Guys,I am working through a load of potential investment...

Guys,

I am working through a load of potential investment opportunities amongst Tin stocks and therefore, quite logically, CSD came on my radar.

The SPG option to acquire 50% of the Mt Garnet project for a cash injection of 100% of the PFS NPV is certainly a novel approach, but it does then draw focus on just what that NPV may be!

As far as I can deduce, there is a strong probability that the PFS may well introduce a higher throughput (from 700ktpa to 1mtpa). There must also be the likelihood of the introduction of sales of Fluorine, Copper & Zinc. In addition, the increased JORC resource since the July 2010 scoping study would imply an increased LoM from 7.5 years (presentations are hinting at 8-10 years).

However, in the meantime we only have the basic numbers from the scoping study to go on, as an increased throughput and more comprehensive processing flow sheet must surely impact CAPEX and costs per tonne.

So falling back onto the scoping study we have 700ktpa ore @ 0.64% and 68% recovery, producing c. 3,047t Sn per annum.

We also have c. 236kt magnetite concentrate at Fe grade of 65% (although I notice CSD have recently reduced that to 60%).

Running my model over 7.5 years at the Sn & Fe prices quoted in the scoping study I get broad agreement with the Gross revenue figures supplied by CSD.

However, I am much happier working the numbers with expected Net Smelter Returns for both Sn and Fe. Hence, I have applied 85% NSR for Sn and 64% for Fe in accordance with results elsewhere on similar projects.

CDS also supplied an estimate of $49/t for plant feed which results in an annual cost of $34.3m for the 700ktpa operation (c. $11,256/t Sn produced).

CAPEX of $124m was quoted, so we then have all the elements available to make a basic NPV(8) & IRR calculation.

The current price of Sn is considerably weaker at c. $18,500/t but Fe prices are considerably higher than they were in 2010 (I am using $135/t for 63% concentrate).

This results in a current NPV(8) of $58.3m and an IRR of 21% for the 700ktpa model.

As things stand and without changes to throughput, costs, CAPEX, et al, that would imply that SPG would inject c. $55.3m of cash for their 50% share of the project - at their option of course.

The balance of $68.6m of CAPEX would likely involve off-taker involvement & bank debt to reduce the equity component required for funding.

CSD shareholders would benefit from the remaining 50% attributable share of Mt Garnet which, from the basic model and at flat current prices, would be net pre-tax cash flow of c. $128m over the 7.5 year LoM.

However, Sn market price does look set to rise with mounting supply/demand deficits.
The increasing resource will surely result in a longer LoM and/or increased annual throughput.
There does remain the intangible possible revenue boost from Fluorine, Cu & Zn.

CSD does remain an interesting proposition from my point of view and I look forward to the PFS results for further clarification as to the investability of the project.
Kind regards
CPDLC