Infrastructure and CAPEX..... I'll continue my thoughts on this subject by first correcting some grammar in my previous post...... :)
"Actually speedkills, I would like to continue my thoughts of all the positives aspects and developments of this great project later this weekend when I have more time.......you have inspired me to refresh the true excitement of this stock potential. I will be talking about things like a power plant, that once the cash flow pays for the capital expenditure of the plant, then you are only left with fuel costs to run it. And once cash flow pays for the cost of a port......well, then it's paid for! Then you just have your typical loading costs.....as does every other miner."
Sorry zedman, I'm not going to get into "power plant" specifics, for I don't have any. But what people need to realize is, the cost to build a power plant does not affect OPEX, only CAPEX. Once a power plant is built....it is built! Once it is paid for through cash flow.....it is paid for! Then the only concern......for the life of the mine.....is fuel and maintenance.
Liquid Natural Gas [LNG] appears to be the favorite choice these days for isolated mining operations around the world, and it is working quite well for them. You should also note, that more and more mining operations are also going with LNG haulding trucks and equipment. But with respect to OPEX, there is only a slight increase in Kilowatt costs over a mine that has local electrical supply. But they too, have a one time capital cost of bringing those lines and towers into their site. And none of this is much different than the one time CAPEX of building a rail line to transport their goods to sea. And in many cases, iron ore miners need to pay for the capital costs of building a "Spur Line" and "Loading Facility" at an available port, if there is indeed a shipping port with capacity to grant such service.
Yes, AXI/XXP will need to build a port and a loading facility, but once again, this will have no bearing on the OPEX.....except maintenance. And yes, depending on the design, it too will have a limit capacity, as too will the power plant. And if production is slated to expand, then obviously those new projects will pay for the possible expansion of the port and power plant.
But using AXI's base case production scenario of 5 million tons/annum......I am guessing that we will not see an IRR of less than 25%. Therefore, whatever the CAPEX turns out to be in the soon released FS, the power plant, port, loading facility will be paid off in four years. And I can't speak to the potential size of the power plant......but AXI has stated their intention of building a port and loading facility that can handle 10 million tons/annum. What that then does, is boost the economics of the next expansion of up to another 5 million tons/annum.....without further "port" capital costs. And I have to assume that AXI/XXP will be doing something similar with the power plant......building it large enough to handle future production increases, whether they may be at Roche Bay or at Tuktu.
The downside to this is, it throws off [slightly] the economics of the first phase numbers at the C zone. But that is the Chinese's decision to do so, since they are the bankers......if they are in fact are looking forward to increased iron ore production down the road. For AXI and we shareholders are in a unique situation......in that XXP is the Chinese State, and the Chinese State is XXP. And the Chinese State has over one hundred state owned steel mills. And if XXP cannot handle increased capacity at Roche Bay/Tuktu, then there are 99 others who are also told to seek out a more trustworthy, independent and invested supply of iron ore......to break the tight reins of the three giants, Vale, BHP and Rio Tinto. And just think, our little 5 or 10 million tons a year, doesn't even put a dent in what the "Big Three" currently supply. :)
With respect to size.....XXP might only be focusing on 5 or 10 million tons per year of iron ore, but in the large scheme of things, I'm sure the Chinese State is seeing what I am seeing, and that is a possible 3 billion tons of iron ore in Roche Bay and another 3 billion tons in Tuktu. Yes, yes......I hear all the noise about drilling, drilling......but as a shareholder, I want CASH FLOW! Sorry for yelling, but that is where shareholder value is built to the greatest degree. The drilling on other hand, has and will continue to take place, but get me [a shareholder] a mine first, and I will be happy. The rest will naturally fall into place!
And speaking of drilling......didn't AXI just prove up a half a billion tons of the stuff at one of their ten zones at Tuktu this year, on their very first drill campaign? That is nothing to shake a stick at! Move that inferred resource into the indicated category and you have another multi billion dollar cash flow generator. :)
It's so sad, that so many here are not seeing what is keeping the Chinese in this great play.
More later on the bigger picture,
Murray