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78.0¢ avz minerals limited

Dunny, great post. The medium term outlook for spod concentrate...

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Alex999

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06/06/18

08:54

Post #: 33520186
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Originally posted by dunny29 ↑

The point I'm making here is I think it is not reasonable to assume that a tin credit can even be included in any calcs or justification at this early stage. I'm assuming that because it is a 'credit' it is less valuable to the companies potential future revenues compared to the lithium. We know that lithium concentrate sells for around $1000/t and opex is generally under $200 excluding transport. Perhaps I have this wrong and the lithium is the 'credit' (although I think this is unlikely as the tin grades are much lower than some other mines). Perhaps the tin per kg is much more profitable.

If the transport from the company you are comparing was reduced to $99/t after taking out the truck to rail changeover, from $187 initially. AVZ logistics will likely cover a distance twice this (at least), on roads that aren't in as great condition, will include a few modes of transportation changes and as you mentioned this is where the costs stack up, plus a few border crossings. Allowing for these I don't think that $250-300/t transport cost is unreasonable based on what is currently there (It could easily be more as there are so many unknowns on these current routes). This can obviously be improved with infrastructure, but this will take time and someone has to pay for it. It's alright to drive it once, but what are the load limits and a 2mtpa plant could be producing over 400,000t of lithium concentrate, that is many truck loads! Then add on the potential tin transportation and all of the other mining expansions and explorations that may also develop in the country and this is a concern to me if AVZ is bottlenecked out of the best logistic routes while/if upgrades are potentially taking place in the future.

If the tin is a credit having less profit than the lithium, obviously has it's own associated opex, needs the profit margin to justify the capex and incurs a similar price per ton to transport. Is there enough meat left on the bone to bother with it is way too early to know. It's certainly a nice to have, but I just don't think it is justifiable to include it at this stage and can't see it being of use during initial production. Also with the increased demand for cobalt and copper which have a higher profit margin and the DRC has plenty of, these are going to be some of the metals that can afford to pay a higher price to utilise the most optimum transport options as more is produced and capacities may be reached sooner than expected. If there is ever a bottleneck, lithium concentrate will not be at the front of this queue.

I would like to point out that the shareprice is getting much closer to a price that I think myself and many others would consider reentering/entering, but the issues above are very large concerns of mine in this getting to production. If it is possible to get some further info/comparisons I'm sure that would make more people than just myself more comfortable taking a position in the company. But for the time being I do think it is still a bridge too far. Having a very high margin product is better when it comes to transport than 1 or even 2 very decent options in the DRC IMO, especially for this location.

It's alright being able to commute from Manono to port in your suggested way/s, but can AVZ reliably transport around 1100t of material along it every day of the year (plus however much tin concentrate)? Is there capacity now and into the future? Can the routes physically handle it? These are still significant risks and the outcome of the logistics study is crucial to how successful this company can be, much more important than the maiden JORC IMO.

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Dunny, great post.

The medium term outlook for spod concentrate is around $700/t (e.g. used in modeling NPVs other Li producers). This project may also have a say in pricing if it ever gets to 10mtpa+.

If transport costs are as high as $300/t for Manono then the project simply won't fly IMO. After other Opex maybe $200/t there's not enough profit left to pay for all the upfront cost of plant and infrastructure. So how 'significant' are transport costs and why the warning in the ANN?

Be interested in Dr M's analysis. I don't think its enough to speculate based on BGS's DFS.

AVZ Price at posting: 11.5¢ Sentiment: None Disclosure: Not Held
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