Hi All
New to this stock - bought in the other day around 3c. Not new to copper or investing.
I'm not going to speculate about price valuations from here because its VERY early days still. I thought I would just try to provide some unbiased opinions about the process from here, the timelines, process, opportunities, etc. I actually used to be a prolific poster but there comes a time when i realised that my posts were perhaps being used as investment advice and my timeframes were not the same as everyone else. My timeframe is quite long, 3-10 years.
For context ...
I was lead electrical/control engineer for Argyle Diamonds underground development
I was lead electrical / controls engineer for Sirius minerals which failed for many reasons due to management, over-selling, under-delivering, poor engineering processes, poor understanding of rates, shipping, contracts etc.
I was lead commissioning engineer and commissioning manager on 2 large copper concentrators in Kazakhstan. They cost about $3B USD each initially and that was 0.2 to 0.3% grade.
I was lead commissioning engineer and HV Electrical supt with Fluor in Mongolia including Oyu Tolgoi and then moved to Beijing as part of the upgrade team as Lead Eng / Eng manager before Royalty arguments stalled that project and issues with mine plan etc.
I worked with Amec Foster Wheeler on the process plant upgrade for Oyu Tolgoi as lead engineer working with some of the best process engineers specialising in crushing, grinding and flotation. I was involved with Oxiana, but only on the infrastructure side, before it became oz minerals when it merged with Zinifex. More recently i was involved with FMG in engineering before leaving to join a mega project in Saudi where I presently reside.
So I know mining, power, infrastructure, process, design, construction, commissioning and operations. I'm NOT a geologist and this is the magical phase of the geologist.
At this point I thought I would attach a nice little graph of the Oyu Tolgoi / Turquoise hill Valuation. For those that don't know, Turquoise Hill found the Oyu Tolgoi copper gold deposit in 2001. I was commissioning that electrical system and concentrator in 2011. Thats how long it can take to get a large complicated mine into production - 10 years.
So around 2001, TRQ wasn't worth much, probably until about 2003. Within say 5 years it was valued around 1-2B (USD). It had ups and downs - there was no straight line to that beautiful near $20B valuation peak as the process plant was finalizing its commissioning. Once it was commissioned, there were significant other issues such as Royalty arguments with the Mongolian government, batch plant issues, issues with crushing and grinding, mine plan, cost over-runs etc.
This brings 1st point home very quickly. Firstly, there should be time between now and the first really significant re-rate (if and when it does occur). And maybe / probably 3-5 years before the large multi-bagger everyone invested wants to see, but IF WCN does go on a wild ride, today will always be a great entry point if you don't mind tying up your money for a few years, and it does go on a wild ride, even buying more in a year should still be great value. Thats the point - its probably still 1-3 years away from starting that wild ride, but with those already good drill results i don't see WCN going backwards or down based on results we've seen. There will be just too much hype on this one I feel. Buying when things are certain does however limit the downside. ok - with that said, i'm more on the risk taker side.
Also uUnderstand and know what is your time frame? Then filter out all the rubbish from traders with different time frames. So if you time frame is 2-4 weeks, then i think lots of up/down opportunity and noise. If your time frame is 1-3 years, then will likely see up/down noise that doesn't mean anything and just ignore. I'm terrible at the short-term stuff and I don't play or talk that game.
My gut feel is easily another as least 1, maybe 2 years of drilling and analysis of results before anything really definitive. In the graph above, that's the first peak. Each announcement from here detailing grade and depth and location will be cause to either sell the partner and kids (but not the dog) and buy more or a caution to hold and wait for the next step or exit.
What I do know today is the grade so far appears bonanza grade from a few holes on first principles is pretty hard to fluke. Its not a JORC resource yet and mine plan not even started yet. The drill holes were likely targeted and that means they picked the best spots first - gut feel is to perhaps support decent CR which makes perfect sense. You need money to keep this going but that's a good thing because WCN should get it. It means to me that I should keep buying too. Even if other holes only returned 0.2 to 0.3% and it was wide/long, this will likely still be an amazing project. Today is a good day though!
Next is the mine plan. If the deposit is shallow and wide, then likely it supports open cut mining which is nearly impossible to stuff up. Dig from the top and truck it out. Even Iron Ore miners can do that! Thats what I'd like to see. Even on low grade this is easy and profitable.
