Scarpa,
Have a read of my opinion below.
In my opinion we are now chasing >5% FULL HOLE AVERAGES FROM SURFACE within 70-80% of the remaining holes.
ANYTHING OVER THIS WILL THEN BE DEFINED IN KEY TARGET AREAS TO ALLOW FOR AN SS AND LEAD TO A POTENITALLY COMMERCIALLY VIABLE RESOURCE??
Within the LARGER area there will be higher grade key targets of which the company can work on building a >350MT higher grade resource to conduct a scoping study on. This will be >7% THM and have a 20 year plus LOM. This is what needs to be considered. IS this probable?? And whether they can look to mine the most optimal pits within the area which holds this higher grade material? Again is this probable?
In my opinion they will probably mine the highest grade reserves first in the smallest km2 area and that will last years. You mine what the market can absorb, and mineral sands mining is over time not in the now, and issues around mining are generally resolved overtime as economic benefits spread to the residents of the region through improved infrastructure and services.
I originally invested thinking it It would be nice to have 2BT@ 3-4% THM but it would be superb and far more commercially important to have 350MT @ >7% THM (WHICH IS A 20 YEAR MINE LIFE) – HIGHLY PROBABLE IN A SMALL DEFINED AREA.
Ultimately until ALL the assays come in it is going be very difficult to determine what the priority areas are to start with and which aspects of those priority areas can lead to an economic mine firstly of course which will come with a study.
In my opinion MRQ are not going to mine 20 Sq km, so that resource talk at this stage is irrelevant - it is what will be mined and can be mined that is the key. BUT having a global resource of significance to scale in the FUTURE can be of value. Make no mistake here.
IF the company can achieve these averages and define a smaller high grade area within this it will be a HUGE result. Is this probable given data to date? YES.
It will also allow the company to work on defining the best target areas to mine effectively and in parallel work on corporate activities to secure JV partners through the likes of Kenmare or Richards Bay to deliver concentrate to.
When ALL the assays come in MRQ will define an area first they would specifically target through more in fill drilling - i.e. re - target an area that possibly can become the basis of the first pit. Ultimately though, if the market cannot absorb MRQ's output whatever in ground value it has is irrelevant, but if the market can absorb it (which seems likely given current market conditions and outlooks) then we have a financially viable project for many years to come.
At this stage it appears the market outlook gives scope for new green-fields entrants and as such the SP will move in line with these expectations and the companies ability to define an economical resource in a defined area. Its my opinion that this will happen over the next 6-12 months.
Long term valuations are based on a proper DFS being completed, entering the market in a timely manner, obtaining JV or Off take agreements, obtaining finance and when in production hitting your milestones. This is a LONG way down the road.
The only thing I am interested in the now is simply grade and width and depth of deposits in KEY places - Which WILL drive SP short term! 6-12 Months.
RISK VERSUS REWARD AT CURRENT PROJECT STATUS:
MASSVIE REWARD UPSIDE IN SHORT TERM – (6-12 MONTHS). ANYTHING MORE AGAIN AT THIS STAGE IS MEANINGLESS FOR CURRENT HOLDERS OR THOSE CONSIDERING INVESTMENT!!
A FEW ITEMS TO CONSIDER HERE MRQ HOLDERS / NON-HOLDERS:
Talk of Building a Producing Mine - MEANINGLESS AT PRESENT
Talk of Dry Mining - NO
Talk of Wet Mining - YES (Considerably Cheaper)
Talk of Village Re-locations - MEANINGLESS AT PRESENT
Talk of Mining profitably prior to defining a Resource with associated MA within a study - MEANINGLESS
Talk of Sovereign Risk in Africa - Yes always BUT recent mining approvals for Savannah, recent Infrastructure plans from Mozambique Govt and other producing companies in country prove we are in a supported jurisdiction.
Talk of World Class Management - YES
Talk of Supportive Vendors - YES (Dr Mark Alvin heading the project)
Talk of Enough Cash at Bank at Present - YES
Talk of BOD having considerable skin in the game - YES
Talk of discussions with JV Partners to sell concentrate to - YES
Current Market Cap (INCLUDING OPTIONS IN MONEY) - Circa $28-$29 Million with Cash at Bank (Once Exercised Options) Circa $8 Million
EV: Circa $20 Million with 74 HOLES REMAINING, FURTHER EXPLORATION ONGOING, NEW TENEMENTS TO BE DRILLED (LINHUANE >15% FROM SURFACE AND ON COAST)
Pier Comparisons: SUGGEST A CONSIDERABLE (250%+) UPSIDE TO CURRENT SP
What we also know is that the first two batches of results showed the LOWEST VISUALS and so we can expect the BEST RESULTS TO BE IN BATCHES 3 and 4. So the BEST IS PROBABLY 2 WEEKS AWAY IMO.
