Re: Kukula West?$20 a share is wildly optimistic at this point. $10 maybe. We're talking about 40% of a mine here. Base case of $3.00 lb copper is in not realistic. Right now we're looking at $2.50 lb. High priced copper is relatively new. You can't count on that going forward. NPV is especially sensitive to metal prices. For example in the PEA study released Jan 27, 2017 NPV drops from a base case $986 million to $123 million over a 25 year LOM at a 10% discount rate. The discount rate measures the risk to capital. A mine in Ontario would be assigned 8%. A mine in the Congo has an infinitely higher risk, probably more than 10%. They do have scenarios in the PEA study for 15% discount rate. But I didn't want to go there. It would destroy all profitability.
Obviously the increased grade from 3.86% to 6% will have a very positive impact. It's hard to quantify without a proper Prefeasibilty, PFS. And I don't want to start pulling numbers out of thin air.
In the Jan 27 PEA a feed grade of 3.86% copper has unit operating costs of $1.48 lb. They had a scenario where feed grade goes up 25%, and I extrapolated this to 50% higher grade of 5.8% Cu, which is probably what we're looking at. Unit costs then come down to $1 lb. So the model where AISC costs are $1 lb may be overly optimistic, since OPEX at a grade of 5.8% is already $1 lb. Yes, an economy of scale will bring down costs, possibly to a buck, but I wouldn't just assume that.
Don't get me wrong. This is the most valuable copper project in the world, if it goes into production. But making guesstimates without supporting studies is a gamble. As long as you know it's a gamble, that's legitimate.