RE:RE:RE:RE:RE:RE:Looking for High GradeGoing Deeper,
You can design any mining scenario you want. Execution of that plan is another thing entirely. If this project were in Canada, there would be little doubt IVN could fulfill any plan on time and on budget. I have no confidence this will happen in the Congo. As Ursus pointed out, China Moly's open pit at Tenke Fungurume is currently running at 0.3 to 0.4 Mtpa. I'm sure that was not in China Moly's original plan. The reality may be 6+6, 4+4, 2+2, or some other value. I'm sure IVN desires 6+6, but through no failing on their part, this may not be possible. That's why I don't consider any NPV derived from 6+6 anymore than a theoretical mathematical exercise. In Canada you could take it to the bank. Not so in Congo. Under these circumstances, NPV is no longer an objective measure of value. The Company needs to demonstrate they can actually deliver that kind of production. Some here will consider this an unreasonable demand. They will say you should have faith in RF. I do have faith in the ability of RF and IVN management in general. I have no faith in the Congo.That's why I'm sticking with the 4+4 scenario in my own valuation of the project, until which time they can demonstrate either a higher or lower throughput. At that point, NPV can be easily adjusted up or down to match real world conditions.
Payable Metal is also referred to as Recovered Metal in the 8 Mtpa scenario. You only get paid for Recovered Metal. You don't get paid anything for Unrecovered Metal. Therefore, the Unrecovered Metal has no value whatsoever. How much Unrecovered Metal is there?
Total Resource - Recovered Metal = 80.7 billion lbs (1% cutoff) - 16.052 billion lbs recovered metal = 64.65 billion lbs of copper left behind because it fails to meet head grade requirements as mill feed.
Only (16.052 / 80.7) x 100 = 19.9% of the total resource at Komoa-Kakula will be Recovered Metal.
16 billion lbs of metal is still plenty of high grade copper.
You are correct that you could drop the head grade, currently 4.68%, to something more modest, and thereby increase Payable Metal. You can drop it all the way to the marginal cost of production. However, that may do very little to improve after tax undiscounted cash flow, currently $17.114 billion. In fact, it may go down. It would also lengthen the payback period for CAPEX, and delay shareholder profits. There is a balance point, where dropping head grade no longer benefits cash flow. All of these mining scenarios seek to optimize head grade with cash flow. So reducing head grade isn't such a reasonable option.
That's why any increase in Payable (Recovered) Metal, at the CURRENT head grade of 4.68% is so important. Zero increase would be a huge disappointment. 25 to 30% over the Nov 2016 PEA, or 4 to 5 billion lbs copper, would be very favourable for shareholders. 50%, or 8 billion lbs would knock it out of the park. In this case, NPV is improving because a genuine store of value, additional high grade copper ore has been uncovered in the course of exploration.