THEY ARE NOT GOING TO BUILD A PRODUCING MINE HERE - . AND SO DISCUSSIONS AROUND THIS ARE MEANINGLESS
Please leave those discussion to SFX as a HMS peer comparison etc where massive Capex Requirements will curve the projects becoming realities.
Here are some key points below from a research analyst at Bridge Street Capital worthy of consideration:
Temporary closure of Richards Bay operations, including delay of construction of the new Zulti South project
• The Rio Tinto Group (RIO AU and LSE) halted mining operations at its Richards Bay Minerals unit in South Africa amid escalating violence in surrounding communities that led to employees being shot and injured. The following detail is from Reuters
. • Smelters at the site in the KwaZulu-Natal province are operating at a reduced level and a $463 million expansion project (Zulti South) has been temporarily paused, Rio said. There’s been an escalation of criminal activity directed at the operation’s staff, Rio said.
• Output for 2019 is now expected to be at the low end of a guidance range of 1.2 million to 1.4 million tons and Rio is contacting customers to minimize disruptions. It isn’t clear when operations will resume and the company is appealing to the government to step in and end the violence, Werner Duvenhage, the managing director for RBM, said by phone.
• “The losses are quite clearly going to be a significant amount of money,” Duvenhage said. “We continue to work to see how the situation can be resolved, but we don’t have a timeline on when operations can resume.”
• The decision to halt operations was preceded by weeks of protests around the area where the mine is located, causing “on-and-off disruptions,” Duvenhage said, adding that the demonstrations are not related to the company. South African protests against everything from poor municipal services to strikes are often marred by violence, assaults against nonstriking workers, the blocking of roads or burning of tires.
• “We have taken decisive action to stop operations to reduce the risk of serious harm to our team members,” Bold Baatar, chief executive officer for the energy and minerals unit, said in an earlier statement. “Our goal is to return RBM to normal operations in a safe and sustainable way.”
• The South African press have suggested that the incidents are related to a long-standing issues with a local traditional council and a succession battle within a clan for chieftainship.
• We were also interested in the following quote from the FT (6/12/19): “The violence is happening particularly with mining communities who aren’t having water and power provided by the company,” said Indigo Ellis, head of Africa at Verisk Maplecroft, a risk consultancy. “And there’s a political dimension that goes further than poor service provision. The area is incredibly anti-Ramaphosa,” she said, referring to South Africa’s president.
• We note from Rio Tinto’s September 2019 production report that construction of the $463m Zulti South project, which was forecast to commence in June, has been delayed due to ongoing negotiations with local communities.
Madagascan risk emerges at Base Resources’ Toliara project
• On 7 November 2019, Base (BSE AU) announced that the Government of Madagascar had issued a statement requiring suspension of on-ground activities at the 100%-owned Toliara project.
• On 8 November an environmental website (Mongabay) provided further colour suggesting the shut-down was due to opposition from local communities and unfavourable fiscal terms. This report questions the validity of the Toliara mining lease which was granted in 2012 by a transitional government which was emplaced by a coupe in 2009.
• As a reminder BSE purchased Toliara in early 2018 for a total cost of US$92m. The recently completed DFS identified a pre-production capital of US$442m. Some US$116m of this is required for the construction of the access road and port. The study delivered an IRR of 21% using “internal commodity price forecasts” for the first 8 years, and TZMI long term forecasts thereafter.
TiO2 feedstock outlook:
For many months now we have been flagging that pricing is starting to look quite positive for the likes of rutile and ilmenite. Tightness in the rutile market is undoubtedly down to ILU’s woes in Sierra Leone, together with the imminent closure of the Stradbroke Island operations. We are hearing prices of up to US$1200/t (CIF), 10-20% higher than earlier in 2019. This is starting to flow through to ilmenite pricing. We noted in an earlier report that Industrial Minerals (9 September 2019) reported that a shortage of supply has translated to a pricing range of US$190-210/t, up $10/t on the previous week (47-49% TiO2 basis). Numbers of $220-230/t were also mentioned, but no firm deals have yet been confirmed. The most up to date chart from TZMI projects an ever-widening supply/demand gap emerging (around 12% of demand it looks like to us). And this we assume includes 100% of Richards Bay Minerals, where the future is far from clear.
RISK VERSUS REWARD AT CURRENT STATUS:
MASSIVE REWARD UPSIDE IN SHORT TERM – (6-12 MONTHS). ANYTHING MORE AGAIN AT THIS STAGE IS MEANINGLESS FOR CURRENT HOLDERS OR THOSE CONSIDERING INVESTMENT.
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