Give Reason to hold or invest in CXO, page-258

@dawgfather in response to a shareholder query Core advised it has completed ~85% of the waste rock movement (possibly costs) and 10.8M of 12.2M bcm required. From DFS, ore reserves and ore resources movements only about one third of the open pit ore reserve has been mined. When flipped around to the "2nd half" of the Grants project its ~15% of the waste rock still to move and through this, recovering the remaining two thirds of Grants open pit ore. When restarted with this cost structure it will cause a step-change downwards in the reported monthly cash operating unit costs and those high costs will become a distant memory. The way Core has chosen to release (or not release) this information means the generally accepted view is that this step change isn't happening or doesn't exist. Its unclear why Core aren't releasing information to clarify the state of Grants. Removing uncertainty tends to be favourable to share prices.

Core's strip ratio/Mined ore to production ratio
While the currently reported costs from Grants are ugly, overall its a pretty normal project for waste ore movements, with a high grade that gets ok DMS only recoveries and is also high grade in that a magnetic screen was not needed in the flow chart to keep iron grades below 1%. In one of the quarterly conference calls GM noted it being ~15:1 strip ratio. On a volumetric basis the DFS was moving 13.1M bcm of waste for 0.79M bcm of 1.4% ore for a volume 16.6:1 strip ratio. These two remain aligned because all the weathered rock Core needed to move is less dense creating a lower strip ratio on a ton's basis than volume basis. Grants is a comparatively normal but smaller project. Its higher grade than many other projects and the overall strip ratio is in the middle of 4 projects below:

• LRS (Moving 551.9Mt of waste rock for 31.4Mt of 1.24% ore or a 17.6:1 ratio)
• GL1 (Moving 419.1Mt of waste rock for 18.9Mt of 0.98% ore or a 22.2:1 ratio)
• Atlantic (Moving 381.7Mt of waste rock for 31.1Mt of 1.21% ore or a 12.3:1 ratio)
• Develop (ex Essential) before reworking to more UG (Moving 117.4Mt of waste rock for 8.8Mt of 1.11% ore or a 13.3:1 ratio)

So is known about 2023 physical movements?
From ASX releases - nothing, however in October2023 Core had analyst call and Kate asked about questions about physicals at the 45min mark. These verbal answers haven't made it into written communications but were answered as:

• Waste tons moved were just under 2M bcm of waste rock
• Milled tons for processed for the quarter were just under 150kt (crushing was just over that)
• Ore tons mined for the quarter just under 320kt.
• Headgrade - Grade is at or above reserve estimates
• Processed tons were just under 150kt
• Reconciliation work was at or above on volume and grade. GM was really pleased with work to define the ore grade. Grades being as at reserve was noted as being a good estimate (the upside was small).

The September quarter cash operating unit costs were A$1,889/t. If 1950k bcm of waste rock was mined at a density of 2.9x, 5,655kt of waste was mined for just under 150kt of ore to be processed. Despite a Grants project average of ~15:1 waste to processing ratios, the sept quarter was ~38:1. Of course costs were high, and it would be bizarre if they weren't. The primary reason for this was that ROM increased from 7.6kt to 164.8kt. 157kt was added to ROM while "just under" 150kt was processed by the DMS. The secondary reason was despite dealing with some of the strip ratio via pre-strip capex this period was still around/above the overall average. Its bizarre that Core didn't state what the cash operating unit cost was excluding ROM built elements or perhaps they were with the A$904/t comments. So the high costs associated with well over US$1,000/t are a function of ROM build. All this above average work means there's a below average area to go.

The earlier noted email response said 10.8M bcm had been shifted. Figures close to this make sense from the financials:

• Core has capitalised $91.7m of costs to the stripping asset and now expensed it all. Assuming $16/bcm this is 5.7M bcm of waste shifted.
• In the June 2023 accounts Core had $66.4m of mining costs with $46.6m shifted to the stripping asset. Assuming inflation increased the cost to $17/bcm 1.2M bcm was moved that was ~95% waste rock.
• Core has stated that just under 2.0M bcm of waste rock was shifted in the Sep23 quarter. A similar capacity was available for the Dec23 quarter until with mining operations ceased in early January. Guessing the Dec quarter was the same as the September Core shifted ~3.9M bcm in the half year.
• The sum of these movements is 10.8M bcm so waste ore movements being close to completion align to the combination of financials and reported comments by Core.

There is an unresolved issue of what quantity of ore will be recovered by shifting the remaining 1.4M bcm. Inter-related to this the email referenced a new planned size of 12.2M bcm not 13.1M bcm. Core may have made modest changes to the mine plan that removed some high strip ratio material from the plan. Given Core added 28:1 strip ratio between the original and final DFS's. Adjustments to remove 0.9M bcm may only reduce the ore reserve target recovery by 0.1Mt but there is a risk its more. If there is ~1.4M bcm to move (4.1Mt @ 2.9x density) for ~1.4Mt of ore, the residual strip ratio for Grants going forward is ~2.9:1 which is an excellent low cost operation. A few months ago SYA released the Moblan DFS. This case had a 2.3:1 strip ratio but a much more complex processing plant (DMS, Flotation and magnetics) and higher logistics than Core has at Grants. Moblan's operating unit cost of US$417/t which shows the sort of financials that can exist with low strip ratios, even with expensive processing/logistics. If Grants was anything close to US$417/t on restart the restart is incredibly viable.

Note - in addition to mining costs there's processing costs. Core has been reporting high processing costs but the DMS was built by an industry leader so technically it shouldn't have an ugly cost structure. Past high costs most likely relate to the previous contract that is finishing around now.

I've got no doubt that certain posters will try to dismiss or discredit this suggestion of a future low cost Core. Some may be shorters and financially benefit if the CXO share price falls. Some may be ex shareholders that lost money or smug ex shareholders who sold out to make profits. Some may be shareholders in other larger projects that think their pet project is somehow better by trash talking Core.