RE:RE:Kakula 2016 PEAOne must be careful because this is a 100% project basis NPV, so 40% of this is to Zijin and 20% to the DRC. 40% of 4.7 is USD 1.88 billion, which is about equal to the USD enterprise value of 782M x .76 x 4.17 - 400M. So from the point of view of the PEA, Kipushi and Platreef are free. However, it's much better than that, for the following reasons:
1. There is no way they will do 8Mtpa. Not with the size and grade of Kakula alone, plus all that high-grade at Kansoko Sud. More likely 12, 16 or 20Mtpa. So double the NPV right away.
2. Ongoing optimisation, should improve capital and operating costs. Sometimes numbers get worse, but with this company, everything gets better all the time. Why? Conservative assumptions by dozens of high-calibre people working around the clock on unparallelled ore bodies? The trend is your friend.
3. The 8% discount rate, per the chairman's comments, is far too high for the most profitable mine in the world. The margins are unassailable. Call it the Saudi Arabia of copper.
4. Look at all the question marks along the Kakula trend. Think there might be more copper there? Naaaaahhh.
5. Remember NPV is a moving target. We gain 8% just by getting a year older. (The chairman's way of explaining accretion of the discount.) So while NPV is theoretically fair value today, any future target would be higher.
6. Is USD 3/lb a fair long-term copper price? An open question for the board. The experts have a poor track record or predicting macro-economic factors, including commodity prices, but we can try. Ideally you want to have it both ways. You overwhelm competitors with production, but the market demand absorbs (or, better, overwhelms) your production. The fear is that this is so big that it crushes the copper market. (Which means you win on volume, but not on price.) But EM demand and requirements of technology may absorb all incremental capacity, and then some. Technological innovation such as bioleaching, advances in crushing methods, etc., will be passed along to customers, unless this technology is unevenly distributed. If anything, larger mines will have more access to technology. Economies of scale. (Another advantage to our oliphants.) But mainly, the aggregate demand/supply balance is what matters.
7. Probably other factors I forgot....