The Mt Thirsty numbers - high and low capex

Morning all,

There have been some big numbers thrown around here recently - so I though I'd post the numbers we're working with. Below is a comparison of the high and low capex mine plans for Mt Thirsty - 2010's 2Mtpa, $883Mil plan, and the 2013 - current, .9Mtpa $65-70Mil plan. Note: I think they will go for a larger mine than .9Mtpa, esp with Mark Creasy involved(?) but .9 is our starting point. It's fully referenced. Please do your own net present value calculations on these figures if you haven't already. Our NPV, done at very conservative discount rate (30%) and conservative life of mine guess is very, very encouraging. Current Mcap for BAR and CNJ = crazy cheap assuming scoping study looks good.

As you can see below, the current plan returns significant nickel and manganese revenue (over $30Mil p/a), and importantly is profitable if selling ONLY cobalt (so a pure play capable of riding out unstable nickel market price) and interestingly is also profitable if selling ONLY nickel and Manganese (so if cobalt horribly crashed to zilch - doesn't looks likely!). However it is unclear as to how much of the extractable N and Mn the JV can process under the (very cheap!) low capex plan. But if they can only process cobalt initially to get the ball rolling - we're still winning.

The high Capex plan is 12 x more expensive to build, and is, like other laterite plays (such as ARL) nickel price dependent. However it returns only 3 x as much profit as the low capex mine - and this is not accounting for relatively more expensive price of debt now compared to 2010 when the bigger plan was developed. (Let's say the JV needed to finance $700Mil of the $883Mil High Capex plan, at 15% (the rate AJM is paying on their recent finance deal), that's $105Mil p/a in interest...). The low capex plan gives us $124Mil profit per year and has a payback of 6 months or so, the high capex 2.2 years ($388 Mil profit).

This is why my assertion has always been that the JV will continue to pursue the low capex option, with a new plan that's scaleable: So, 1: design the fastest to build and finance/lowest risk (so cheapest) mine possible to maximise income in the current (next 3 -5 years?) cobalt boom. 2: scale mine up when possible.

These are my big questions:

1: What's going on with Platx? Will the JV do a deal with Platx. If so,  and it looks likely, then this is MASSIVE.
2: What off-take discussions have been going on (every cobalt junior is in discussions with many suitors).
2: What mine size is the most viable - given that global conditions have much changed since 2013, and the resource may grow significantly with new JV tenement and Platx addition.
3: How does the JV plan to re-launch this project into the world once the scoping study is complete?
3: How will the JV manage this project moving forward - the current shared management(BAR?CNJ) seems unclear and potentially problematic.

Cheers,

Solarbat

	Column 1	Column 2	Column 3	Column 4	Column 5	Column 6
0	Comparing higher recovery, high Capex (2010) Mt Thirsty plan with the lower recovery, lower capex (2013 - current ) plan. 2010 plan top, current low capex plan below.
1
2	Assumptions:
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4	1: Assume the JV will continue to pursue the 900,000 tpa 'low capex plan' (estimated at costing $65-$70 mil), the idea being to get the low hanging fruit as quickly as possible, i.e build a low cost mine quickly to maximises extraction of shallow lying cobalt while cobalt's value is extremely high. However, gut feel - they will go for a bigger mine 2Mtpa?
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6	2: Assume the capex figures used below cover the processing of cobalt, nickel and manganese to a saleable commodity.
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8
9		Cobalt tonnes p/a	Manganese tonnes p/a	Nickel tonnes p/a
10	2010 study - 2Mtpa mine - US$700Mil, AU$883Mil
11	Yields predicted in 2010 study:	4000	13000	9000		HIGH CAPEX
12	Approx current price /tonne	$73,500.00	$2,750.00	$13,500.00		Total revenue per year
13	Net value of yearly production	$294,000,000.00	$35,750,000.00	$121,500,000.00		$451,250,000.00
14	Opex expressed as per pound Nickel	$3.15		Total opex p/a:		$62,500,977.00
15	Opex per kg Nickel	$6.94		Gross profit p/a:		$388,749,023.00
16	Opex per tonne of nickel	$6,944.55		CAPEX		$883,000,000
17						12 x more than low capex plan.
18
19	Proportion of metal exctracted from ore in 2010 study	96%	98%	85%
20	So total amount of metal in unprocessed ore - we work this out so we can use the metal % for the low capex model. Note: The first three years hold proportionatly more metal.	4,166.67	13265.30612	10588.23529
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24	Low capex mine throughput compared to high capex:	45%
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26
27	2013 Study (Low capex) 900,000 tpa mine (AU $65-$70Mil)
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29	Amount of metal in ore	1,875.00	5969.39	4764.705882
30	% of metal extractable in current low CAPEX scenario	80.72%	86.64%	26.59%
31	So amount of metal recoverable each year in first three years	1,513.50	5,171.88	1,266.94		LOW CAPEX
32	Approx current price /tonne	$73,500.00	$2,750.00	$13,500.00		Total revenue per year
33	Net value of yearly production	$111,242,250.00	$14,222,663.27	$17,103,626.47		$142,568,539.74
34
35	Opex expressed per pound cobalt	$5.50		Total opex p/a:		$18,351,808.04
36	Opex per kg cobat	$12.13		Gross profit p/a:		$124,216,731.70
37	Opex per tonne of cobalt	$12,125.41		CAPEX		$70,000,000
38			Gross profit if ONLY cobalt was sold:			$92,890,441.97
39	Notes:		Gross profit if ONLY N and Mn were sold:		$12,974,481.70
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41	1: These figures are based upon average quantities of metals recovered over the first three years of production in the 2Mtpa plan.
42	2: The Mt Thirsty orebody continues into the next-door tenement owned by Mark Creasy investment vehicle Platx. Platx's portion is approx half the size of the Mt Thirsty JV's side. It is known that the JV and Platx are in discussions, and recent site photographs suggest that Platx is undertaking extensive drilling. If the two combine resources, the total resource would grow by 50% to approx 60,000 tonnes contained cobat metal plus additional nickel and manganese metal in (assumed) similar proportions to the JV side. Increasing the resource size would reduce Capex and opex / tonne. A new larger JV with more borrowing power would potentially opt for a larger mine plan - 2Mtpa?
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44	3: The JV also owns a geologically similar resource 3km from Mt Thirsty - currently being further drilled and assessed. They recently announced that this has the potential to add to the Mt Thirsty JORC - but we have no idea how much yet.
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46	4: It seems as though some minor extra processing (beyond what is covered in the low capex estimate) may be required to produce nickel and manganese as saleable comodities - all depends on what chemical format buyers want the product in.
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48	References:
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50	Asx release on the current low capex plan:	http://www.asx.com.au/asxpdf/20170808/pdf/43l7hcffsmxvvd.pdf	[/url]
51	Information memorandum on the Low capex plan:	/wp-content/uploads/2016/06/Mt-Thirsty-Project-IM-FINAL.pdf
52	Presentation on the High capex plan:	http://www.mtthirstycobalt.com	[/url]
53	Link to discussion of low capex cost.	http://www.barraresources.com.au/projects/mt-thirsty/	[/url]
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55	Capex and Opex for low capex plan (from Barra resources website):
56	…two 900,000 tonnes per annum conceptual flowsheets are currently under investigation….Early studies indicate both flowsheet options have similar capital requirements of approximately $65-70 million (including 30% contingencies on plant and equipment and $20 million for site infrastructure). Unit operating costs were estimated at $5.50/pound of cobalt for the RIP option and $5.55/pound of cobalt for the Thickener option.
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