Nice friendly threads to read through for a change. Just updated a project REO value table to include the Gifford Creek deposits, a useful tool for comparing disparate REO deposits. There is always more detail, more accurate analysis and explanation but I pretty much learned all I wanted to from this area. I've challenged the consensus, shared and substantiated my opinions (which I know you don;t want repeated) we'll see how they age. Didn;t come looking for a grudge fight or to smash a stock and gloat (the market is in charge, I'm just 2ic), so taking this opportunity to respectfully exit stage left without feeling chased off while I've got the chance.
Going to make it longish though sorry, it feels better sharing. The exploration upside/downside everyone gets, the importance of mineralogy and chemistry everyone gets. Putting whatever DRE and everyone else ends up with into economic context is the money shot... because in the end money talks and BS walks. This table summarises REO ore feed for a number of projects, calculates basket value, a market value for the REO concentrate, and annual revenue from the assumed mine production rates. It looks busy, but it's simply the tonnes on concentrate produced, TREO% of the con, value of the con and thus annual revenue.
Notes to table:
Ex-works China prices quoted with 13% VAT tax, needs to be removed for export pricing
As per ILU Eneabba RE Plant, the payable products are NdPrDyTb (orange) SEGHY mixed carb (green) and Ce which is worth $1/kg to ILU but nothing for con feed sellers. I have not accounted for SEHGY discount being in mixed-carb form, selling costs etc.
ILU opex costs to process are ~US$3500/t feed (A$250Mpa), margins I've called the same which isn;t unreasonable on $1.3B capex accounting for depreciation, WACC, risked return etc (nominally 19% return pa on ungeared investment)
ILU payability is 90% because 10% gets lost through the RE-ox plant.
Eneabba $160Mpa opex for 24.5tpa Feed lifts to $197mpa for 36ktpa feed and to approx $250Mpa for 55Mtpa plant by my call (se bottom)
As verification of sorts, the 60% TREO Mon-con was priced at US$8,830/t after 13% VAT removal, similar to what the Eneabba con works out to. Chinese costs/margins will be different to ILU, significant premiums or discounts may be involved based on market dynamics. The table is more a process for comparison than actual reality.
The value of a concentrate is worth it's basket value, by it's TREO content, less ILU's opex and margin. This is important, because as I wrote last week, RE concentrate processors only have limited tonnage capacity and each tonne of feed is expensive to process. A mine may produce twice the tonnes of con as it's neighbour for twice the contained TREO, but that will not help get an off-take if the neighbour produces much higher value concentrate. This table has a fixed cost for ILU to process, but in reality a higher value con has more margin to share and will generally get the nod in a competitive situation.
Browns Range, for example, has a very high basket value, but at 25% TREO it is less valuable than Yangi with 40% TREO con. As per previous post, Browns low TREO and Heavy REO is what ILU are looking for due to REO capacity constraints, but otherwise Yangi's monazite con is more valuable
I have used 40% NdPrTREO ratio for Yangi because it's only Yangi North that's dragged the average below 40% and you know how I like to cut outliers lol. The tonnes x grade x recovery (used 87.5% to a con) gives you tonnage of con, but not the quality. The NdPr ration basically determines the con's value for Gifford monazite being ~90% of the value, and the Yangi deposits are very high NdPr ratio.
Yin has a NdPr ratio of 31% in resource (which i used) but with dilution into a mine reserve is bound to be lower (Yangi drops from MRE to mine reserve). I assumed a 750ktpa starter pit and bene plant for HG Yin ore to generate early cashflow because it equalled Yangi's 1.2Mtpa con production, but it really doesn;t matter what mining rate you assume... Yin concentrate is going to be worth roughly 25% less that Yangi's because it has 25% less NdPr in each tonne of 40% TREO! Yes DRE need to do the met work and finalise numbers, but I can't see it being much higher than 40% TREO, not 25% anyway.
On an annual revenue basis Yin can match yangi because of higher TREO grades and simply running a large enough plant to hit total revenue targets. Margins are critical because there is only so much processor off-take available and the extra tonnes need to find a home. Yin at 36,000t of con on the above metrics generates the same annual revenue as Yangi with 24,000t con. If RE prices rise substantially then the margin difference between yangi and Yin won;t be such a big percentage, but Yangi con will always be worth, with opex costs similar for two 40% NdPr rich mon cons.
If DRE find next deposit is more Sabre like with mid 20's NdPr ratio (used 24.8% just as an example, I know it's early days), obviously the revenue and margin per tonne of con falls further. Move to a C3 carbonatite NdPr ratio pf 22% and it falls further again. Move down to KFM's 18% NdPr etc. It is expensive to process monazite com through a hydro plant. Lots of tonnes of low value TREO isn;t much help unless you get really good TREO grades so mining and beneficiation is very cheap to make up for it. Mt Weld is the best, but they are 8.5% TREO and 25% NdPr... they got both.
Wimmera con is the most valuable owing to a good dollop of heavies plus the 60% TREO grade you can get with clean, well sorted mineral sand deposits. Roughly US$11,000/t vs $6000/t for Yin (I haven't pro-rata lifted Yin's other REO's to hit 100% after lowering the Yangi NdPr to suit). Obviously anyone would rather process high margin Wimmera feed with a bigger pie to share than YIn, all things being equal. The plain fact is though, I can't see ILU ever replacing zero cost after bi-product credits Wimmera feed for Yin or anyone else. 15,000t of Wimmera con is worth A$242Mpa after costs and margin to ILU, which all disappears if they buy 15,000t of con from a third party.... then they only get the US$3,500/t margin. Makes no sense, only break glass and buy third party concentrate in case of emergency!
DRE is still in the exploration phase, so until they drill it out my table is only applying economics to speculation. I'm a confessed exploration pessimist. The price chart is marking Lassonde as clearly ahead on points now into the middle of the match. The market has been taking profits on DRE for the last 6 months, that includes a lot of smarter people than me speaking with their actions. How were disappointing results going to reverse the price trend? The fight isn't over yet, and my fingers are crossed the drill rig comes up trumps, but even at 8c and much better value this stock isn;t for me. If it makes you feel better, think I'm just a downramper now going long, whatever makes you comfortable.
I really don;t care and it feels bloody good to step back and start my week of fresh. Thoroughly interesting project Gifford, but as much as I enjoy the banter and stirring up bull cheers squads, I think I'll approach the next one differently. Some people my blame me for the share price, but at best I may have quickened it's fall by some of my calls. The market is a lot bigger and smarter than me.. to repeat myself again
GLTAH, seriously!
DYOR, my posts are for only entertainment purposes only, is my honest opinion but may be full of errors etc.
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