Many of us were aware that COB were “rushing” to meet the PFS June 30 deadline. We were also aware that the mine life was going to reflect the M&I tonnage and would come in at 10-15 years. What caught us out was capex, A$550m is a lot to amortize over a reduced mine life. Hence the lower IRR and NPV. What’s important is that the PFS was conservative, as it should be, leaving lots of positive news flow to be released over the next 12 months, namely:
- optimization of tailings and power
- metal recoveries (90% target Co) and 75% S
- drilling program for mine life extension
- potential jv or purchases of ore from neighbors
The NPV and IRR is hugely sensitive to improvements in the above factors. A reduction in capex to $525m, opex to $11.70/lb, grade increase to 850ppm and recovery to 90% gets you a 30% IRR and A$1bn+ NPV with a 20 year mine life. If COB extends the life to 25 years you can relax the other variables and still get to 30%+ IRR.
COB, unlike other projects, hasn’t released its BFS yet, only its PFS. This means lots of room for improvement over the coming 12 months.
Releasing the PFS without an extended mine life and $550m capex, was, in hindsight, an error. But, it would seem COB had no choice. The final BFS will define COB, you cannot pass final judgement on the company with what’s been released thus far. In addition the Co price could well stage a recovery in the coming months which would provide a further underpin.
IMO, talk of removing Co from batteries is cheap. To go from lab proven to fully tested and commercially produced takes years and billions of dollars. Roskill’s agrees. There may be thrifting improvements and improved recycling but even the low estimates have 130m EV’s on the road in 2030. The exponential growth in sales will far outweigh battery technology advancements. If you replace Co with Ni you risk reducing the battery life (and safety).
COB Price at posting:
64.0¢ Sentiment: Buy Disclosure: Held
