Hi mate,
So just to clear up on those figures 105kt is to total tonnage of that high grade area. The LREO typically mean light rare earth oxides. There are 4 lathanides considered "light" La, Ce, Nd, Pr. So the way i read this is that in you're high grade area, if you only consider those 4 elements you have 9% grading. As in 8.9% of every tonne of that 105kT contains LREO. = 9340T of LREO. There are actually a bunch of other elements (HREO) "heavy" there as well but in smaller quantities. Most companies would simply present tonnage and grade as TREO. All the lathanides. In this instance i think VML wanted to show it had very high LREO content which contains 2 high value elements NdPr.
This makes sense, if you consider the JORC grade total ppm is 15000 = 1.5% and the LREO content (La, Ce, Pr, Nd) is 10000ppm = 1%. The Ce is 5000ppm. So this is where the comment comes from that "almost 50%" of the product is Ce. As half of the LREO is Ce. Or 1/3rd of the TREO.
Okay so that's the rough cut explanation on grade. Now for my own sanity just wanted to lay out the steps of the process.
1) mined from pit (VML)
2) ore sorter/extraction plant (VML)
3 Separator (REEtec)
At stage 1 you're grade from North T is 8.9% LREO. This makes it hard to estimate the TREO, but if we view the below table. Now to have it make sense again we need to add back in the Ce whereby its 50% by distribution. So that makes it a fair bit easier as it would becomes 50% in the table and all the other % would halve.
For now ignore the dollar value shown, but note i've made Ce 50% of the raw basket and halved all other elements. I've then ensured the LREO content is around 8.9% = 8900ppm. IMV this means your TREO content is around 9300 or 9.3%.
View attachment 2952290So step 1 we are mining a 9.3% grade resource with 105000T total resource. which means total contained tonnes is 9765 TREO. Of which ~9300 LREO. (La, Ce, Nd, Pr).
Now we move to step 2; this is where we grab this 9.3% stuff and turn it into 40% mixed rare earth carbonate. Obviously this is 4 times as concentrated so to make 1 tonne of stuff at 40% i'll need 4 times of those mined tonnes. So the equation is 40/9.3 = 4.3 take into account the 95% recovery it moves to around 4.5. This means VML needs to throw 4.5T of its dirt (at 9.3% TREO content) into the front end of the process circuit and as a result you will get 1T of MREC (at 40% TREO content). Note i'm not omitting Ce yet, i will do this at the end.
***Pause***
If you were like other rare earth plays this is where all my previous working finished. If you were just selling a 40% MREC the value in my table above is roughly what it would receive. As
@Scarpa rightfully points out. Revenue is one side of the equation. The other is opex. High grade deposits need less mined tonnes to produce 1t of concentrate. For e.g. PM8's revenue on product was almost half this. but its AISC is just over $1.3.
Anyways, this gives some insight if VML wanted to sell their product direct to someone. For now it's not the case so ignore the figure for now.
Okay step 3.
So VML sends its 40% MREC to REEtec. Now REEtec also needs to take it from 40% to near 100%. Again 100/40 = 2.5. Therefore REEtec need 2.5T of VML's 40% concentrate to produce 1T of pure TREO.
Now breaking that down refer to the % in the blue/orange column in my table.
each tonne REE will produce will contain the following quantities in kg
| Column 1 | Column 2 |
|---|
| 1 | La | 237 |
|---|
| 2 | Ce | 500 |
|---|
| 3 | Pr | 52 |
|---|
| 4 | Nd | 171 |
|---|
| 5 | Sm | 18 |
|---|
| 6 | Eu | 2 |
|---|
| 7 | Gd | 8 |
|---|
| 8 | Tb | 1 |
|---|
| 9 | Dy | 2.5 |
|---|
| 10 | Ho | |
|---|
| 11 | Er | |
|---|
| 12 | Tm | |
|---|
| 13 | Yb | |
|---|
| 14 | Lu | |
|---|
| 15 | Y | 7 |
|---|
now essentially you're offtake is for 2000T i.e. 2,000 of the above.
| Column 1 | Column 2 | Column 3 | Column 4 | Column 5 | Column 6 | Column 7 |
|---|
| 1 | | In kilos | annual kg | in tonnes | | Price/t | Total received |
|---|
| 2 | La | 237 | 474000 | 474 | 1000 | 1354 | $ 641,796.00 |
|---|
| 3 | Ce | 500 | 1000000 | 1000 | 1000 | 1431 | $ 1,431,000.00 |
|---|
| 4 | Pr | 52 | 104000 | 104 | 1000 | 70417 | $ 7,323,368.00 |
|---|
| 5 | Nd | 171 | 342000 | 342 | 1000 | 100200 | $ 34,268,400.00 |
|---|
| 6 | Sm | 18 | 36000 | 36 | 1000 | 1780 | $ 64,080.00 |
|---|
| 7 | Eu | 2 | 4000 | 4 | 1000 | 30180 | $ 120,720.00 |
|---|
| 8 | Gd | 8 | 16000 | 16 | 1000 | 33815 | $ 541,040.00 |
|---|
| 9 | Tb | 1 | 2000 | 2 | 1000 | 1408000 | $ 2,816,000.00 |
|---|
| 10 | Dy | 2.5 | 5000 | 5 | 1000 | 402000 | $ 2,010,000.00 |
|---|
| 11 | Ho | | | | 1000 | 143155 | $ - |
|---|
| 12 | Er | | | | 1000 | 28200 | $ - |
|---|
| 13 | Tm | | | | 1000 | 1250000 | $ - |
|---|
| 14 | Yb | | | | 1000 | 150000 | $ - |
|---|
| 15 | Lu | | | | 1000 | 1500000 | $ - |
|---|
| 16 | Y | 7 | 14000 | 14 | 1000 | 6345 | $ 88,830.00 |
|---|
| 17 | | | | | | | $ 49,305,234.00 |
|---|
So this price is a little higher at i've considered the Ce in here. So can remove that value.
