RE: Dahlman Rose Forecast From an interview with AJ Ali:
What makes Avanti really interesting is the economics of the project. As a former producing mine, the Kitsault project enjoys an existing infrastructure that reduces the capital cost needed to develop the mine. “We are big and we are low cost,” says AJ Ali, Chief Financial Officer. “Our total operating costs are only $5.50/lb. In the four years prior to the recession moly averaged about $30/lb. As Steve Smith, managing director of Mining and Metals at West LB, our lead financial advisor, said, being a low-cost if not the lowest-cost producer means we are virtually invulnerable to market crashes.”
He compared Avanti to another moly producer. “Thompson Creek produces the equivalent to our 30 million planned output; however our costs will be about $1.20 less per pound — a savings of $36 million.”
Moreover, the final feasibility study for the property has increased the project’s net present value (NPV) from the pre-feasibility study by 44%. The results of the final study announced on December 20, 2010 reported an after-tax NPV, at an 8% discount rate, of US$794 million and an IRR of nearly 27%, assuming a base case average molybdenum price of $16.76/lb. Initial capital costs were estimated at US$795 million, with an expected payback period of 2.6 years.
The projected price for moly is a good thing for this mine. This mine will be highly profitable at $16/lb moly prices. This will not be the case for some of the other projects in the works as they are simply not on par with Avanti. As I stated in a previous posting, once these few viable projects come on line between 2013-2015 there is no other big deposits out there. None. With demand for moly projected to grow annually at 5% (approximately 25 million pounds of production) moly prices will head up after this time frame. It has been stated that if moly prices would return to $30/lb for just 11 months the entire capital cost of this project would be paid in full.
I am continuing to accumulate shares from the weak hands.
C