RE:RE:RE:Looks like we can thank KAT for our problemsNewbie,
The Company won't go charging ahead like a bull in a porcelain shop, regardless of whether or not they can arrive at binding agreements. Of the two projects in DRC, Kamoa/Kakula is by far the best. Our share of initial Capex is around $600 million, half of construction costs. Yes, this is nearly twice that of Kipushi, at $327 million, but the potential earnings are far higher. We have a JV partner,at both Kipushi and K-K, Gecamines, but unlike Zijin, I don't believe they contribute anything to Capex.
By my calculations, NPV8 for Kipushi at $1.10 zinc, in the base case scenario is $612 million after tax, life of mine at a 3.5% royalty.That doesn't include the extra 5% corporate tax, which will trim this further. Yet we only control 68% of the project. $612 million x 0.68 = $416 million. So, we're going to spend $327 million to realize something like $400 million NPV8. That's for the entire LOM. Anything over NPV zero is a potential green light for a project. These are good, but not spectacular numbers.
In another place or time it would be worth it, but not in the DRC today. Especially as there are already two outstanding projects, Kakula and Platreef, that require financing. It's a great zinc project, but if you're going to take a risk, it may as well be on something that really pays. We'll remain in the clear provided the Company maintains good risk management. We can realize all of our objectives, Kipushi included, by moving step by step, carefully. The important thing is to arrive SAFE at our destination. And if that takes a bit more driving time, so be it. I'd rather arrive in strong financial condition, then be left to the tender mercies of TSX snipers.