Also pricing of raw product may have increased since the VML table.
Essentially this is the annualised revenue for both VML/REE for 2000TREO or 1000T (ex-cerium).
Now; we know 2.5t of 40% MREC produces 1t of pure TREO and 4.5T is required to make 1T of the 40%. Therefore ~11.25T of raw mined material is required to make 1T pure TREO.
Which we could have loosely worked out by simply doing 100/(9.3 x recovery loss) - 9.3 being your raw feed grade). But i wanted to show how it worked out when you step through the production profile from MREC to Pure rare earth oxides.
Now if you take your 105000T of the North T resource divide it by 11.25 = 9333T.
Essentially if you mine the north t resource in full you can produce 9332T of pure REO
Given 2000T is worth 49m USD. then i estimate you have 4.6Y of production in that deposit at that rate. For total revenue of around 230M USD.
This is plenty of time as i imagine they will shift to stage 2 whereby they open up your large resource at the 1.5% grade. You can then run through the same working i have done but simply change the resource inputs.
Finally in terms of revenue, as i suggested yesterday your annualised revenue is ~45-50M. But minus out whatever VML AISC is and whatever REEtec AISC cost is. Now the figures i presented about what an MREC is worth becomes helpful as this is what a separator would buy it for. In this case $5/kg.
Why is this relevant you ask? well a separator would buy it for that price and sell it for 45-50/kg(the average price for 1kg of the elemental base). Nice profits for them right.
One would then assume that it must be relatively cost intensive process. In this instance i really haven't done enough research to work that out or know what it would be. But i think looking at rainbow rare earth whom emplore a similar strategy to VML you can get a rough AISC. They are close to breaking even. Meaning their AISC thumbsuck is somewhere around the $5. Reetec's AISC at a pure guess i would imagine be somewhere between $5-$15. Meaning of that 50M USD p/a I reckon at least half will be profits and then split across both parties. maybe 30M or so USD split.
Again, if you then ramp up to 10000tpa it goes up to 150M USD or so profit p/a.
Trusting this has provided some clarity, and appreciate everyone's patience here. I'll retreat back out from posting as i can appreciate not everyone wants to read the monologues. As also suggested this share profit arrangement is absolutely imperative to success as it's where the profit is made so very good work there. Additionally as scarpa touched on revenue is one side of the equation the other is AISC. Lower grade resources typically have a higher AISC because it requie more mined T to produce 1T concentrate. Obviously this is something VML will shift to when it moves to it 1.5% resource.
Also to be clear
@Scarpa i was never inferring that one would or would not be profitable for a given revenue of product. I was more inferring that a lot of companies have used pricing mechanism in their DFS/BFS which i've not been able to replicate. Lyc and PM8 being the exception. The reason being is many used pricing based on forward forecasts not at spot price. So although the spot price has risen a large amount it is only now coming back in line to what companies inputted into their studies. to repeat and i do agree, it's only one side of the equation AISC is the other. VML is fortunate that it AISC doesn't matter much as if it's higher it simply means the shared profit is less, but doesn't mean they will not make money. Its really a very good arrangement for VML.
I would say based on the info i have at hand that VML would be one of best hard-rock propositions - solely due to the offtake agreement. I personally will want to wait until a formalised study is completed for the stage 2 program though so that these aisc and revenues can be proven as if we look at lynas mining 8-9% is marginal at today's pricing. With technology improvements maybe lower grades become economical. PM8 found a way afterall.
Secondly if VML continue with a shared profit arrangement with REEtec then regardless of what grade it mines IMO it will always make profit. This is because the offtake arrangement suggests it will pay whatever the AISC is, for that reason VML is a good investment in the longer term. The market cap here will ultimately be reflective of the margin and TPA. I think currently it's only being priced on that 2000TPA which imo assuming split profits of 15-30M USD means VML could receive up to 10-20m AUD. Use a PE ratio 10/20 and hey 100m-400m NPV becomes relevant. theres always premium placed on rare earth stocks and obviously VML's growth prospects. For that reason I genuinely see VML successful long term. Current S/P is fair and if you read the post of the rare earth i hold i've also stated current price is fair. (i copped a lot of heat on the stock i hold for saying so, but it is my belief). So i don't believe my stock, VML or many rare earths are just going to go up 5 times tomorrow - but i do believe that VML has that opportunity in time.
Again, thanks for everyone's patience hopefully this hasn't confused people more but should explain how i works from start to finish and explain the difference between profits when you sell direct to a separator vs getting in bed with one. The latter definitely being the better deal.
Always good to rely on company information as i've been told 100 times before, sometimes though it doesn't exist in it's entirety and i like to try and get the jump on figures where they don't exist or interpret them for my own understanding. If i waited for a scoping study on the stock i hold i'd still be waiting. Because i took available information worked a little out for myself i made 10 x return. The same is true here at VML if you do the due diligence not only can you get insights that the market won't you have also de-risked any investment by intrinsically understanding the mechanics - it also helps me to hold with conviction. Think everyone will do well here (which includes close friends and colleagues) and yes company announcements are the best data to work from, my post on HC are simply my brain dump of interpretation.
SF2TH
but this is one thing that has been itching at me for quite some time and no doubt a few of us on this Sub even before this post.
(20min delay)