Duluth Metals Ltd DULMF

PFS: even worse than I feared

[rationalinvest]

Had a closer look and it's even worse than I feared..

• copper 'base case' price assumption $ 3.50... while currently at $ 3.13. Did AMEC approve this? So an already poor headline NPV with price assumption way above the market. We're basically looking at a negative NPV at market metal prices, not to mention with a margin of safety. Unfortunately (but understandably?) no sensitivity analysis included.

• initial CAPEX $ 2.8bn.. we already knew it would be above $ 2bn, but this is a shocker. Operating costs also $30+ p/t, up from the $22 or so in the 2008/2009 PEA (CAPEX was $ 1.33bn for 40 ktpd).

• always watch the fine print: small note below Mineral Reserves Estimate table: "Antofagasta uses different parameters in its calculation of Mineral Reserves." That basically confirms that Anto uses other (more realistic) assumptions (as other assumptions would render some ore uneconomical and that ore would thus not categorize as reserves anymore).

• still, DM price assumptions are different for reserves and NPV! with $ 3.00 copper instead of $ 3.50, and also lower other metal prices. So Anto is even lower than $ 3.00 copper. This confirms that the $ 3.50 is totally wrong and misleading, especially because of the lack of sensivity analysis included in the release (it will most probably be in the full report).

Ergo: this project is just not gonna work at 50 ktpd... it seems to need at least 80 ktpd.. but then, who is going to put up the even bigger CAPEX needed for that? 

Exploration from now on again for DM, and big dilution.. with the $40MM+ debt the stock can go very, very low and perhaps even bankrupt. Leverage works both ways..