OK ... lets see if you guys have been reading carefully (or...

OK ... lets see if you guys have been reading carefully (or not). This is why I remain invested in PAM ... certainly at least until we know what is at Rosario. If there is nothing there then fare thee well 'cos it's going to hurt.

This post is based on Cu being discovered at Rosario ... I just don't know the quantity or the quality. But that's the beauty of modelling ... you put in your assumptions (or when the data presents itself the actuals)

Right now no actuals of any kind ... I'd like to think this is a very conservative model ... just 12Mt of Resource (might start of more than that in just an Inferred category but I need to get to Measured and Indicated ... and Indicated Resource of 12Mt will do just fine). Again no idea on Tcu% or Tsol% but I'm taking numbers from other PEA's I've gotten over time ...0.94% TCu% and 0.79% TSol% with and 91% Mine Recovery and 83% Met recovery to Cathode (total 75% recovery ore to cathode). I've basically taken those measures from the Cactus Mine PEA . All of done is now apply those measures to the WAG of 12Mt of Resource.

That should hopefully explain the "blue inputs". The output from all that is the "Production statistics" driven by LoM and the single purple shaded box for Copper Cathode Produced (no smelting in the Heap Leach SX-EW process.

Now what do we do with this Resource. Well according the PL, the ENAMI SX-EW plant down the road is desperate for Ore. So the initial plan for Rosario is to find the copper oxide discovery and then open pit and crushed the ore to the spec needed by ENAMI SX-EW plant.

That strategy drives the "green inputs" - Aussie's PEA. I've plugged in a LoM ASP for Copper as US$3.50/lb. That will be I think conservative.

Mine Capex has suddenly become quite cheap ... prestripping for the Open Pit and then crush and truck to ENAMI plant. So IMO this is a Capex light scenario (as all we need is crushing and a bit of the infrastructure ... trucks etc would all be contracted). This would likely make our Opex higher (since while me don't have to buy the trucks and fuel etc the trucks don't pay for themselves - we pay an operating lease cost to someone). But that's fine as what we don't have is a lot of capital to spend.

Likewise we don't have to build an SX-EW plant either ... we pay ENAMI to toll treat our ore (i.e. we are not selling ore wwe are selling cathodes). Again Opex is going to be higher ... but $3.50/lb+ copper permits that higher Opex.

So I come up with this model.


Now I need to figure what Capex is required for the stripping of the Open Pit and the crushing equipment. Likewise Estimates for Mine Opex and SW-EW Opex (what we would be paying to ENAMI for toll treating our ore). All G&A costs (so admin, marketing, transport etc.) are in the Mine Opex. I even put in a Royalty sale (this is expensive but it is non-dilutive ... maybe we could get $7M - $10M for a 3% royalty on revenue)

Those inputs lead to an after-tax NPV of almost US$125M with an IRR of 52% and a payback period of about 18 months ... And that's pretty damn good IMO.

Again IMO, this is what PL would be knocking on doors with trying to get a partner to provide the capital in exchange for a slice of the pie. I have (in the past) seen deals where paying 150% gets 100% ... so pay 75% to get 50% etc. That would mean FOR EXAMPLE in the model Capex is $38M. If a partner wanted 50% of the project that would pay 75% of the Capex (so $28.5M) leaving FLG to come up with just $9.5M. They would also pay their share (i.e. 50%) of past Capex (so whatever FLG has paid to acquire Rosario and an Exploration capitalized) plus their share of expenses. And of course going forward it is 50/50 split.

At least the project would get built. It's not a lot of money but the return is quite good when compared to NPV on offer.

Lots of things change the returns on offer. Simple things like Copper price, Tsol%, tax, discount rate and such.

This post is meant to make you think about your investment. The content may change. The author takes no responsibilty for accuracy etc. and makes forward looking statements which are based on forward expectations. This may not suit or be compatible with your point of view. Such is life.

I'm off to the Aus Open tomorrow. Wont be posting till next weekend.