2017 NI 43-101 Technical Study Update - Mining Hello fellow Verde shareholders,
Please circle this Friday June 25th on your calendar as the deadline for voting your Verde shares for the June 30 AGM - you actually have until 11:59 pm on Sunday, by why leave it until the weekend?
This post continues the series on the 2017 Study, today looking at mining costs. The Glauconite Siltstone deposit that provides Verde's raw material is at or near the surface, and can easily be extracted in an open pit quarry, initially without expensive blasting. The 2017 Study says this:
Mining will be performed by a subcontractor and therefore the purchase of production equipment will not be required.
With Plant 1 located about 25 km from the mine site, it appears the most significant "mining" cost is the need to haul the raw glauconite the 25 kms to the plant. This included loading the bulk trucks (from the satellite photos tandem units with a truck and trailer), driving to the plant and unloading in the storage area in the compound), and returning to the mine site empty, ready for the next load. The actual cost of the glauconite mineral can be determined by looking at the Amortization of Mineral Properties in a period, divided by the tonnes produced in the period. For 2020 this was $18,000 for 243,000 tonnes, or about $0.07 per tonne.
Verde does not provide a breakdown in its financial statements of the different compnents of the Production Costs total, so you cannot track the split between Extraction (cost of mining and delivery of the raw ore to Plant 1), versus Processing (the fixed and variable costs of operating Plant 1). In 2020, in total, these were $3,515,000 or $14.46 per tonne (in Canadian dollars). The 2017 on the other hand goes into significant detail for bothe Extraction and Processing, arriving at a Year 1 estimate on a 600,000 tonne production volume of US$14.27.
Given the exchange differential and the lower production volume over which to spread fixed costs, I would suggest the actual 2020 costs compare favourably with those predicted in the 2017 Study, and have been steadily improving.
Unfortunately the study did not address Sales, Marketing and Distribution costs which as we now know, along with CEO bonuses, represent a significant and necessary(?) additional cost burden before shareholders see any of the bottom line results.