I started this post hoping to come up with a 12:1 or 10:1 remaining life of mine strip ratio but ended up with a value lower than that. Are there any obvious errors in it anyone? The missing couple of pieces existed in the September 2023 quarterly call but in the Q&A section, not the main early results commentary. Cumulative this provided enough for a low accuracy guess to be made around volumes of waste ore that has been moved and therefore what's still to be moved at Grants.
What I can't explain is if these calculations are correct, why isn't Core putting out more good news stories about the low remaining cost to mine out Grants?
At the 45minute mark of the Sep 2023 quarterly, Core answer that just under 2m bcm of waste was moved in the September quarter and just under 320kt mined for the quarter. A little later it was noted good grade/volume reconciliation to the ore reserve. The Q1 slide noted an 8% increase in material moved in the quarter. At the 49min mark, life of mine strip ratio is about 15:1.
From other documentation we know Grants open pit ore reserve was 2.0Mt at the end of June 2023. From backwards calculations, this was after removing about 140kt of ore through to June 2023. If Grants has a weight based strip ratio of 15:1 with 2140kt of ore, around 32.1Mt of waste rock needs to be removed to take the Grants project from start to end. Ore values lower than 2.14Mt would lower this figure below 32.1Mt.
Weight vs volume strip ratios The Grants DFS noted a volume enabling based the calculation of a volume based strip ratio of 16.6:1. Critically weathered waste rock is lighter than Spod ore. This means that less weight needed to be moved for the volume of waste material nearer the surface assisting the ton's based strip ratio to be lower. Both figures can be consistent.
So if Core moved say 1.9m bcm of waste rock at a 2.5x guess of an average density, 4.75Mt of waste was moved in the September quarter. If the September and December quarters were similar, 9.5Mt of waste was moved in the half year to Dec 2023. There was also around 0.6Mt of Ore taken to the ROM (and of that just over half was used by the DMS). If Lucas shifted 10.1Mt in the half year at a mining cost of $68.9m from the HY report that's at a fairly high $6.82/t. We know Core is a "high cost" operation so a higher than expected figure isn't a surprise. If this figure per ton was lower, it would mean the residual strip ratio is even lower than calculated at the end.
Core created a stripping asset with a value of $83.2m at 30 June 2023. If all of this asset was created at $6.82/t it implies 12.2Mt of waste rock had been moved and not expensed by 30 June 2023. The actual figure of waste rock moved is probably higher because if progressive inflation has bumped up the average mining cost rate, earlier periods would have been at lower rates.
Around 140kt of ROM was created and almost entirely used by the DMS through June 2023. In the June 2023 accounts Core depreciated $6.0m of stripping asset. Using the same $6.82m figure, another 0.9Mt of waste rock was shifted. If Core were operating on a 15:1 strip ratio calculation, 2.1Mt of waste rock would have required shifting for 140kt of ore so there may have been 1.2Mt of directly expensed waste rock mining costs in addition to the stripping asset depreciation. If this is the case 9.5+12.2+0.9+1.2=23.8Mt. Potentially 23.8Mt of waste rock has been moved so far.
Sanity double check (this para can be ignored if you want) If Lucas shifted 9.5Mt of waste rock to recover 0.6Mt of ore, the strip ratio for this half year period was 15.8:1 which is consistent with Core comments of the strip ratio being close to the life of mine average. The life of mine average would have been 9.0Mt so an "extra" 0.5Mt was shifted. At $6.82/t that "extra" would have been a stripping cost asset increase of $3.41m. Before writing off the stripping asset, Core added $2.5m to the stripping asset. Perhaps Lucas shifted about 0.37Mt extra beyond the 9.0Mt required for a life of mine average strip ratio. 0.37*$6.82=$2.5m. This supports the suggestion of 9.5Mt +/- 0.1Mt.
Implication #1 If the conference call was correct that the project strip ratio was about 15:1 then around 32Mt of waste needs to be moved to empty Grants of waste rock. If 23.8Mt has been moved, waste rock removal in Grants is about 74% complete and 8.2Mt remains to be removed. If there is only 8.2Mt of waste rock to move but around 1.4Mt of open pit ore still to recover, could the residual strip ratio for Grants really be now as low as 6:1? An open pit operation with a 6:1 strip ratio has robust profitability. That would mean its a question of when not if Grants restarts mining.
Implications #2 If there really is only 8.2Mt of waste rock to move and 1.4Mt of ore to move then Grants pit then the remaining mining cost to complete the removal of all open pit recoverable mining activities at Grants could be A$70m or less. The residual ROM cost of ore is only $50/t (under half the average in the last 6 months). The volume of material movements is small enough it could potentially be blitzed in one dry season meaning after the Blitz, Grants would be fully available to undertake its 2nd function - as an overflow void to old extra BP33 water. Lucas has shown they can move around 5Mt in a 3-month period so the completion of mining Grants could be as short as a 6 month mining stint using the levels of equipment that were onsite previously.
Could Core's strategy be a poorly explained one where they want Spod prices high enough that they can fund a Blitz of Grants and be at least close to maintaining cash balances while undertaking this blitz. If Core were to do this:
Lucas's contract would need to end, but there would be rumours of Lucas coming back (thank you Stu)
The Primero contract would be ending because Core wouldn't know when prices would be high enough to commence the blitz phase
Core would be looking to get perhaps A$100m from 400kt of ore to cover mining and processing costs during the blitz period
400kt * (1.4%/4.8%)*63% = 74kt of SC4.8. Core would need around A$1,350/t for SC4.8 which may require prices nearer A$1,900/t (US$1250/t SC6) for the plan to work. Prices aren't that high so Core couldn't yet have confidence to say they can maintain cash balances while mining Grants out. Core would still be talking about needing higher prices to restart
If Core did manage to build a 1.0Mt ROM pile, they could then continue processing that pile for over a year. This would provide incremental cash flow to fund BP33 and possibly even flotation without a CR
If at the end of the blitz and processing the 1.0Mt ore Core had a working BP33 mine with flotation assisted high recovery rates and a low but positive cash balance - that would be a situation likely to result in a share price much higher than the current one. If this is the strategy, could some in Core outline it properly?
(20min delay)
