RE:RE:RE:RE:RE:RE:Mining Companies Urge Top Congo Lawmakers to Block New LawKatanga is not a fly-by-night operation, but an established company. They are not promotional at all, due to being in production and Glencore controlled and financed. Usually producers do not publish NI 43-101s to update their projects, particularly if there is no material change or a new project is not material to the firm.
300-400 page technical reports are pretty standard for the industry, but in my experience IVN's Ni 43-101s contain more detailed and higher-quality work; in particular, their PEAs are done at a PFS level, with the input of many consultants advising by speciality, and with fairly granular detail for engineering design and costing, well itemised. I have read some pretty shoddy PEAs, which are more like the old scoping studies, where they may be a couple of hundred pages long, but there are relatively few people involved, and there are many blank sections, while those which are filled have sketchy plan details, and a lot of plug numbers for costs, and many of the estimates seem unreasonable to me. You get the sense they pulled the numbers out of their hat rather than basing figures on quotes from contractors. One genarlly expects construction projects to go over time and over budget, but in their case it looks like assumptions are based on expert experience, thoughtful and reasonable, and that overruns will be marginally beyond contingencies.
About the increase in NPV: I knew it was coming because since 2013 PEA for Kamoa subsequent studies have increased detail to a PFS level and updated resources, but what was missing from the more recent studies was a the blister phase. In the original Kamoa PEA there was a Phase II with internally funded smelter, which brought NPV8 from 1B to 2.6B at $3 copper. You must realise that the scalability factor of these projects is what really drives the value. And in the last PEA, they brought back the smelter. Only now, with more resources, at a higher grade, the old starter mine has become back-year mill-feed, while we have a newer higher-grade starter mine, so the grade profile and overall orebody size have improved. This scale increase only makes the blister phase more valuable. This is a capital-intensive business of scale. The more scale, the better the capital investment can pay. So the company will potentially be breaking new ground with the country's first modern direct-to-blister flash copper smelter, eventually obviating significant transport costs to Zambia, and by the way contributing more the the DRC economy. Capital comes upfront, and production is many years down the line, and this is the essential challenge to profitability in thie industry. But in a world class project like this, cash flows just grow and grow for decades as the mine reamps up. So although later cash flows are discounted more heavily, modulo metal price changes, there is more cash flow in the later years!
As far a cobalt, high prices will incent exploration, but exploration does not translate into mining for anywere from 10-30 years, generally at least 15-20 for base metals. This is a long runway for producers. And what is found may be of a much lower grade, such as in nickel laterites, where cobalt runs 0.05-0.15%, versus 0.5% in Katanga. (For simplicity, here I am ignoring coproducts at both mines.) So even if the low-grade resources become production, their marginal costs will set the world price, and therefore their grades will be the cutoff grade in Katanga, with the excess margin as pure profit. There may be only 7 million in reserves, but the resources include those which are sub-economic today. And the reserves are controlled by a very few companies with practical production bottlenecks, as well as an incentive to constrain production. 7Mt may be 70 years' supply, but if global demand trebles as forecast, then it's only 20-25 years, which is low for most metals. I agree about thrifting. Engineers do tend to find substitutions and design reductions when properly motivated by a price spike to make significant cost savings.