I have four basic areas I look at when considering value of Nzuri:
1 - Kalongwe Stage 1, 7 year LOM, Ore Reserve of 6.98Mt at 3.03% Cu and 0.36% Co.
2 - Kalongwe Stage 2, 6-7 year LOM, Leach of tailings/stockpiles, combined resources of 6.1MT at 0.98% Cu and 0.29% Co
3 - Kalongwe Stage 3, LOM extension using satellite deposits from Monwezi cluster (19m at 0.48% Co, 8m at 2.53% Cu), Kambudji (4m at 3.87% Cu)
4 - Exploration program (2018), Kasangasi kamoa/kakula target, Mukansa cobalt target, new aeromag targets
Now start at just looking at part 1, Kalongwe Stage 1, a feasibility level project.
Feasibility Study gave us an NPV of $116M USD and about US$33m in annual cashflow for 7 years. With a capex of just US$52M this feasibility study more than justifies our current market cap. Just one year of the projected annual cashflow in AUD is 82% of our current enterprise.
Now if you just upgrade this FS to LME spot prices you get an NPV of US$142M and US$39.13M in annual cashflow for 7 years.
Now change the transportation costs to reflect a probable off-take with one of the new Kolwezi based SXEW plants, and you get an NPV of US$180M and annual cashflow of US$47M for 7 years.
Now improve payability of that offtake modestly to 55% of LME for copper and 20% of LME for cobalt (very realistic given what we are hearing about cobalt and I'm hearing about severe on the ground on ore shortages in the DRC due to bad mine planning and legal disputes) and you get NPV of US$280M and annual cashflow of US$67M for 7 years.
This final iteration is my personal baseline expectation for Kalongwe Stage 1, using spot commodity prices, around US$280M NPV or A$370M. This compared to a present day EV of $52m (using 22.5c as last close price for NZC).
And if you like to use the oft quoted $4 copper and $55 cobalt for 2019, you get US$596M NPV.
All Nzuri management have to do now is close off the offtake/financing and built it as is, and its a very straightforward build and mine plan.
So what we already have is very exciting.
Then on top of this we have points 1 - 3 as described above. Or if you can't bother scrolling, almost double the mine life with much more cobalt revenue thanks to leaching, more oxide ore from satellite deposits, and then the exploration program might deliver an elephant, who cares.
In 2017 I largely held for the risk free exposure to exploration (which worked out but would have been nice to jag something), in 2018/2019 I hold for the cobalt/copper concentrate market, Kalongwe financing/offtake and to finally be able to say I was right, I have a large ego and its bruised for holding so long with no reward. Fingers crossed.
* Note all NPV are pre-tax and on 100% project basis, CBF trimming it, but its on 10% discount rate, all the spruikers use 8%
Expand
