Originally posted by thaiinvest
No one likes dilution and I am sure that the BOD andDirectors are not proud of this error in letting cash fall to the point wherewe need a emergency ‘credit raise’ however as a large part of theircompensation is linked to their AUZ options will be feeling it to.
This credit raise is down to the delays and probably being ‘played’by SKI so that we are basically out of working capital and now need to go atthe lowest point of the ‘orphan period’ back to the market for more working capitalto tide us over for the next 6-12 months.
I think AUZ ‘running lean’ or simply not find a good CFO like Marcus for solong has cost us dear in both, a very expensive Bergen deal that we have nowexited and to this situation of being too optimistic on both project financetiming and SKI and NAIF funding. Having said that, I do not know many miningprojects that are not delayed and some by years. So no I do not want to changeBen the BOD or management as I don’t think we could find anyone better to run theship. Lets not throw the baby out with the bathwater
I however in retrospect think the original SKI deal waspoorly constructed in that
1) I don’t think SKI want Flemington ore – if anything now we have probably enough ore for 30+ years of mine life LOM would probably if anything want to expand Sconi (potential Sconi pase 2) than start a new project at Flemington.
SKI may have been playing hard-ball in saying instead of 20% of AUZ total the SKI A$80 million should be 30-40% and more control of Sconi whilst AUZ management did not want to lose control or their core asset. (The Koreans even after the ink on a contract is dried never stop negotiating and as we can see from Kim in the North are great a brinkmanship.
Also if SKI did not want to commit to taking Flemington ore then they would not want to sign up as 20% shareholders of AUZ and be liable for 20% of Flemington expense.
Plus if SKI did take up 20% of AUZ it would IMHO be difficult to get another large battery EV company interested in taking Flemington ore with SKI (one of their competitors) holding 20% of the company.
2) Committing to an LME related discount price is difficult IMHO in this day and age. Most large metal contracts are direct supplier to buyer contracts and IMHO the LME is easily manipulated and they do not have yet a reliable pricing on Nickel Sulfate and the premium of Nickel Sulfate over Nickel.
So like some others here I believe it may well work out long term for the better.
I still believe in AUZ and the BOD and Management, its difficult to get the timing right especially as AUZ is in the ‘orphan period’ before hopefully concluding mine finance. I believe as stated the new drilling results and the updated JROC resource report will lead to a much improved “Optimized BFS’. As was stated by BFS personnel in a recent interview, they will not need to take ore from the furthest and smallest Sconi deposit Kokomo and will be able to focus entirely on Greenvale and Kucknow deposits in the early probably 10 years +. After drilling Lucknow and Greenvale like a Swiss cheese we now know the exact ore grades in each location of the deposits therefore AUZ will be better able to optimize ore take to optimize both Mining OPEX, Project payback and Customer requirements.
I am expecting in the Optimized BFS for Rate of Return to improve from 15% to 20-25% and project payback to improve from 5 years to around 3 years. Lets hope so. And a significant reduction in the cost of nickel produced (excluding cobalt and scandium credits) from US$5.73 per lb.
We are also suffering with all Cobalt miners because of the Cobalt price drop, with IMHO not enough credit given to the fact that we are Nickel Mine with Cobalt and Scandium credits
The macro situation continues to improve while car sales are down 17% in China in January EV sales are up significantly and this trend is happen world wide as the EV manufacturing really comes on line.
The largest miners are being to look more and more for EV and Battery minerals as they do 5-10 years ahead plus several funds are specifically target EV Battery Minerals. Glencore recently stated that they will not spend more money on new Coal developments (even though its only 10% of their costs and 30% of their profits) and although they are major Cobalt players they see the Cobalt pricing turning around as several very large Cobalt mines have been put into care and maintenance and Cobalt demand increases. Glencore are also now looking for Vanadium opportunities. Its clear the large global mining players all get the EV Battery mineral demand story that’s coming, so even if in the worse case if September comes and SKI does not proceed what AUZ has and particularly Sconi will be very much in demand to the large players who can afford to look 5-10 years ahead and have the resources to manage the ups and downs of global mineral demand.
So yes while I hate this Capital Raise as much as everyone we are further forward than we were 12 months 6 months and 3 months ago in that
Potential in the Top 10 Cobalt producers in the world
- Confirmed Lowest Cost Quartile Nickel producer
- Almost double the Proven and Probable Nickel and Cobalt at Sconi than 3 months ago
- Under final consideration for NAIF funding
So stay positive, remember this is the lowest point of the orphan period, few if any explorer to miners beat this chart. I know on days like this it seems like the sky is falling however remember its always darkest before the dawn and we can IMHO expect in the next few months 1-6 months
- A much improved ‘Optimized BFS
- NAIF and perhaps other State and Federal Funding (Lets hope this does not get delayed due to the elections. I would hope not both parties should want this and NAIF has the money and mandate to lend for good projects like Sconi.
- Full Project Funding by Sept if not before
GLTA - Thai
Almost double the proven and probable??? How do you come to that conclusion? Reserve may go to 43/45mt from 33mt imo. However that would be best case imo.
IRR and NPV should be based on $8 Ni sulphate to get a real indication of the metrics. With that in mind IRR currently 13% on $8 Ni sulphate moves to 15%/16% maybe and NPV $350m US to $450m/$500m US is my ballpark.
Surprised people here are seeing the long term offtake agreement as a positive thing.
Would be better off imo wiggling out of the term sheet and trying to attract a partner willing to financially back the project.
(20min delay)