You've have a big error in PEK C1 cash costs. Think you may have divided the DFS22 avg ann opex by TREO tonnes instead of Concentrate tonnes in arriving at US$5,100/t, which is approx double the cost per tonne concentrate. This error is why the margin and NPV doesn;t make sense, my calc below
To be accurate, you also need to deduct 13% VAT from the headline ex-China NdPr-ox sales price, such that US$65/Kg NdPr quoted price only pays the con producer US$57.5/Kg. Removing 13% VAT doesn;t help margin or NPV obvioiusly, but does help show just how low the NdPr-ox price s today given anyone selling to China actually only gets ~87% of that price in the payability matrix.
PEK LOM opex breakeven looks to be around US$57/Kg NdPr (excluded interest payments and sustaining capital). First 6 years with higher grade, con production but also slightly higher costs comes in around US$52/kg NdPr. I used 95% NdPr of payable basket value, though would be close to 90% at very low NdPr prices now, closer to 95% at higher NdPr prices (if they eventuate)... more accurately LOM breakeven is ~US$55/kg LOM and $50/Kg first 6 years. Given actual costs may be considerably different to a DFS study, especially year or two old, significant figures are probably +/- $5/t con.
Clearly uneconomic on any western notion of ROI. Minimum for any new project is a revenue:cash cost of 1.5:1, given that interest and debt repayment is a considerable burden that margin needs to carry first 7 years or so. Traditionally something closer to 2:1 is sought by finance and equity investors to confident of sufficient margin headroom to ride the price cycle (which is an incredibly opaque and difficult cycle to read given China's monopoly pricing games). I admit to not looking very closely at PEK's latest DFS iteration, I had assumed they would be lower costs on a con-only operation partly due to very good grades, free dig, despite poor float recoveries and distance to port. These tables show us where the opex is coming from, and where it rose so much from the previous DFS.
BOO power plant is 25% of opex, isn't cheap to run at 75% diesel generator, 25% solar/battery. LIN planning of hooking up to hydro grid power but suspect they will have to build out solar/battery for full energy requirements.
Reagents 19%, LIN will have very low reagents for tailings floc only.
Transport to Port @ 10% is very expensive being all trucking. LIN will have short truck then long rail to port, less than 25% PEK's costs based on SVM Malawi Kaysia SS.
Shipping to China (CIF) 15% of opex is another kick in the nuts. When so many commodities are sold FOB (concentrate seller only pays to the ship at port) the difference is massive. So when looking at NdPr-Ox reference prices ex-China, sellers have to deduct both the 13% VAT and then add 15% shipping and tran to the Chinese customer. So basically knock off 25% of the quoted sales price to start with... ouch
LIN will be operating a simpler gravity plant, but is mining drill and blast hard rock, will consume more power milling hard rock, probably uses less power gravity separation than heating float streams etc. Power may come down with a grid-solar combo, simple operation to mine, run and maintain, but more tailings... a real thumbsuck but maybe you could run a 1.5Mtpa Kanga plant selling ~60ktpa con (first 6 years) operating at US$75M pa opex. $75M div 60,000t con, div by 600kg/t TREO = US$2/Kg TREO opex compared to PEK's $5.8/Kg opex. If so, operating breakeven margin would be 35% PEK's, or ~US$17.5/Kg NdPr, say US$20/kg NdPr after adjusting for Kanga's lower NdPr content and rounding up for simplicity.... very low costs speak for themselves right.
All the wannbe western RE miners are quoting prices sold to the west without deducting 13% VAT from ex-China quoted prices. This is a nod to the value of supply chain security and not taking the easy route to sell to China, and imo western downstream processors should be paying a higher premium than just 13%. Trouble is, everyone in the mine-to-magnet chain ultimately competes with Chinese prices, so the only way western magnet producers want to pay a premium to China prices is if they are protected by tariffs/subsidies in the west against going broke with higher costs than China. I'm sure a solution can be found, but not for every high cost miner that wants to develop into an industry simply to competitive and small to accommodate everyone at once.
Regards LIN 'payability' for their 60% RE-con, I think it's reasonable they start with 40% payable to accommodate downstream losses and Seperator charges. I'd like to add 13% VAT (ie headline to ex-china quoted price) plus a premium for very low radiation levels, but the reality of higher Seperator costs in the west than China will be a ceiling at some point.. everyone in the chain needs to repay debt, make profits etc. A 'profit share matrix' will also help shuffle payability up for very high prices as per PEK off-take, but I can't see Lin mon-con going higher then 50% simply because of the costs and losses of downstream processing.
Regardless of how the industry eventually settles down, backing the very lowest cost producers globally, especially when that producer has a low-radiation product, would seem a prudent way to play these uncertain times...
GLTAH
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