Welcome to the thread, Mondy85.
And thanks kindly for your compliment. Agree with you that the JRV board is one of the better ones on HC. A lot of great contributors in here. I trust that you will continue to join in the discussion.
The 7-year LOM at the ICO is based solely on reserves. They will extend mine life (perhaps to 10 years or slightly longer), but you are right - it is a small deposit. It is most likely why the majors haven’t picked it up already - preferring long LOM projects. Even though it is a small deposit, it is lucrative, given the sunk capital advantages, modest capex to finish the mine build and the high-grade of the deposit itself. Added to which - power and labour costs are significantly lower than operating mines in Australia, so it has capital intensity advantages.
Small, high-grade deposits are a perfect way to start IMO. These projects are likely to get up and cash flow can then be used to fund greater ambitions. Potential USG support of some kind also adds another unique advantage shared by very few companies out there. Best not use LOM at this end of the market as a significant determinant in your DD considerations. Large deposits with long LOM often have significant upfront capex. Investors often focus too heavily on project size from a geological perspective without considering how such projects can be funded. I have been guilty of this in the past and am speaking in general terms here, not to you personally. I think many JRV investors understand how capital markets work and how difficult it is to raise significant capital - both debt and equity - at the junior spec end.
This management team went after the ICO for a reason. Between them, they have the collective knowledge of the best undeveloped projects out there. And from a strategic perspective, it is better to start small and grow from there. For the next few years, they will have their hands full bringing the ICO into production and bringing the SMP back online. Beyond that, how they use cash flow in terms of acquisitions is anyone’s guess. Some exposure to Africa is prolly on the cards, but they could look at projects in Brazil or other countries as well. Dunno.
They have mentioned future acquisitions in some of their presentations, but as I previously said, it is a guess as to what assets they are looking at. I enjoy speculating over what they may pick up. From memory, they made a board decision a long time ago not to venture into the DRC. And frankly speaking, I wouldn’t be invested here if they did. It is a shame they missed out on Kabanga. No other undeveloped deposit matches it in terms of Ni grade for that tonnage size. There are larger deposits out there, but they are sub 1% Ni. The laterite deposits are LT call options on the price of Ni and require massive capex to get off the ground. The better ones will eventually be developed, but we are talking many years from now.
The SMP is the game-changer and perhaps not fully appreciated by the market at the moment. Having this significant industrial asset means they won’t be hamstrung in any way as the ICO starts to exhaust itself. Having a refinery means that JRV can cut out the middle man and establish direct relationships with customers. They are clearly positioning themselves to be the go-to company for non-DRC, ethically sourced Co. A big reason they are pushing the ESG angle so hard (shout out to the spawning steelhead salmon habitats crew). In an era of increasing corporate social responsibility (debatable), JRV are focussed on building a battery metals trading business. I think one of the broking houses has said the refinery is worth 34c to the company on its own. I am confident that the SMP BFS will surprise and that JRV will be able to generate significant CF from it.
The team they have assembled to manage the various battery metals contracts is second to none. Rather than focus on project acquisitions in the ST, I think it is best to keep an eye out for 3rd party feedstock deals into the SMP. Additionally, I will also be looking out for contracts they will negotiate with end users in the US and its allies such as Japan (where I am currently based) and South Korea. They will have crunched the margins and will be selling final products at significant premiums to Ni and Co prices. You can work out your own numbers as to what sorta CF they will be able to generate. It will be significant IMO and give them plenty of flexibility in terms of future acquisitions/growth.
Although finance is the major ST price catalyst, as a LT investor, I view this as the last hurdle they need to jump before arriving at base camp. Just under two years from project acquisition to finance is pretty solid. Some developers have been chasing finance for a decade plus. After that, it is time for them to roll up their sleeves and get down to work building a mid-tier mining house. A lot has to play out and we always need to be cognisant of the broader macro risks, however, it is exciting to visualise where JRV will be in the next few years.
Wishing you all the very best.
Deme
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