For context one of the deepest open cut mines in Australia is Fimiston Gold Mine measuring 3.5km in length, 1.5km in width and 360m in depth. Thats the Kalgoorlie superpit and I think the largest gold deposit of all time. Its been going a very very long time. But its a wide and deep resource so that makes sense.
However, if the ore body is relatively deep, like at Oyu Tolgoi (1200m), it might make more sense to go underground and use a block cave operation. This is where it gets complicated, costly and development time draws out. This is not a simple process and Rio and others often don't get it right and when they stuff it up, mines fail or their value seriously decreases as major parts of the orebody become un-extractable. We are 10 years+ away from that stage should it even occur!
Underground mining operations are complex and expensive and take a long time to get it right. At first glance, we can only stipulate that grade appears from the surface going deep and open from a few drill holes, so if next holes test width and length and find something, that IMO might be payday. That's a huge positive and would likely mean an open cut mine, at least to start. If its narrow in width but continues at depth, that's an indicator to me to watch very closely and perhaps take profits on spikes - that time is perhaps 1-3 years away but in all fairness, I have no idea, just my own gameplan on how to watch this one. I think most investors won't care about mine plans as perhaps don't understand the problems with undergrounds, geology, shafts, ventilation, costs, hazards, tunnels, cave-ins etc.
Next is the engineering phase - this usually takes about 2 years give or take. If open pit, then its just a process plant. Primary / secondary crushing, grinding, regrind, flotation, thickener, concentrate, tailings. Where this sometimes falls over is the geology and the process. Getting the crushing / grinding correct requires samples of the all the different types of ore in the area - test for hardness, grade etc. I don't see it as a problem, but you want experts doing it, and you want LOTS of samples tested individually, not lumped together. Plants are tuned to a certain hardness of rock and its a science. Just FYI but may influence the plant complexity and cost.
If its an underground, you need expensive shafts, ventilation, very sophisticate mine plans etc. That is complex and well outside my sphere of competence, but also a VERY big if. Lets hope its wide and long (and deep).
Next is power, water.
Copper at this grade is EASY to process. The lower the grade, the more energy you need to crush and grind which takes HUGE energy - projects i was on used north of 200MW up to 450MW of power. For context, that's about $400M in power bills per year. I don't see power being an issue at this grade, and in Canada, I'm guessing water ain't an issue either. So wouldn't expect many problems on this side that aren't easily navigatable.
With high grade, i would expect power costs to be substantially lower. Thats a HUGE positive. But mining is done on average grades so lets see where this lands. Not a deal breaker by any means. Just exciting if it was super high grade the whole area.
After that is construction and commissioning which can take up to 2 years or more depending on the complexity and size of the plant.
So gut feel is that we have perhaps at least 4-6 years before seeing any concentrate at the back end and unlike other metals which have short life cycles due to boom bust over-supply / under demand like lithium or nickel, copper is here for good, hence no need to rush and get it wrong. Turquoise hill took 10 years remember from first drill to concentrate!
Next and as stated by others - Any grade higher than 1% Cu is sensational. I only did a few hours due diligence based on this one simple fact before buying in myself (not a huge amount to start, but enough to keep me interested). I'll wait for another few months before I look to sell the wife and kids...lol
BUT ... remember anything above 0.2% on open cut should be profitable.
Lastly and for some context, the present demand for Copper is very good and price trending between USD $4 and $5 per pound. Electrification of the world will continue to support demand and any project that has potential. Historically, copper price trended between $2 and $3, but has jumped with everyone on the solar panel green dream band wagon. This is a big positive and those projects i was on were based on long term price of around $2 with those crappy grades.
Also, Australia is a mining exchange and lots of hype goes into the latest trends - whether it be Lithium, Nickel (which were always going to be oversupply / under-demand). Copper isn't one of those minerals. its a critical metal that we cant do without. You can substitute some applications with Aluminium, but its problematic.
Point being - if you are a holder, IMO you've done well and see where this goes but if you aren't, there is not necessarily a hurry as drilling to first concentrate has years to play out, but assuming the results aren't a fluke, then today will always be a good day to buy.
Anyway, GLTAH and watch this space i guess!
(20min delay)