Since the DFS is coming soon (due mid year - i.e. I'm guessing late July-mid August), I think it's only appropriate if we revive the TMT forum with discussions about what to expect in the upcoming DFS.
Firstly let's refresh our memory on the PFS. Key metrics:
Targeted Annual Production Rate: 13,000 tpa V2O5
LOM: 13 years
Opex: US$4.27/lb V2O5
Capex: US$284M
V2O5 Price Assumption: US$13/lb
Pre/post-tax NPV (10% discount rate): A$1,277M / A$850M
Pre/post-tax IRR: 55% / 43%
Payback period: 3.4 years
I'm expecting that we'll see a number of nice improvements on the DFS, namely:
1) Steeper pit wall / reduction of strip ratio
Geotechnical drilling was conducted after the PFS, which confirmed the viability of steeper pit wall (hence, reducing strip ratio). This should bring some opex reduction.
2) Confirmation of high kiln recovery
Refer to the announcement on 19 Jun 2019 - https://hotcopper.com.au/threads/ann-pilot-plant-scale-kiln-testwork-confirms-high-v2o5-recovery.4817020/. Rates ranged from 84.9% to 90.7%during continuous feed, confirming the 85% solubility / recovery to beused in DFS. As far as I could tell, the PFS had been using a lower recovery rate assumption (see below). Therefore, this should bring some nice improvements to the opex as well.
3) Incorporation of base metal credits
I'm expecting a pretty decent reduction on the opex from the base metal credits. As per the announcement on 12 Dec 2018 (https://hotcopper.com.au/threads/ann-outstanding-**anintha-metallurgical-results.4573693/), there are some good concentrates of Co, Cu & Ni to be recovered.
Taking AVL's PFS as reference, the base metal credit brought US$0.15/lb reduction to their opex.
It is important to note that AVL only owns the rights for the cobalt on their tenement (the rights for the nickel and copper are owned by Bryah Resources), while TMT owns the rights for all - therefore, we can reasonably expect there will be even more credits / opex reduction compared to AVL.
The opex in the PFS was US$4.27/lb V2O5. With the various factors mentioned above, I'm very hopeful that the DFS will show an impressive sub-US$4 opex. Another potential "bonus" is the AUD-USD exchange rate. Current lower exchange rate (i.e. 0.70 vs 0.75 assumption used in PFS) will help to make the opex number look "better".
4) Resource upgrade
I'm noting ~34% increase (21.6Mt -> 28.9Mt @ 0.9%V2O5) of the total measured & indicated resource from the time of PFS to now. The resource estimate in PFS (21.6Mt @ 0.9%V2O5) translated to 16.7Mt @ 0.96% V2O5 ore reserve. I think it's reasonable to expect that similar proportion of increase (around 30%) to the DFS ore reserve estimate. This should give a pretty nice bump on the mine life, NPV and IRR.
Looking beyond the DFS, there are a few other exciting things:
1) Potential binding offtake
https://hotcopper.com.au/threads/ann-mou-with-subsidiary-of-china-nonferrous-metal-mining-group.4774795/
Even though it was "only" an MoU, I thought it looked more meaningful than other MoU's that we typically see. The MoU has a deadline of 1 Oct 2019, so binding offtake (if successfully negotiated) should come fairly soon.
2) Bridge St Capital
TMT recently engaged Bridge St Capital to organise funding for the development. I understand Bridge St also recently worked with Liontown Resources (LTR) and managed the CR, and we all know what happened to LTR share price over the last few months. I think it's important to have "professional" investors that will "support" & "defend" our share price, as opposed to selling into the rallies.
Interestingly they also seem to have prior connection with Glencore (see http://bridgestreetcapital.com.au/Transactions), which could be handy as Glencore's offtake with Largo will expire in 2020. -- Thanks @Therookie88 for pointing this out.
