Thanks for clarifying @LongTony, but how about next time you tell me YESTERDAY... haha. If you don't mind, I'll critique what you heard for the benefit of debate, nothing against your generosity in posting it for us to consider.
"they said to me that the mining costs were massively understated in the DFS"... without doubt, as feasibilities do, but Coburn had more red flags than most. Suppose we'll find out in time how big the fibs, and whether "massively" is hyperbole. I like to think STA were only pushing the envelope on opex, not taking the piss.
"that STA would have trouble operating the plant at the stated name plate/recovery/quality metrics"... as per my previous defence, that doesn't stand up on deposit geology or technical grounds imo. A free-flowing sand deposit well suited to scaled up mining rates from industry standard processing and better recoveries from technology improvements. History shows increasing size, production rates and economies of scale over numerous commodities including mineral sands, no smoking gun there. At the margin, aggressive recoveries or production might have been a few percent overs but that's not the situation. Guessing a team will fk it up is very different to knowing they will based on fundamental flaws, and nothing yet points to any physical reason the production wasn't possible beyond poor equipment design/build.
"they also told me that it was an open secret that the construction was a debacle and the commissioning would face trouble"... now you put a timeframe on this advice, the warning has a different complexion. Factual Observations during mine development can be as opposed to predictive, requiring insiders eyes and ears, not a crystal ball. Given the lack of progress on WCP ramp up, delayed MSP ramp up, litigation from construction partner, 6-9 month ramp up delay, murderous CR out of the blue... the claims can't be refuted obviously. Unfortunately, claims made on Monday morning aren't worth much being after the game.
Well, the plot thickens like a real murder mystery... shareholders the ones being murdered with a large, heavily discounted and unexpected CR. I love a whodunit, though rather be doing the forensics with a supercilious Not Held position than smelly fingered Held. On consideration I have to admit, given my concerns regards the project's economics and management's veracity, buying just because shares had been smashed down to 'cheap' wasn;t a good enough reason to try catching the falling knife, even with technical and management guidance support. A falling price screamed trouble, but without any inside knowledge I was guessing how much trouble, gambling not trading. Lay down with STA and got fleas... mea culpa.
I'm going to put some time into reviewing how I could have done better paying more attention or doing better analysis if anyone is interested. Starting with the bottom line risk... is Coburn an economic proposition badly implemented, or a marginal one cruelled by inherent flaws? As per my previous post (https://hotcopper.com.au/posts/69056164/single) fatal flaws are nearly always in the geology/metallurgy if the process tech is very well understood and de-risked (which it is). Examples of min sand deposits with fundamental flaws include:
BHP Beenup 'alluvial style' min sand deposit, that ultimately went belly up from high slimes, fine grain size, and swampy high water levels that contained anaerobic pyrite generating acidic tailings. Geological flaws in a non-standard style of min sand deposit was high risk, and the risks killed it. MZI's Keysbrook mine, went into administration because recoveries of light leucoxene HM in high slime ore was too poor and took too long to improve. Although Doral bought Keysbrook out of admin and with plant improvement and no debt made it work, an example of geological risk rather than plant design/build issues. Issues and risks that go beyond design/build/implementation. Nothing about Coburn says fundamental mining/processing flaws...
Plant design/build/implementation is a common risk/failure point, especially in ramp-up and what STA appears to have suffered from. One example is Kenmare Moma mine in Mozambique (which used BHP's second hand Beenup plant as things have it) had a lot of issues commissioning and ramping up to nameplate. CR's shares smashed on delays. Another is Mineral Deposits Grade Cote very large dredge mine (40Mtpa) in Senegal. Large low-grade dune-strand system, free-flowing sands, high production rate to make very low grades work. Similar to Coburn, except larger and floating dredge not dozer-push mining. Grand Cote suffered two years of plant related ramp-up issues (initially dredge impeller problems, compounded by others and ongoing) that saw CR's, more debt, deals with debt holders, shares smashed on operating losses.
These examples are reminders ramp-up doesn;t always go smoothly or without long slippage., based on poor plant design/build/implementation and/or overly aggressive ramp-up production targets. Had the design/build/implementation been done well there would have been no issue because there were no 'geological flaws' at issue (my point with coburn). Kenmare's Moma went on to hit nameplate, then instigate multiple mine expansions to become a very successful mine. Grand Cote went on to reach full production and eventually get taken over by their partner for a steal once things were tickity-boo.
Without inside knowledge that a mine design/build/implementation has been f'd up, or production targets are knowingly over-stated, I don;t believe one can say the ramp-up will or won;t reach nameplate (or close enough). Qualifying that risks of reaching nameplate look difficult because of the quality of players involved is fair play, and maybe the basis of such claims LongTony heard. I'm sure it's just a coincidence Mineral Technologies as @kcf posted a link on were responsible for the Grand Cote dredge and wetplant design that caused so much trouble... Bottom line; Coburn has hit ramp-up and commissioning issues, unresolved now for too long to ignore any further. Hopefully the question is only when not if they're fixed.
Third issue a new mine faces is generating economic margins, including paying back debt, even once production and recoveries have hit nameplate. Generating good free cashflow is not helped by lower than guided production, recoveries or product prices, nor higher than guided operating costs. I suppose time will tell if we have invested with incompetent bastards, lying bastards, just unlucky bastards... or maybe all three? Going to leave my review guidance wording and hints as over the last 4 months for later.
GLTAH
STA Price at posting:
22.0¢ Sentiment: None Disclosure: Held
(20min delay)