I think Franpower is mad at me for pushing back at his...

I think Franpower is mad at me for pushing back at his denigrating my opinions, when he should have known me better than that (probably knows me better than anyone else on HC for that matter). I imagine he is hurting like all LT holders and wondering wtf is going on...

My premise always starts with company management spinning news in the best possible light to keep up the share price and optimism. Sometimes they really believe their own opinions, sometimes they are only a bit optimistic but fairly accurate with commentary like Bruce was this week. Still, there is information regards HM grade, reconciliation, actual recovery % in the WCP, CUP plant that has not been released so warts and all honesty only goes so far right.

Now I'm obviously considering buying back, and in large volumes if I can build a case that the price and risks are much lower than the sellers stopping losses might believe. I won't buy on hope or even just "a bit over-sold', I'm taking my risk-reward a bit more seriously after the STA short term punt disaster as you would understand. I have proven mathematically they have higher grades in the u/size sand ore than would be the case if HM was evenly distributed between OS and U/size material (based on how HM assays are calculated). That's a LT plus to partly mitigate the OS problems...

Trouble is when I plug in Apr-May production statistics things have actually gone backwards since Mar Qtr on production-to-ore mined ratio and costs obviously. The simplest way I can explain it is with the table below. The critical metrics are Ilm Con as a % of Ore Mined, which basically tells us how TB is tracking against the DFS22 expectations (from which all the financials are based). This figure basically summarises all the OS, HM difference, recoveries etc into a single figure of comparison vs mine plan.


Only finished mucking round with it this morning so might be some errors, but I think it's right. Mar Qtr for 1.1Mt ore mined produced 6.7% Ilm Con tonnes per ore tonne mined. That is a better than DFS Yr1 6% Ilm t per ore t, and close to the DFS Yeras 2-4 at 6.4-6.6% Ilm/t ore mined/t. Of course the quality of con product will effect the tonnes produce, where higher TiO2/t (or ZrO2/t NMag con) content means less con tonnes and vica verca, or multiple other variables might explain the difference.


Bruce said Ilm Con was overreporting from higher than expected recoveries in the WCP an CUP, which means higher Ilm Con product tonnes closer to Years 2-4 where the DFS assumed ~10-15% improvement in plant recoveries after Year 1 as the plant was tweaked and improved as is usual. The most likley explanation is that the plant was built and performed close to nameplate form the very start, unsual but not improbable... well done plant design engineers! Possibly recoveries stall out at nameplate in next years, maybe the final steadystate is higher than DFS recoveries... we don;t know yet and Bruce has given us zero hard numbers guidance.

Anyway I digress. Look at Ilm Con production falling from ~6.5% of ore mined down to 4.8% Apr-May, or 4.85% assuming Jun replicated May production figures. By comparison, BridgeSt also had 6.0% matching DFS Yr1 as their Iml Con production per tonne ore mined, from their May Update Report that made adjustments to lower production based on the OS issues raised in the Mar Qtrly. The Jun Qtr is on track for 2.1Mt ore mined vs BridgeSt 1.8Mt, yet producing only 102kt Ilm Con (ie 65kt + 37kt Jun) vs BridgSt 120kt (ie TB has currently dropped Ilm Con production bigly per tonne of ore mined since the new style of mine it all quickly and shunt the OS to the side instead of driving dozers up and down to break it up at cost of lower mining rates). This is captured by my 4.8% vs 6% Ilm Con per tonne ore mined figure in the top table...

That lower production flows through to less free cashflow obviously as per the table. However, if this is the Ilm Con per tonne ore mined metric that TB has to live with at "higher than forecast recoveries' then where is the upside for Year 2-4 when the DFS was expecting much higher recoveries but perhaps the plant is already operating at those higher levels? That means it's possible the mine will continue operating at ~20% less Ilm Con per year if the product/ore ratio stays 1% belwo DFS forecast, but possibly if recoveries don;t proportionally lift from alreday near nameplate performance then the differential rises to ~25% less Ilm Con per ore tonnes mined (ie ~5% Ilm/Ore ratio vs FS ~6.5% ratio).

The same logic applies to zircon, except the current Zir Con to Ore mined ratio is only ~5% below DFS comp to Year 1, and 15% to Year 2 if recoveries don;t improve proportionally from here. My guess is that Zir Con is over-producing tonnes with lower than DFS ZrO2 content (ie more tonnes Zir con per tonne of Zircon recovered to product), which would also be supported by lower-than-expected Zir Con pricing (lower ZrO2 = lower price).

Perhaps I'm wrong or too negative to see the positives, perhaps there are positives I've missed and Franpower can come back and prosecute the bull case again? Improvements can be made across the board, but right now the thinkers in the market are not liking the increased risk on a debt laden developer (although the Royalty swap from interest on debt post 7 years now looks a master stroke by Bruce) and especially after the STA debacle are thinking a small loss now and better sleep later is the way to play... time will tell.

GLTAH