Ferguson Lake vs. Voisey''s Bay - FundamentalsThere is a lot of TA provided on his board that appears quite accurate and helpful by the likes of Zeta and others. They should be commended for their unbiased assessments. However, this mainly gives short term direction for the stock and investors remain uncertain of longer term prospects. The latter would be more influenced by an assessment of the fundamentals – which the board seems to lack somewhat.
So lets looks at the fundamentals by comparing it to another remote but quite recent proven successful nickel mining operation we know as Voisey’s Bay.
Resource Characteristics:
Deposit 43-101 Report* Reserve %Ni %Cu %Co
Ferguson Lake 2007 15.2 Mt 0.71 1.04 0.14
Voisey’s Bay 2004 34 Mt 2.82 1.54 0.08
* - Voisey’s Bay reported resource is “Proven & Probable”
Ferguson Lake reported resource is “Indicated”
Also: Voisey’s Bay has another 50 Mt “Indicated” @ 1.64%Ni, 0.78%Cu, 0.10%Co
Ferguson Lake has another 48.3 Mt “Inferred” @ 0.68%Ni, 1.06%Cu, ~0.08%Co
We note the significantly higher grade Ni in the Voisey deposit – namely 4 times greater;
However, consider the nickel prices of:
Year: 2004 2007 2008 2009 2010
Ni $/lb.: $6.00 $15.00 $15.00* $11.00* $8.00*
* - Credit Swiss projected Ni prices.
JP Morgan uses lower projections of: 2008: $12.48, 2009: $8.51, 2010: $6.45
Long term Ni price estimated to be $3.15/lb. JP Morgan also predicts future Ni surplus’ including 24,000 tons in 2008 and 11,800 in 2009.
We note the significantly lower price of Nickel – namely 60% lower – when Inco decided that Voisey was a viable resource.
But if you considered today’s operational costs and the logistics associated with the deposit location, would you still consider the deposit profitable? The 43-101 gives the operational costs so let us just consider locational implications.
Locational Logistics:
Voisey’s Bay is 12 km from an ocean port. Ferguson Lake is 240 km from Ranklin Inlet. The Nunavut and Manitoba governments are considering building a road from northern Manitoba to Ranklin. Will this take place, and if so, when? Starfield will still then be required to build the 240 km road to Ferguson Lake. Voisey’s 12 km road required a full environment assessment. The Ferguson Lake will likely also require an EA. How long will that take and how much will that cost? Will there be native opposition?
Whether transporting by road, rail, or ship, Ferguson Lake distances are substantially greater than Voisey’s Bay. Considering oil will likely be $100 - $150 per barrel by the time of proposed mine construction in 2010 and then likely operation in 2012, how much will this impact the economics of the operation?
We note the potential additional economic implications of the remoteness of Ferguson Lake relative to Voisey’s Bay.
Questions for Long Term Investors:
1)Inco was involved in drilling both Ferguson Lake and Voisey’s Bay. They decided to turn Voisey’s Bay into a mine but walked away from Ferguson Lake – why?
2)The Ferguson Lake deposit is very large but are the grades of metals high enough for profitable extraction?
3)By the time of operation of a proposed mine, likely in 2012, will Ni and Cu prices be high enough to offset continuously increasing operational costs?
4)Is Ferguson Lake likely to show a significant PGM deposit, in the future, that would help offset operational costs?
Greg