SuperTim,Not sure what Ms Wang's move will be next. She's not on...

SuperTim,
Not sure what Ms Wang's move will be next. She's not on the board anymore, which is major.
Cheers Bleasby.


I wrote this up last night as it has been bugging me for months and it's not doing anyone any good if it just stays in my head. Apologies for the length, but it could not be avoided.


I have been following MGX/Koolan for quite some time now and it is why I have previously posted that MGX should be the PLV partner on a best fit basis. The synergies go way beyond underground mining. MGX has recently conducted a study into efficiency gains. They have a considerably underutilized ship loader and significant overburden issues. They need scale at reduced cost. I was disappointed at the results of MGX efficiency study released in Mid March. It seems they applied a very narrow definition of efficiency by spreading their 13:1 overburden removal task over a wider period. Smoothing the stripping profile is a good start, but what about the other options to increase efficiency and reduce costs? Surely they can think a bit wider than simply optimising the hole in the ground.

Any efficiency study conducted by MGX (or by PLV via a Definitive Feasibility Study) should examine efficiencies arising from the three islands acting jointly within a production hub. Bathurst Island may come into the mix at a later stage, having recently been sold to a Singapore based mob.

A major factor for both PLV and MGX is energy. Both would be willing to sign an off-take agreement with a company with power generation experience. There is LNG available not far away. LNG storage and power generation facilities can be located on one island, with electricity supplied to the other islands via undersea cable. In 2005 Koolan had a 2 MW power station. At a guess, all three islands would need around 10MW, depending upon what machinery is also electricity fed.

The truck and digger fleets can be run on LNG with significant savings. I presume the OHP on each island can also be LNG powered. Koolan has significant quantities of low grade ore that it is currently just shipping out to China. Economics suggests they can value add and blend if they have a suitable energy supply that makes it viable. So we are talking about quite a sizeable LNG demand across the three islands that is driven by electricity and machinery needs. It is also possible to transport LNG between the islands via pipe if need be. Alternatively, have separate storage facilities.

At its most basic level the decision by PLV to only go to a 40% pre-concentrate on Irvine was primarily energy related. Labour savings are in the mix, but less so given beneficiation is a capital intensive process. Environment is also in the mix, but is not the driver. Energy is. We are shipping ore, and unfortunately waste, to take advantage of cheaper Chinese energy. It is important to get your head around the Irvine PFS. Capex is not the primary project driver. Opex is far more important. I have posted about this before. Even small reductions in Opex are meaningful given the volumes involved.

LNG will be significantly cheaper than Diesel for both PLV and MGX. What are the drivers of such an approach? First, getting sufficient volume in the LNG off-take to justify the infrastructure outlay. Second, getting sufficient duration, so that the infrastructure cost can be recovered over many decades. Three islands can do this better together than apart since risk is reduced considerably. Remember, this is off-grid production which involves stranded production risk.

I quit providing energy related advice many years ago. Concerned that this old has been might not be up-to-date , I approached a mate for the latest costs and we had a long discussion involving some back of the envelope calculations. We jointly concluded it was a goer worthy of more examination. My mate, who provided the figures for the analysis, currently consults to mining companies on energy efficiency gains.

Other potential energy sources are tidal and solar (including solar storage). There is a mob in WA that have been pushing a dead-end tidal/dam approach that has been knocked back on environmental grounds. Perhaps they should look at LNG instead, build the infrastructure (storage/power plant) for the production hub and obtain a long term off-take from PLV and MGX. It is viable to stage the development of the infrastructure with the development of the resource via multiple storage/production expansions.

PLV and MGX have two choices. 1/ keep a distance and compete with each other. 2/ Combine their infrastructure and energy needs so it can be acquired at lower cost and be smoothed out through a joint island production approach. No one needs to acquire anyone for this to work. They just need to work together. Full marks on 1/ and zero progress on 2/ so far.

I expect initial replies to my waffle might be that a production hub has/is being assessed. Where are the ASX releases or quarterly reports stating such? MGX has just completed an efficiency study without any mention of a production hub approach. PLV plans are based on exporting a 40% product. The door doesnt look that open to other options being assessed by either party. If it is, then what is the harm of a joint PLV/MGX release stating they are working together on some ideas?

MGX should be taking the lead. Optimising a whole in the ground is not taking the lead. Here's a novel idea MGX - walk into the PLV offices and start a conversation about how you might work together to explore your joint underground ambitions. You might initially acquire some lower consulting costs and stumble upon energy efficiencies along the way.

Cheers
Bleasby