own views.
The key information is buried in the detail in the announcement and is not very transparent.
Cap ex is in 2023 dollars while metal prices are in future nominal values - the cap ex should allow for future inflation of maybe 30% or about 5%pa - increasing the cap ex from 1.6b and 2.3b to 2.1b and 3b (500m and 700m increase).
The financial modelling broke basic economic modelling rules (and they are dead right being somewhat of an expert in such modelling).
They stated the metal price assumptions are absurd.
They compared the consensus long term real (ie in 2023 ) commodity prices with CHN assumptions sourced from Consensus Economics (look at estimates from brokers etc) - they took the average of the dataset
CHN assumed
Pd is 92% higher than consensus forecasts
Ni is 31% higher
Cu is 39% higher
These 3 represent about 90% of future revenue
These assumptions drive the NPV of project and is why brokers are so surprised the metal price assumptions are so high
Sensitivity analysis set out price sensitive separately for base metals and precious metal s separately and can’t see result for both sets together (I noticed that as well). They explain this is not the usual way that one does sensitivity analysis.
Discount rate - using a 6.5% rate for a relatively risky project - their view is it’s way way underdone - Datt stated internally they use 12% for a SS, 10% for a PFS and 8% for a DFS. Using 12% reduces NPV to under $1b - CHN provided no sensitivity for the discount rate (hmm not a good look IMO). The discount rate is supposed to capture the risk - they imply CHN are saying it’s a low risk project (it’s not)
They looked at capital efficiency ie NPV/Cap ex - normally NPV in a robust financial project is multiples of cap ex - they gave one example where it was 6 - for CHN it’s close to a ratio of 1. Datt stated it’s going to be hard to get the project off the ground without improvements.
Metal recoveries which have a big impact on revenue- a lot of past test work was completed on higher grade ore - newer results are not filling the market with confidence and one of the bigger reasons for the SP fall. The payability looks incredibly high which just adds another layer of risk in the project - focused on Pd (96%) and Ni (90%). Datt stated the playability looks incredibly high and something like high 70% to low 80% is typical
Datt - views on stock before SS pretty big resource and pretty low grade - SS did not surprise him.
Interesting comments on the NiEq grade - they stated looking at it is equivalent terms is a false approach - it supposed to capture the relative price difference between the commodities and the recoveries. With very different recovery rates between the metals ie 43% for Ni and 80% for Pd and Cu using Ni as the base metal with the lowest recovery inflates the Ni equivalent grade - ie the real equivalent is lower than reported for CHN (I need to look at this more closely).
Other views : comments suggest it’s a lemon.
They discussed other issues (eg where are they going to get the water for such a massive processing plant - they may need a desalination plant but no allowance is cap ex for it) and generally they were negative towards CHN.
Patterning ie a big miner coming in - while MC is a lot lower the risks are now better understood- they believe a partner is not likely to come in until permitting risk has been eliminated. Dart’s stated his view that no one will be interested in patterning with CHN on the project due to the SS details and results.
Overall they are cynical and believe it may still be undeveloped in 15 years and may never be developed into a mine.
My own view is the SP will continue to fall unless there is a a significant positive catalyst and drill results won’t be the catalyst. In addition CHN is looking into an extended orphan period. I suspect shorters will be licking their lips.
The details in the podcast are consistent with my and others views on the HC thread but much better explained .
(20min delay)