G1A (ASX) Ann: Re Release Abra initial production guidance

Originally posted by 2ic: ↑

A lot of detail to pick through in this confession if it spins your boat. Downgrade obviously driven by drop in 2021 MRE grade, based on a LOT more geological ore lode modelling detail, which fed straight through to mine plan downgrade. The clear implications of MRE downgrade was never communicated beyond "future mine optimisation" which sounds like a good thing to most readers. One could argue the negative impact of grade and tonnage falls was actively hidden in future releases, as knowledgable posters like @Panda7 will atest.

Anyway, the LOM Revenue-Costs tables best show bottom line changes between 2019 DFS and new 22 FS_Update. There are changes in numerous variables you can look up, all falling out into net Pre-Tax Project Cash Flows.... A whopping 40% fall in projected free cash flow from Abra (A$1,214M down to A$734M) if you want to take a minute and let that sink in...

2019 DFS US$0.92/Lb lead @ 70c AUD (A$1.31/Lb) vs FS22 US$0.90/Lb @ 68c AUD (A$1.32/Lb) demnostrates that reveune has fallen entirely due to fall grade and tonnes. Increasing costs have been in LOM summary by running the mine and plant harder to 1.3mtpa thus removing 2-3 years of ~$100Mpa costs. Thank goodness someone had the foresight years ago "During the detailed design phase of the processingplant as part of the EPC contract, the process flow sheet, design criteria and equipmentselection were adjusted so that the plant could process the revised production rate"... Look at the 2019 DFS and mine plan was milling close to 1.4Mtpa for years 6 and 7 so politely suggest overclocking speed was always available.

Actually it get's worse now i look closely, which most readers won;t so instead of playing Where's Wally I'll point it out. No way has 'Capital expenditure (pre-production and sustaining)' dropped between 2019 and FS22. For starters, 2019DFS pre-development capex was $169.6M and we know FS22 pre-development capex blew out to $231.4M (as shown on monthly capex updates). According to my maths there is about $152M LOM sustaining capex as per FS22 Update below, so someone 'accidentally' typed $283 instead of $383M into the Update LOM cash flow summary table .

Some of the costs are clealry still 2019 unchanged or surpisingly lower but the fine detail doesn;t matter. Based on corrected LOM capex Abra only throws out ~$634M PRE-TAX free cashflow over 13 years mine life. No wonder the FS_Update left out any NPV or IRR updated figures, thats almost a 50% drop in free cash generation from the 2019 DFS figures been sold to shareholders this last 15 montgs of mine build post FID. Put another way, that's an average A$50M pre-tax free cash flow annually over 13 years... should repay taurus and all the others feeding on it but Abra's just become a Jenny Craig snack.

Finger's crossed the lead price goes for a run and not the other way or Taurus will be the only ione gets any feed at all... if only I shorted or sold down holdings in G1A a couple of months ago like some lucky others did

GLTAH

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I soent a few hours reading the detail last night. Truth is I saw exactly what you have spelt out for everyone in your post.

Only caveat I had was in 2019 it was not foreseeable a global pandemic and war in Europe would cause a skills, energy and inflation crunch. I think the 40% drop in cashflow is circumstantial and not a large reflection of any "hidding" from management.

A drop in global oil price, and inflation getting under control over the next few years could see us back towards the original cashflow value. Markets are forward looking and I'd be surprised if this isnt on a few peoples radar now.

Good healthy debate goes a long way so that you for sharing your deep dive 2ic.