AUZ (ASX) Grade discrepancy

Originally posted by SparkyR ↑

As I have seen this question many a time and while it has been explained well by a few longterm holders of AUZ I still emailed Ben so you can all hear direct from the man himself regarding this issue. I would like to add he replied within 20 minutes, what a champ!

Please see below my questions which I gathered from a few previous posts by various people and his responses below them

Question: Where does the 3kt cobalt/pa figure for 20-years at .11% feed grade come from?

Reply from Ben: Shall we take the issue of feed grade first.

A Mineral Resource is the size of the current deposit when you consider it to be a single ore body. In this case, when you look at the nickel and cobalt as a single zone. That means there are parts within this ore body zone that has high cobalt, for example, and lower cobalt. As a result we end up with a grade of less than 0.1% cobalt.

But you don’t mine an ore body as a single deposit. Instead, you put the waste to the side and only treat the mineralised ore. Thus you process the higher grade cobalt and nickel material and stock pile the lower grade dirt. As a result, the actual grade of the material you feed into the plant is much higher than the overall Mineral Resource grade.

Take the Clean TeQ Sunrise (Syerston) deposit for example – on page 15 of their presentation http://www.cleanteq.com/wp-content/uploads/2016/12/CLQ-2017-AGM-Presentation-web.pdf. Even though they refer to their cobalt-nickel deposit as being 4 km long (Sconi is 5km by the way), the high grade cobalt is concentrated in four or five pods. So in this case, they will mine the high grade zones (shaded in green) and have a feed grade of 0.14% cobalt, rather than consider the entire ore body as a single unit.

Same with Sconi. Our mining pit shells means that we will be mining two pits with an average feed grade of 0.11% cobalt.

Question: And how do you scale to 12kt?

Reply from Ben: The PAL + SX are modular.

We propose to build them as a series of 750,000 tonne per annum throughputs.

Therefore, but building additional “lines” (as they are called) we can scale up from 3,000 tonnes of cobalt sulphate per year to 12,000 tonnes of cobalt sulphate per year

Question: The original MLM report says only 54kt contained cobalt at 0.06% grade. I notice some studies by MLM actually had lower cobalt output (less than 700t/pa) but high scandium output to give the $870 NPV figure on 20-year mine life

Reply from Ben: MLM were focussed primarily on scandium, thus their economics were based on the scandium with the cobalt and nickel considered as a by-product.

This is the reverse of AUZ, which is building a cobalt + nickel plant, with scandium being stock piled for future sales.

Question: I read the technical report released 31st March , and it has the 89Mt @ 0.58% nickel and 0.06% cobalt, giving 54kt contained cobalt for sconi and notes these numbers have not changed sinced the 2012 MLM study, which I also read. Is there evidence such as a scoping study of PFS that supports a 20 year cobalt production rate of 3000t/pa and the $800m+ NPV figure.

Reply from Ben: First please be clear that we are talking cobalt sulphate output and not cobalt metal.

In terms of the pricing for a cobalt or nickel sulphate . . . a cobalt sulphate contains about 20% cobalt metal. Nickel sulphate similarly contains about 20% nickel metal.

Therefore, in rough terms, 1 tonne of cobalt sulphate sells for about 20% of the price of a tonne of cobalt metal. Same goes for nickel sulphate.

So in an Australian Mines presentation, were we state that we are seeking to produce 100,000 tonnes per year of nickel sulphate, this equates to about 20,000 tonnes of nickel metal.

And where we state an annual cobalt sulphate production of 12,000 tonnes, this is the same as 2,500 tonnes of cobalt metal.

Therefore, our pricing numbers are based on the LME price for cobalt and nickel metals, multiplied by 20% of the expected cobalt sulphate and nickel sulphate outputs.

https://www.lme.com/metals/minor-metals/cobalt/#tabIndex=0

https://www.lme.com/en-GB/Metals/Non-ferrous/Nickel#tabIndex=0

Today cobalt metal is seeling for USD61,000 per tonne.

We anticipate producing 12,000 tonnes of cobalt sulphate (being 2,500 tonnes of cobalt metal) per year.

So our from cobalt sulphate production at today's prices would be (USD61,000 x 2,500) = US$150 million per annum

And nickel sulphate production at today's prices would be (USD12,000 x 20,000) = US$240 million per annum

Hence, at today's metal prices, the revenue from the Sconi project would be about US$400 million per year (or AU$500 million per year)

Expand

"So our from cobalt sulphate production at today's prices would be (USD61,000 x 2,500) = US$150 million per annum"

How come they can say there is no material difference to CLQ then? CLQ is planning to produce 5,000t per year of cobalt, double of AUZ

"Is there evidence such as a scoping study of PFS that supports a 20 year cobalt production rate of 3000t/pa and the $800m+ NPV figure."

Also, he didn't address your last questions, just did some basic calculations. What will be the CAPEX and OPEX for the project so we can get to the NPV? The Sconi PFS was based on scandium being the primary product. Hence that $870 mil figure needs adjustment and isn't a reliable source for an investment decision.

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0.014	3593683	9
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0.016	5653591	20
0.017	15839838	17
0.018	3361352	6

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(20min delay)
Last 1.3¢		Change 0.000(0.00%)		Mkt cap ! $18.18M

Open	High	Low	Value	Volume
1.3¢	1.3¢	1.3¢	$5.874K	451.8K

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