RE:RE:RE:palladiumCarbide,
The Platreef Feasibility study is quite rigorous, where the base case scenario is AFTER TAX NPV 8%. That means AFTER consideration of all costs AND taxes. Furthermore, the study has a very detailed analysis of how price fluctuations of various metals will affect bottom line Net Present Value. Actual cash flow is much higher, but because the Company wants to be conservative, they assume the time value of money is discounted by 8%. That way you can compare Platreef to other investment vehicles.
The price assumptions used for various metals is conservative. Because platinum and palladium are present in equal amounts, 2 g/t + 2 g/t = 4, the value of Pt + Pd is the number we’re looking for. Right now, that sum is $100 over base case. Nickel is way too high, that will bring the overall NPV lower. Yet Rhodium is estimated at only $1000 oz. Today, it’s at $2,500. Other accessory metal price assumptions are reasonably close. It is possible to get an exact deviation from projected NPV using weighted averages. I did it once, and don’t feel the least motivated to repeat it. There are not a lot of surprises.
A few points to remember. Platreef is highly scalable. 4 Mt/annum is simply a starting point. It would be relatively straightforward to increase throughput and achieve economies of scale, such as 12 Mt/annum. Much of the infrastructure would already be in place. This means NPV and cash flow increase, not only due to increased throughput, but also because less CapEx is required for a larger footprint. This is a really solid project. One of the things I appreciate about IVN is that they don’t cook the books. All of their studies are exhaustive and first rate.
So, why haven’t they built Platreef already? I think there are three reasons. One, they want to focus on Kamoa first. It’s clearly the flagship project. IVN does have sufficient cash on hand as long as they exercise patience, and avoid triggering an internal liquidity crisis. It’s easy for a business to have a great product. Yet if costs leap ahead of cash flow, they still go bankrupt. This happens all the time. It’s better to take an extra couple of years, than go bust. If you drive slower, you still get there - alive.
Two, the Company may partner with another miner to share CapEx. They wouldn’t share the project, just processing facilities. Why rush to build very expensive facilities, if someone else can help defray costs, and therefore mitigate risk? You arrive at the same destination, but capital investment risk has been reduced by including partners. To reiterate, they are NOT diluting the project, just the cost of processing facilities. Anglo American Platinum has suggested just such an arrangement. So, if you’re not in a big rush, there might be ways to improve bottom line NPV. Feasibility is a starting point. Nothing says you can’t improve on it.
Three, there is still some uncertainty over changes to the South African mining law. It’s nothing like DRC though. If for any reason Kamoa had to be put on ice temporarily, and I’m not saying this is the case, then Platreef is good to go.