Hi guys, below is a cut and paste from the a CVI thread written by "Trade for Profit" .... Thought it might cheer a few of us TMR holders up with respect to CU prices......long but an excellent read...Enjoy!
Doc777
I see one poster offering detailed calculations here, with supported reasoning...then I see another saying they are no good, but not actually offering anything of substance in argument?
For what it is worth, the 80% recovery is clearly arbitrary if you ask me...and if I may say so, somewhat conservative in nature.
Discounting the inferred resource prior to confirmation is fair...but the 7mt "measured" component is clearly well understood and not likely to vanish.
This area has been drilled at least twice (maybe 3 times?)…the geology seems to be well understood, the previous drill pads preserved in concrete for ease of twinning, and inferred interpolations appear reasonable. One might even argue conservative?
As for the price of Cu…there are arguments suggesting it will level off and even soften over the next 2 years...then there are arguments suggesting Cu will easily pass $6/lb within 18 months.
I will go out on a limb and suggest we may see higher prices still...with figures in the $7/lb range not out of the question within just 2 years! International supplies are far from reliable and the low LME stockpiles suggest disruptions could create ongoing supply issues…not unlike the way car accidents are still obvious long after they are cleared off the roads via the ongoing congestion.
RIO's statement that the planet will consume more Cu in the next 30 years than in all of history, I suspect has not been fully comprehended by the market…it is not a throw-away statement!
There are no more large tonnage, high grade Cu resources around (lol...except for one perhaps)...instead we are now looking at the spectre of large tonnage, low grade porphyry type deposits...where we may well have 6m tonnes+ of contained Cu, but at only 0.4-0.6%. Whilst scale will make them profitable, the biggest single cost in such operations is energy consumption...something many have not fully projected in their production models, is that with higher energy prices comes severely reduced margins on such low grade operations…much more than higher grade operations!
With oil at $130/barrel, either grade needs to be improved...or...price per lb needs to rise significantly, otherwise even some of the massive scale projects will fall of their purch! Given grade cannot simply be lifted in the vast majority of cases, higher Cu prices is a certainty, if for no other reason than low prices will close down mines, in essence self regulating the supply demand ratio.
So, with energy not likely to fall significantly over the next 30 years...lol…and already marginally economic Cu grades likely to fall even further as existing mines run out...it is very clear to me higher Cu prices are obvious.
I really do see the current Cu market as being not unlike that for u3o8 when it was just $10/lb...different driving forces…but nine the less, the same supply demand pressures over the next few decades.
Interestingly, 30 years is not that far away...and like the decline in the availability of oil, Cu’s price will peak to incredible levels long before it entirely runs out!
Lol…sorry to digress…
Where was I…oh yes…the short answer to a long question is that adopting $6000/t Cu, for projects expected to produce over the next 20 years or so, is hardly a stretch in my view.
Just 4 years ago, I often argued with the view of analysts using $35/barrel in forward pricing of energy projects...I suggested it was a joke...they typically argued it was the long-term norm.
lol...seems some are a little stuck in their ways at times…just like some of those on these threads.
Anyway, next we come to in ground values...shallow, close to port, high grade...and if simple in metallurgical composition, will command a premium over projects when looking at in-ground values.
Anything from 5% for inferred (today) to 20% measured (tomorrow) will be applicable here in my view.
As for discounting grade from say 2.14% to 1.75% or so…that’s a pretty massive discount at the business end of the profit model…lol
Say for example a project’s break-even point, for an operation processing 7.4m tonnes of ore per year, from a shallow, shear/breccia hosted IOCG resource, kicks in at 0.7%...not to be confused with economic cut-off which can be as low as 0.2% or even lower for mining purposes..
Now…in effect, at a grade of 0.7% and 80% recovery, we produce some 41,400 tonnes of Cu metal from 7.4mt of ore…at say $6000/t, we earn $248.6m…less costs of 248.6m and we pocket zero...lol
Increasing our grade to just 1% however and suddenly we earn $355.2m…less costs of $248.6m (+3% of income for extra handling/material costs)…and we walk away with $95.9m
The project has moved from moth-ball to economic for the sake of just 0.3 of 1% of Cu grade.
Frankly, I see the PWC report as being extremely conservative...as you would only expect from such a group.
Nothing wrong with debate...but I suggest if people are going to discount the efforts of someone clearly informed in their approach, the very least they could do, in respect of other HC posters (let alone the one they are accosting with their arguing for the sake of it), is to offer alternative evidence to support said views.
Cheers!
TMR Price at posting:
0.0¢ Sentiment: Hold Disclosure: Held
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