the NPV is high for a number of factors and I'm still investigating and making sure it isn't overly optimistic.
Unfortunately in Australia (unlike Canada and other countries), scoping studies and even feasibility studies don't have a truly defined format or signoff under the JORC. Only the mining resources and reserves do. Because of this, it takes a lot of digging to truly find whether or not there is any aspects which are optimistic. I'll list my thoughts from my brief research below:
-The copper price is optimistic but the Zinc price is below spot (and zinc is set to rise again the next 2-3 years also) so I don't see that as a huge issue, but remember that NPV is massively effected by the first few years and less so after that. Currently, they are mining/processing the highest grade stuff first and trailing off towards the end. This is a good approach to get funding, but it also means that the NPV is more sensitive to price in commodities. They are also aiming at a lot more copper is coming in the first year (114wmt to only 16wmt) compared to zinc, however over LOM, the ratio is almost 1:1 (619wmt copper to 774wmt Zinc).
-the permitting they are currently trying to do for open pit shouldn't be a problem, but changing the dry-stack tailings (low environmental risk) to a TSF may raise some eyebrows, however WA is a good climate for a tailings damn as you don't have huge streams in a lot of locations and most streams are not fish bearing/animal bearing. If they have to go to Dry stack, the capital cost will increase.
-Their schedule is quite aggressive but will be indicative and solely depend on permitting and funding.. the engineering and construction activity durations look within normal ranges, I just never underestimate how long a government can take to get a response back.
-There is a conflict between the NPV price tables and the JORC assumptions with regards to moisture. The concentrate assumption in the JORC table is 10% yet the NPV uses 8%. Higher moisture will give less price per metric tonne but more tonnes. This should even out however it would depend on refinery pricing and availability. From a refinery point of view, and 8% concentrate would have a premium over a 10% even if the price allowed for the same metal content at the same price. This is due to the amount of energy needed to remove the moisture and/or the amount of reagents used (generally being on a volume basis rather than tonnage basis).
-The capital and operating costs are done on the basis of +/-25%, however the cautionary statement at the start refers to a definitive (generally +/-15%). This isn't an issue but it is likely there will need to be more pricing surety (from their consultants) before people will fund, or they will get a worse funding deal (higher rates etc). Something I'm sure the company is on top of.
-They are assuming that their recoverable ore is about 60% (11.5mt out of 17.9mt) of their current indicated/inferred resources, this may be high, low or neutral depending on the drill bit. They would know better than I would, so I would say this would be pretty conservative (it's not something any geologists I've met like to bet on)
-The increase between spot and assumed prices is based on a much lower zinc treatment cost (170 vs 235), I assume they got a quote for this, but I would probably discard the spot number for now. There are too many early assumptions for my liking.
-The metallurgical testwork was conducted at 45um and the plant is designed for a P80 or 65um. I would have to assume that the testwork showed little to no difference between these two, but that is not confirmed by any of the announcements I've looked through. This change would reduce the capital and operating costs, but the trade-off is that it may lower recovery.
45um would be hard to achieve with a Sag/Ball mill alone, with a High intensity grinding mill or Vertimill likely required, where as 65um could probably be achieved with a ball mill, thus there may lie the difference. The original pre-production capital was $279million and now its $202million, so there has likely been some changes such as this to improve capital, but has the testwork been done to confirm this will work?
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