Back to that hoary old chestnut, the DFS. In my opinion there’s...

Back to that hoary old chestnut, the DFS.
In my opinion there’s only one reason why the company has chosen not to release the outcome of the DFS, and that’s because the study revealed that the project would not generate the robust returns that many shareholders anticipate. It may have been a prudent move not to release the study results as the company has maintained a healthy share price until recently (overly inflated in my opinion) that has enabled them to raise funds without substantial dilution.
I believe that the study probably revealed that although there would be some profits during the first years of operations, the overall NRR would have been marginal. I suspect that the main areas of concern raised in the study would relate to;
Complex metallurgy. The oxidation so frequently boasted by WM to depths of 180 vertical metres below surface may generate some fabulous NCu but it also introduces complex metallurgical issues when trying to deal with a multi-commodity deposit. I’m sure that any metallurgist would prefer his Cu served in chalcopyrite, rather than a mixture of chalcopyrite, chalcocite, NCu, malachite and cuprite, and whatever other Cu species occur at Rocklands. Just ask some of the former (bankrupt?) operators of mines along the Starra line. The metallurgy in itself may not be problematic in a technical sense (laboratory), in that each ore type can be treated and the respective products recovered in isolation, but from an operational perspective it will be complicated. The inter-fingering (often over very short lateral and vertical distances I suspect) of Cu oxide mineralisation, NCu ore, DSO/supergene sulphide ore, primary sulphide ore will be a constant headache for the grade control geo’s and plant operators. Cobalt may be present in all of these ore types, but I’m not sure whether it can be economically recovered from the former 2 ore types with the current flow sheet. It will be interesting to see whether the concentrate achieves spec’ consistently. An unfortunate aspect of Cu mining is that the most difficult ore to process is the initial feed to commission the plant …it gets easier as you go down.
Reserves. The resource statement of Nov 2013 reports, by definition, a resource that does not equate to mineable reserves. Perhaps the reserves specified in the study were not considered palatable for public view so the study got put on the shelf to gather dust.
In any case, it may well have been the correct decision to put the DFS in the bin, or whatever became of it, as they’ve managed to successfully raise capital without substantial dilution. It might have been much worse for shareholders if the contents of the study were made public. Who knows? Certainly not me, I’m only speculating, but it seems highly unlikely to me that the company would have withheld the results of the study that demonstrated robust economics for the project.
My guess, and it’s pure speculation, is that the study was found to be essentially positive but with several fundamental caveats relating to operational risks, that the Company management felt would be unpalatable to the market and hence they decided to soldier on without releasing the report to the shareholders, probably confident that they could successfully manage the risks. As a result of this they’ve had to look to alternative forms of funding at which they’ve been very successful considering the economic environment.
There will be some good results in future I’m sure, but the Life of Mine bottom line might be a little less attractive to major investors.