Just to clarify why I chose US$600m - $1B CAPEX estimates in the above post/table to which I am replying.
First of all, in no way am I suggesting that there will likely be cost overruns to the project. On the contrary, I believe that there is some considerable fat to trim on these CAPEX estimates and in any case, there is a 10% contingency built in to the US$545m estimate (refer April 2020 DFS) to allow for cost overruns.
Secondly, the reason I chose to increase the $545m CAPEX to $600m (assuming 4.5mtpa) is to allow for additional CAPEX that will IMO likely be required for the more recent (i.e. post April 2020 DFS) proposal for a sulphuric acid plant to be built onsite.
Therefore, I've allowed for an additional US$55m for this. The likely additional CAPEX requirement will be money extremely well spent IMHO, saving the company millions in OPEX each year and positively contributing to an expected overall improvement EBITDA, IRR & NPV via upcoming BFS estimates.
As a seasoned Project Director with EPC project delivery experience in sulphuric acid (amongst other fields), Michael Hughes IMO is the perfect individual to ensure that this added bonus is delivered on time and within budget.
'Moreover, AVZ is investigating and planning substantial greenhouse gas mitigation measures, which include the purchase of an electric mining fleet once commercially-viable equipment is available; the generation of hydrogen from excess renewable electricity to enable the use of fuel cell electric vehicles; and the establishment of a 5 000 ha sequestration plantation. The company is also considering harvesting power from the steam produced at its proposed sulphuric acid plant through a steam turbine as an additional form of green energy if it goes ahead with the establishment of an on-site sulphuric acid plant (currently under investigation).'
Furthermore, I am of the opinion that the company will progress straight to the 10mtpa option, certainly that is the feeling that I have after speaking with colleagues, reading recent announcements & listening to Nigel in his most recent interviews.
And why not? After all, CATH/CATL will need all the SC6 & PLS that they can get their hands on by 2023 IMO.
Either way, below is a simplified table of estimates for both 4.5mtpa and 10mtpa scenarios.
Key points to the above:
1. Based on a 70/30 debt to equity structure, AVZ will have MORE THAN sufficient equity (i.e. post satisfaction of conditions precedent (CP) for the CATH deal) to cover either a 4.5mtpa or 10mtpa build. Therefore, any speculation about capping for a possible future equity raise can be put to bed IMO.
2. AVZ has pre-emptive rights to an additional 15% of the project. I've included the assumption that these rights will be exercised prior to the commencement of construction.
3. The potential cost of the additional 15% is yet to be determined, and so I have not considered it in the above table. However, I suspect that any deal struck with the DRC govt. will involve a modest deposit upfront and then either a backend payment/s (eg. post cash flow generation), an exchange of the 15% ownership for future LOM royalties, or possibly even a share based payment arrangement whereby the DRC govt. becomes a shareholder in AVZ and is entitled to its share of future dividends. There are many ways to skin a cat here, and these are just a few of the possibilities that would make sense for both parties IMHO.
4. IMO 'economy of scale' will ensure that key items required for upscaled mining and processing won't cost double i.e. in the event that AVZ progresses straight to a 10mtpa operation.
5. The only scenario in which I see another equity raise is in the event of a Lithium Hydroxide plant being built. But even then, if it costs @1 billion to build (via say a 51/49 JV which AVZ controls), then a 70/30 debt to equity arrangement only requires AVZ to stump up another $150m or so in cash. By then, I fully expect the SP to be well north of $1 and so any dilution in the event of a future equity raise for this purpose will be minimal IMO.
6. The USD $74m - $118m in available cash (i.e. post equity funding) should pave the way for an aggressive drilling campaign to quickly establish a maiden JORC resource/reserve over at CDL.
After that, I suspect we will see a duplicate of Roche Dure (or better) in terms of resources, reserves, grade, consistency, LOM and production profile. And you can bet your bottom dollar that CATL & others will be screaming for quality product by the time CDL enters production. (by 2025?)
7. All of the above and below is IMO only, so please DYOR.
Onwards & upwards and what a magnificent time to own the world's largest & most homogenous spodumene deposit (KISS with DMS only), with the added bonus of Tin, especially given that relatively small Lithium & Tin markets (valued at just @$8 billion each) are required to grow exponentially in the coming years in an attempt to meet future demand.
Have a great weekend, expect the unexpected, and IMO progression beyond this week's material developments maybe closer than we think.
), with the added bonus of Tin, especially given that relatively small Lithium & Tin markets (valued at just @$8 billion each) are required to grow exponentially in the coming years in an attempt to meet future demand.
(20min delay)