Another reason to vote against the mergerA few days ago Taseko released an updated resource and an economic assesment for their Aley Niobium project.
Here are some project highlights:
- Pre-tax net present value of approximately C$860 million at an 8% discount rate
- Pre-tax internal rate of return of 17% with a 5.5 year payback
- Anticipated operating margin of US$21/kg of niobium (Nb)
- Average annual production of 9 million kilograms Nb in the form of FeNb
- 24 year mine life at a milling rate of 10,000 tonnes per day
- Life of mine strip ratio of 0.5:1
- Total pre-production capital cost of C$870 million, including; $520 million for mine, concentrator and site infrastructure; $180 million for the converter, $100 million for offsite infrastructure including the transmission line, and $70 million for pre-strippin
Some thoughts:
-First of all they used a Niobium price of 45$/kg. The current price of Niobium is 40$/kg.
-This mine would produce nearly 10% of the total world production of Niobium which is really high and could have an impact on pricing.
-PRE tax irr of 17% is very low. 5,5 year payback may be acceptable but certainly not great. Return much too low for all the risk you take in building a mine.
-Iamgold feasability study for their Niobec block cave expansion shows somewhat better economics but it looks like they are not able to to finance the operation or do not want to build it. The mine is for sale for 12 months now. On the Denver Gold show the ceo said that they would have a market share of over 30% of the world market after the expansion and that this would not go well with CBMM who control 80% of the market...whatever that means. I guess the market could not handle that much supply without weakening.
In my opinion the Aley project may have some value to a strategic investor like CBMM or the Chinese but Taseko will not be able to develop Aley if the price of Niobium does not appreciate significantly.
If Aley would be a world class deposit with significantly better ecnomics i could warm up for receiving Taseko shares but since that is not the case i think that the price they offer for Curis is much too low. I will vote a huge chunk of shares against the merger if they do not increase their offer significantly.