@rainbowdaisy I am bringing your post from the FFX thread here - Post #:
50233487 - as I am also for
@Roller62 from the AVZ thread - Post #:
50226358The technical study from Ivanhoe raises questions IMO but after reflecting for the last day since they were raised on the FFX thread, I have come to the view/opinion that it remains unclear in the Ivanhoe documents exactly what cost they are actually attributing to the Lobito route, in terms of of its specifications and mix of road/rail. But it is clear the costs differ to AVZ's costs and therefore I suspect AVZ in time is going to have to deal with this emerging speculation around cost reliability however informed or misinformed it is using Ivanhoe. Transport has always been AVZ issue to market, so it is an issue which needs some form of clarification, albeit I would suspect Ivanhoe is utilising the Durban route for a short period before switching to Lobito hasn't IMO fully examined those costings as there is to much unknowns in what has been stipulated - see further below.
https://www.ivanhoemines.com/site/assets/files/5095/kamoa-kakula-idp-october2020.pdf
Section 18.1.9 of the above is a key in the Ivanhoe document as saying part of the railway route to Lobito still needs fixing, i.e. on the DRC side, which will be interesting what that timeline is, with the report saying a switch to that route will occur, when available. They are still leaving the Salaam option open as well. And they suggest solid cost reductions once Liboto option opens up, I presume fully opens up.
In terms of 24.2.1.1 they then model the Durban route and some form of Liboto route, which when you relate it back to 18.1.9, appears to be a road haul option to Ndola (Zambia) followed by rail to Durban initially, followed by some form of rail/road option (?) to Liboto, when referencing back to 18.1.9, given their concerns with part of the current rail route in DRC to Lobito.. Cost differences are not significant, in both options so it is not clear how they came to the Lobito number and what they actually were modelling given their actual view that Lobito provides better cost savings than the Durban option in the past from recollection as derived from the pat corporate presentations, i.e. one below to, and too me they
may be modelling something different to what the 'ideal route configuration is by the looks of it, given they state the Lobito route still needs work.
It is also clear that the difference in cost is very strange given the Liboto route (and Salaam route) is a lot shorter than the Durban route, so again this provides more questions than answers as to what Ivanhoe were modelling and where the price came from noting Rainbow's comment in the embedded post above. It would also seem too me, part of the reason for the short term two year Durban route is also based on sourcing inputs into the mine, so appears they were not confident they would get them in a timely manner either from port to minesite using Lobito from day one - last sentence of Section 5.1.3 a key to the choice as well.
The other key is the following comment on page 451 of 627, which seems to reinforce in my mind that the Lobito cost estimate in the Ivanhoe study is quite indicative in itself, given again the statement that the Lobito route offers cost savings but the cost estimate does rely on teh below been done, which you can tell from the document has yet to be done, so reliability of the estimate itself is in question (i.e. note I have some comments on AVZ too in terms of Lobito btw below):
Section 1.16.3 is also interesting in that it would appear under the Lobito option they are looking at quite a long road haul option to the border of Angola, so the key becomes cost reductions if the railway is available closer to minesite in those estimates. Section 1.17.3 talks about the longer DRC haul been rail from Kulwezi to Diloto - link shows where these points are with Kulwezi essentially in the copper district etc:
https://www.nationsonline.org/oneworld/map/dr_congo_map2.htmIt is not clear what they are actually modelling under the Libito option and how it was costsed, which probably is why I linked @rainbowdaisy post here. Why do I say this, well returning back to 18.1.9 they state this, so suspect they are using the longer road then rail option to Lobito:
So rail capacity will be there, when that link is built, but in the interim rail capacity is lower, how lower who knows and this then asks the question can AVZ's product transform that line. How lower the trasport cost also a key. AVZ says it can do a lower cost, noting AVZ's cost estimates I think are net of credits from recollection, so that needs to be taken on good faith at this stage, noting it would appear too me in totality Ivanhoe through its various copper operations will have greater quantities, with quantities essentially detailed in the technical study.
A DFS must be + or - 10%, so if you got these uncertainties you need to model what is realistically available to you at production, which then means when is Ivanhoe's production date - the answer is mid this year, AVZ's a few years later, but it does IMO means further explanation by AVZ as to why they believe their estimates are good and what were they assuming for the route itself (as is or upgraded noting my DFS comment above + or -?). Obviously it seems too me Ivanhoe haven't indephtly looked at the Lobito option given the above, but will be interesting what is actually there view. It is the way it is for Ivanhoe. Also if part of the concern is inbound logistics, as per AVZ's DFS would appear AVZ is sourcing a number of inputs locally so not relying on timely delivery of inputs to the production process from port to mine, but this is an assumption of what I read in the DFS and others may want to clarify.
Now, if we go to the Ivanhoe wish list it is clear from these presentations their choice overtime will be the Angolan route btw, and rail, so they clearly see cost benefits here when fully available and I suppose fully reliable. Slides 26- 29 below:
https://www.ivanhoemines.com/site/assets/files/4465/ivn_corporate_presentation_august_2019.pdfRelevance to AVZI would be more interested in AVZ's response around their confidence in the route been available to them at production time and reliability of costs, as well as what were their assumptions on the makeup of that rail route in the DFS (as is or upgraded) and how they calculated the costs, given differences. At the end of the daya DFS has to be plus or minus 10% so they seem confident in their rail costs, so the key is really understanding the Ivanhoe study as to why costs can differ. It seems too me that Ivanhoe hasn't fully evaluated the Lobito route as they don't see it as been available when they come into production short term, but do see benefits in using that route btw, so will be interesting what they really think on cost, as the number for Lobito is very strange when compared to the Durban route given it is much shorter, and to repeat it is not clear exactly what they are modelling and where that price has come from given comments around needing to negotiate a price still - refer back to 18.1.9 - as appears to me they haven't been able to start that process and then the reason becomes why and why has AVZ been able to cost the route and how?
Transport arguments I think won't go away anytime soon, so I guess time will tell how reliable the estimates are, but there is a discrepancy between the AVZ estimates and Ivanhoe so posted in good faith by me and my views on the discrepancy so would be good if AVZ does deal with such a discrepancy given who Ivanhoe is. The Ivanhoe study has therefore tweaked my interests in this area, albeit it does seem too me AVZ has spent effort in costing Salaam and Lobito. Time will tell how and when Ivanhoe switch to Lobito and the cost savings thereof.
Finally I post both positives and negatives as people know. Obviously the Ivanhoe study is been used as a 'negative' by some in questioning AVZ's costings. The only people who can put this to bed is AVZ.
As @roller62 post above shows and going back to the AVZ DFS it would appear a lot of work - mainly through Infraology consultants with pricing derived by quotes as per table 1.4 of the AVZ DFS from the transport operators in DRC - did go into costing the AVZ options (Table 6 of the AVZ DFS which roller has cut and pasted into his embedded post). The question is will the quotes align to 'contractual specifications' noting on page 11 of Section 1 of the AVZ DFS this comment:
Out of interest,I found this link interesting, especially the map in it of the rail route:
https://www.irtsociety.com/journey/dar-es-salaam-lobito/
All IMO IMO IMO and VB downed.
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