Types of Pre-Production Capital CostsAs mentioned before, it is in Kootenay`s best interest to minimize the start up capex, as it would allow for the 25% dividend payout to kick in faster. In addition, it would allow for less upfront project financing (even if funded by Pan American Silver) and quicker timeframe to production.
Types of Pre-Production Capital Costs (that can be expected):
1) Pre-Stripping
There should be substantial cost savings here, as the La Negra deposit goes to the surface. Not as much overburden to remove before reaching mineralization. Of course, we still have the normal costs to carve out the pit, as we go down.
2) Mining Equipment
If we use Pan American`s Alamo Dorado plant, I am wondering if some of the mining equipment is still usable. The answer should be yes, given the operation is still producing. Though, likely, a lot of modern equipment will still need to be acquired, especially the giant trucks.
Of note, they might be able to lease some of the equipment (instead of buying upfront), especially the trucks. This could help our 25% to kick in faster.
3) Site Development
Should not be a big portion of the capex.
4) Crushing & Coarse Ore Stockpile
Again, how much help can we get from Alamo Dorado`s existing crushers and such?
5) Processing Plant
This is where we can get the biggest capex savings. It is impossible to know the capex for a processing plant (for this operation - La Negra) without a prefeasibility study. However, I am thinking capex savings of $50 - 75 million (or more), with utilization of Alamo Dorado - and not having to build a new processing plant.
6) Tailings
Alamo Dorado might have a bit of tailings area left, but definitely new tailings ponds will be required.
7) On-Site Infrastructure
Not sure how much is required. Existing Alamo Dorado site should help, but some infrastructure will likely be required at the La Negra mining site (i.e. equipment storage facilities, machine repair shops.....).
8) Off-Site Infrastructure
Not sure what all needs to be done here - at La Negra. They will probably need to look at roads, power, water.........
9) Project Indirects
Not sure of the extent here.
10) Engineering & EPCM
It will help tremendously that the first phase of La Negra mining will be open pit. There should be all of the standard studies, but I don`t imagine there should be any urgent technical/crown pillar types of underground studies in the first phase of mining.
11) Other
12) 15% Contingency