Dragone64,
I think more exploration is going to make very little difference to the company's prospects at this stage. They would really need to unearth eye popping results to change the position we are in. You might get a short term rally in the share price with some exploration results but unless they represent the discovery of a new and very substantial deposit they will be meaningless in term of the company's development prospects. I think you should read the Prefeasibility Study PFS http://www.blackthornresources.com.au/uploads/documents/ASX_ANN_Kitumba_PFS_20130910.pdf
and the Optimised Prefeasibility Study http://www.blackthornresources.com.au/uploads/documents/ASX ANN_Kitumba_PFS-OS_20140429.pdf again.
It is important to understand the ramifications of these studies to try and understand the future of the project.
Here are the key points as I see them.
The original PFS envisaged creating copper concentrate from the Kitumba ore. Part of the concentrate would be leached to produce feed for the SXEW plant, the remainder of the leached concentrate would then be processed to produce approximately 24,000 tonnes per annum of copper concentrate at 25% Cu.
So in this plan we would produce an average of approximately 33,000 tonnes of copper metal per year that is sold to costumers and 24,000 tonnes per annum of copper concentrate which would need to be sent to external smelters in Zambia for treatment and refining.
The optimised PFS tipped this plan on its head. Instead of creating a mine that needs to sent copper concentrate out to smelters in Zambia, the new mine plan actually envisages the need to buy sulphide concentrates at an average of 40ktpa for the first 5 years. This is because the ore which will be mined at first is low sulphide supergene ore which does not contain enough sulphur to generate enough acid and heat for the leaching process that leads to the creation of copper metal.
So the new plan envisages the need to buy sulphide concentrates at an average of 40ktpa for the first 5 years then after that as our mine starts reaching higher sulphur grades we switch from needing to buy sulphide concentrates to buying oxide concentrates at an average of 85ktpa from year 6 onwards. The OPFS states that oxide copper concentrates are available on more favourable commercial terms in Zambia.
So you can see Dragone64, if we discover more supergene ore as it is likely we will, it doesn't seem to be much use to us with the current mine plan at least for the first 5 years. Having the new ore available would give the mine more flexibility under the current mine plan, towards the end of its life, as I assume less external oxide concentrate would need to be bought and processed.
With the current mine plan there is also the possibility of continuing to make money even after the ore at Kitumba has been mined out. Below is an extract from the OPFS which explains this.
"Furthermore, consistent with the forecast longer term availability of concentrate from Zambian and Democratic Republic of Congo (DRC) operations, there is additional economic potential to continue operation of the processing plant as a merchant operation after the mine has reached the end of its economic life. The positive margins that may be realised from these incremental metal sales have not been considered in the Project economics, but represent a material upside to the base economics. The longer term outlook for Zambian and regional concentrate supply is that a significant potential concentrate may exist. No infrastructure currently exists for the export of copper concentrate as a bulk commodity. In addition to the significant cost of packaging and transporting containerised concentrate to the international market, the Zambian Government actively encourages ‘value adding’ in-country by levying a 10% export tax on concentrate. The Project has therefore assumed that this concentrate is available for purchase at export parity pricing."
As part of the OPFS Blackthorn commissioned " Base Metals Marketing Services Ltd (BMMS) to conduct a
market study to examine the future market for concentrates and copper cathode, and to assess
transport, treatment and refining charges. The BMMS report has been used as the basis for pricing
cathode sales as well as deriving indicative terms for the purchase of supplementary concentrate feed
for the process plant. A key finding of the BMMS report is that the balance between forecast mine output and smelter capacity "suggests that output from current mining operations and those under construction
exceed domestic smelter capacity by the middle of the current decade. (The smelting capacities
include also the Kansanshi smelter which is under construction and basically integrated with
Kansanshi mine expansion/Trident project).”"
So you can see Dragone that it is a tricky balancing act with all our mine and smelter neighbours in Zambia, including Glencore, one of our major shareholders who own the Mopani copper smelter in Zambia. Changes to road infrastructure or concentrate import and export levies also play a role. I put up a link a little while a ago dealing with some road infrastructure projects. I haven't check to see where these roads are proposed to be built or if they might have influence on the future of Kitumba yet. I'd say the BMMS report would make interesting reading as it probably details the balances of the various known and future copper ore supplies in Zambia against current and future expected refining and smelting capabilities. How important and where the Kitumba project is I just don't know, that is the subject for a lot of research which I don't have the time for.
What we know is that our mine plan will give us flexibility in the future to take advantage of any growing supplies of copper oxide concentrate within Zambia and possibly the DRC. Our problem currently is the copper price, the mess Glencore and others have created with the Zambian government and finding the nearly $680 million of development funds to start the mine.
Dragone, someone has their foot on our throats at the moment, for me I see it as a great buying opportunity, for you I see it as a danger unless you are willing to start averaging down further (very difficult thing for you to be considering doing given the current size of your investment in IAU, that I understand you have from having read this forum over the last few years).
Good luck.
DYOR all IMHO
Eshmun
(20min delay)