Ann: Merger Presentation, page-198

Thanks for sharing that Gollada …
FWIW I disagree strongly that the August 2019 study references to costs and payback are still relevant.
That opinion comes from a long term investment in a large contracting company which is in the position of needing to pass costs on and so has adjusted most of its contracts to ‘rise and fall’ agreements.

This increased payback time due to sharp cost increases plus lows in vanadiun pricing may be a key reason those driving the merger decided now was the best time.


See also :
Quote from The West in January:
…. “Liontown Resources isn’t backing down from its Kathleen Valley lithium project near Leinster, but the previously budgeted $545 million development will now cost an extra $350m to get into production in mid-2024.
On the other hand, Ramelius this week canned a proposed pit extension at its Edna May gold mine after the cost blew out from $165m to $220m, seriously undermining the economics of the project…” [ref]


And :
Morgan Stanley estimation on rising costs (dated August 2022)
[ref].

170 Projects​

Morgan Stanley in its long-term incentive price analysis said it had analysed 170 projects to raise inflation-adjusted costs and raise the internal rates of return needed to justify investment from 10 per cent to between 12 per cent and 15 per cent.​

“We are seeing significant cost inflation across commodity markets (10%-to-30% year on year for key metals), mostly driven by rising energy, freight, labour and raw material input costs,” the bank said.​

“As well as operating costs, capital expenditure estimates are also rising, with recent feasibility studies leading to higher capex estimates or reduced scope.​

“Based on when the most recent feasibility study for each project was conducted we have adjusted capex estimates for inflation.​

“For a feasibility study conducted in 2018, we would inflate capex by 17.2%, with inflation for feasibility studies done in 2019, 2020 and 2021 increased by 14.7%, 13.4% and 8.5% respectively.”​

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