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staz024

3,529 Posts.

105

30/08/18

10:08

Post #: 35286326
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Originally posted by Dr_Manhattan ↑

Thought I'd put down a few comments since you put some effort into this. Zinc is actually a good commodity to compare to lithium since its not so highly valued as tin for example. At US$1.1/lb ($2400/t), the 59% concentrate from Kipushi contains about $1400/t of zinc. No one would pay that as there are conversion costs, so its even lower and starts to become comparable in price to 6% Li2O prices ($900/t) miners receive. This is more realistic than looking at a tin mine for example which moves 50% concentrate valued at $10,000/t and doesn't worry to much about transport costs.

Anyhow, on pg 60 of the Kipushi PFS is a breakdown of the costs compared to revenue. What hit me is how good lithium mines look in comparison.

Kipushi's revenue/operating costs gives a margin ratio of 48%.
AJM DFS if it gets US$900/t (reasonable price) with operating cost of US$231/t gives a margin of 75%
BGS PFS gives a margin of 67%

For AJM, the mine operations are 70% of costs with its 1.0% grade. AVZ with its 1.6%, homogeneous deposit + tin credit is going to save substantially on mine operational costs (should be lower than AJM). The main point is that AVZ has a significantly higher margin ratio (lithium mines seem to in general) than Kipushi's zinc and can more easily absorb the expected higher transportation cost.

I will add that the BGS PFS is planning to road haul 6% concentrate 1000km (2000km round trip) to a foreign port at a supposed $99/tonne. Nemaska claims it will be moving 6% concentrate 300km on DIRT roads to rail and then another 555km by rail for supposedly $50/tonne. Disagree that unpaved roads are needed initially (plenty of miners use them with higher volumes).

Some other tid bits from the PFS.
'The costs for transport from Kipushi via Durban in South Africa to China (including all taxes) is estimated to total $212.25/t wet concentrate.'
This cost includes package costs of using 1.8tonne bags and lots of handling [pg 379]. So likely plenty of room to improve. Even $250/t from Manono to port, with the mining cost savings, would still have far better margins that this zinc mine.

On another interesting note,
'....the railway connection from South Africa to the Copperbelt is today vastly underutilised and carried annual transit freight volumes of only 288 kt in 2016 compared to its current capacity of around 3 Mt.'
I'm sure the Angolan line (much closer to road 617 than is Kipushi) is also vastly underutilized.

In conclusion, I don't currently see the high transport costs as a limitation when the operating margins are so high for lithium hard rock miners right now. Additionally, once a mines starts operation in Manono, the logistical situation will only improve. A very obvious use of revenue is a hydroxide plant to the south which would drop the transport costs to sub-$100/t (road 617 trip..ignoring northern route right now) and would add value to the mined product (like Nemaska is wisely doing).

Expand

Great post.
A while back you posted that during WW2 they were flying out a "special material" from Manono and running a 24 hour mining operation. Was that special material tantalum?

AVZ Price at posting: 11.0¢ Sentiment: Buy Disclosure: Held
3 Upvote

0 Great analysis

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