For those interested in comparing the PLS and AJM studies I posted this on the PLS thread.
I was initially thinking there may be something more interesting as to why the headline results would be so different between PLS and AJM. It would just appear that PLS has taken the most conservative and AJM the most aggressive method possible in determining the tonnage for use in analysis. Thinking about the way AJM has gone about in calculating tonnage using the break-even cut off grade of 0.04% there really isn't much room for them to move. Any adjustments could only result in a decrease in tonnage for AJM. I guess that's the danger of being overly agressive. You better make sure you get the numbers right as you don't want to disappoint in the DFS and use lower numbers.
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First of all, I feel like I'm taking crack reading all these threads of wailing and frustration as well as uninformed comments by the AJM 'love in crowd' that today's PLS performance is 'embarassing' etc.
It's fairly clear that most have missed the very much vital point that the methodologies used by the AJM sponsored 'Oreology' and the PLS sponsored 'Mining Plus' are significantly different and may have implications later when approaching institutions for Finance. However more of that later.
I guess the first thing to question is, has the total PLS resource of 80.2Mt @ 1.26% Li2O and 42.3Mt @0.02% Ta2O5 changed in any way, shape or form? No, it hasn't. The quoted maiden ore reserve of 29.5Mt @ 1.31% Li2O is taken as the
'Probable Ore Reserve', a subset of the
'Indicated Resource' that has a very high level of confidence, sufficient as a basis for decision on developing a deposit. You could not get much more conservative that this and the fact that it was used in the PFS would instill much confidence in those considering lending the capital required to develop Pilgangoora.
It is mentioned multiple times within the document that there is significant scope for the numbers in the PFS to revised so it would be fair to assume that the 15,000m drilling campaign (that some consider to be a waste of funds) will greatly increase the 'Indicated Resource' as well as provide a 'Measured Resource'. Commentary throughout the document confirm this, extracts including.
"...Analysis completed by MiningPlus and contributing to mine planning in the DFS optimises both Indicated and Inferred material creating Pit inventories3 totalling 53.9Mt @ 1.29% Li2O, 128ppm Ta2O5 and 1.19% Fe2O3 – further significant Reserve and NPV growth (beyond the PFS Reserve outcome) is expected as a result of current drill programs..."
"...Current Mine Reserve underpins an initial mine life of 15 years with further growth expected from the 15,000m drilling campaign currently underway as part of the Definitive Feasibility Study (DFS)..."
"...While the PFS – which is an interim document designed to assist us with ongoing financing and off-take discussions while we complete the DFS – is based on an initial mine life of 15 years, we are confident that the mine life will be further extended with additional drilling of the current Inferred Resource base as well as exploration drilling outside of the known Resource envelope. Drilling has already commenced and any additions to the resource inventory will be incorporated into the ongoing Definitive Feasibility Study, further enhancing the key financial outcomes of the project...."
Now let's have a look at the details of the AJM feasibility study.Whereas the PLS study used a 'Probable Ore Reserve', Oreology have employed the entire 26.06Mt @ 1.20% resource inclusive of an 'Indicated Resource' of 19.77Mt @ 1.20% and an 'Inferred Resource' of 6.29Mt @ 1.20%. Subsequently the numbers are favorably revised by adjusting the break-even cut off grade to 0.04% Li2O increasing the resource to 35.7Mt inclusive of indicated of 26.70 @ 1.05% and inferred if 9Mt @ 1.02%. Should Oreology have used only the portion of indicated that can be classified as a 'Probable Ore Reserve' the numbers would have been closer to 15 - 18Mt. That is about 42 - 51% of what was actually used in the AJM modelling. That is a significant difference in reserves, one that was obtained by cherry picking and favourable 'massaging' of numbers that may be hard to sell to those who open the purse strings. However that's fine because Oreology have used a lengthy disclaimer
"...a component of the resources underpinning the production target are classified as inferred mineral resources. There is a low level of geological significance associated with inferred mineral resources and there is no certainty that further exploration work will result in the determination of indicated mineral resources or that the production target will be realised..."
However it gets better because the AJM numbers are exclusive of taxation, whilst the PLS NPV of $402M is with taxation deducted.
It is also interesting that most are quoting the AJM throughput as a given 2Mt whist there is no guarantee that this will be the final implemented solution. It is only an option within their study and is subject to conditions.
On the other hand the PLS study is based on a 2Mt throughput plant and whilst a 3Mt plant is referenced the following extract again demonstrates the conservative nature of the PLS study
"...While the scale of the Resource (and therefore Reserve potential) indicates that a larger mine could potentially be established, it is the Company’s view that initial production should be limited to facilitate entry of the Project’s product streams into the market in an orderly manner...."
It would appear then there have been many favorable decisions made in determining the numbers that are used as inputs into the AJM study. As to if these same numbers will be used in the DFS will be of interest. Keep in mind that the DFS will be used for financing and especially in today's climate greater certainty of what they are lending for will be desired.
Before I finish this lengthy post, I would also like to cover some other gold nuggets in today's announcement
"...Eight product off-take MoU’s already signed with leading chemical and technical grade customers for 100% of forecast mine production capacity..."
"...The Company’s objective is to progress sales arrangements to binding off-take agreements in parallel with the remaining feasibility and financing objectives..."
It would be possible then that we could, over the next three months, convert the MoUs to binding as well as arrange finance. It is also possible that during the course of discussions, any number of the 8 may request additional supply resulting in an increase of the plant to 3Mt. I am expecting some nice announcements over the next three months.
Although most of the retail holders would have looked glazed over the numbers without much thought, the institutions and those willing to dig a little deeper would not have and would have been buying during today's weakness.
* A final thought. Should PLS have employed a similar method to what AJM did, namely take all available inferred as well as indicated, then apply a revised cutoff we could have easily had over 100Mt. lol. Anyway food for thought.
