Righto money miners. That's not enough, Ellie, the
three of us put all together. Man.
We got one man 321. Righto money mines.
Three make one. Three makes 1 almost got.
Daddy. There you go guys.
We got like a bit of variety show today.
We got global news out of China. We've got deals, we've got
financings. It's all happening.
It's like a Christmas pageant. Super large caps, very small
micro caps, and a bit in between.
Ally your. Specialty Trav going right down
into the micro cap plan right this.
Is, yeah, on the lower threshold of what I normally talk about,
but it's kind of an interesting thing.
It's one for the silver bugs too, but all lead bugs.
Don't think there's any lead bugs out there, but yeah, like
Keen to. Can you talk about it?
Keen for Christmas too. We're we're on the home
straight. We're close, We're close.
Business days left. Yeah, we're counting.
Some big news out of China, Yeah, no.
So. Big article out today that I
think bloody everyone, everyone would have seen and certainly
the markets, I would have seen the news out of China signalling
bolder stimulus for next year as Trump returns.
So the Politburo, I'm not sure I'm saying that correctly, which
is basically the the ruling Communist Party's most senior
sort of 24 officials led by President Xi announced I will
embrace a moderately loose strategy for monetary policy in
2025 S signalling more rate cuts ahead and shifting from a from a
prudent strategy that's been held for nearly 14 years to now
a moderately loose strategies. This is why all the lithium
stocks are up early. Yeah, this is but everything you
know, not just case metals, lithium, everything's up massive
commodity price wise, most things are up, you know, a
percent, 2 percent, 3% and and the equities even more so about.
Time like jeez. That's like a little China Santa
rally. It's the first.
Day that commod stocks are looking like meme stocks.
Will it hold though? We've been talking about China
stimulus for a number of months now and it's it's faded pretty
quickly. So that is the big unanswered
question, hey. Yeah.
So want to keep an eye on Yeah. And as we sort of said, JD like
and, and people, you know, sort of raising the question like,
you know, this is all good, but very positive, but how it's
going to be implemented is, is not totally clear just yet.
So certainly one to watch, but going to one of our biggest
stories for today is London mining selling some of their
assets to go pretty much all in on to Vacuna.
So take us through it, JD. Yeah, an interesting sale.
It had been one that's flagged for for quite a while.
So London mining was sale Nevis Korvo and Zink Groven to
Boloden, Boloden being a Swedish miner.
So I'll give I'll give a bit of a big rundown, but the headline
is US $1.5 billion transaction. So the money miners might
remember we spoke about one of these assets in particular,
Nevis Corvo, because a lot of the Aussie miners were were
looking at this one. They'd been in the data room.
You had the likes of Mac S32 were named, I'm sure Sand Fire,
we're looking as well. Yeah.
So our first thoughts were how does the price stack up against
the recent copper transactions? We've heard a lot of CEOs of big
miners saying copper deals are, you know, priced pretty richly.
We've seen that ourselves. You know, one that comes to mind
that we spoke about a little while ago was the the comic cow
transaction. But you've seen it for really
fit for years now, so it was worth getting into the weeds.
Was this are they? Is it fit categorise these as as
copper? Copper mines though, are they?
No, no zinc mines. So Nevis Kovo is more copper
dominant, but zinc groovin literally translates from
Swedish to the zinc mine. Yeah.
And the forecast for 2024 was about 80,000 tonnes of zinc and
5000 tonnes of copper from the from that operation.
Gotcha. So to to give the run through on
the miners and the assets just quickly because I don't think a
lot of the Aussie listeners will be too familiar with them.
You've got London mining, on the one hand TSX listed, they kept
it just under $11 billion in Canadian terms, predominantly a
copper miner and this transaction makes them even more
so, a copper miner that are do a good bit of zinc at the moment
and some gold as well. They've got stakes in
Candelaria, Casarones, Chapada and more.
And of course, the big VHB deal which you touched on there Ally
being in the the Vacuna. So from the moment they, they,
they announced that Vacuni transaction BHB that they always
said, OK, we're going to we're going to sell down our other
assets in order to kind of yeah, forward to pathway ahead to
fund. Yeah, and they need to
development. Here of.
To delever a bit before that, that big CapEx cycle is that
that's sort of anticipated to start in 26 and you know a lot
of money's going to go into the ground there.
Hi is Maria to kick things off and then yeah, there's still a
fair bit of way come to the bridge when it comes to you lead
us all to. Yeah, absolutely.
So of course you've got the Lundin family there as well,
about 15% of of the stock in Lundin mining.
Then you've got Bolidin. So they're a Swedish miner and
smelter importantly. So we've got a bit of vertical
integration there. Market cap in Aussie dollar
terms around 13 billion operations, mainly in
Scandinavia, but they've got the Tara mine, which is pretty well
known in Ireland as well, actually shut down not too long
ago and it's getting restarted. So strong zinc focus and then
sort of copper comes in behind that.
Learning more about Boledin. It was, you know, one, one of
the first things that came to my mind is are they just trying to
lock in concentrate supply? You guys will remember we spoke
a lot of the beginning of the year of these smelters around
the world feeling the pinch of not being able to get their
hands on copper concentrate with the, you know, the likes of
copper Panama and other minds shutting down.
We saw a dramatic fall off in the TCR CS that these these
smelters charge. And you know that that is no
different in in Europe that was predominantly focused in in
China, but we saw in Indonesia and a bit in India as well.
But it's it's no different up here.
And that means the the smelting part of their business has kind
of been suffering. And the answer I kind of came to
you on that was like in part, yes, they're definitely trying
to address that. But that is a bit of a longer
term view because of course the operations that are being bought
here have contracts in place already that you can't just
change. A lot of the supply was actually
going to Bolidian already. So it doesn't change and the
other stuff was contracted out. So it's going to take some time
before you self get your hands on that to bind the mines.
I would have thought the dynamics in the smelting market
like the you have TTRC or whatever, it's like a short term
phenomenon because it's just a, you know, like you can't have a
long term, a long term like downstream smelting industry
that's unprofitable. Eventually you'll have supply
curtailment, less smelters available, the ones that remain
more profitable. But there's there's just been
like a lack of, yeah, shutdowns in some of these unprofitable
smelters, virtual, whatever industrial policy settings are
in these countries at the time. But that doesn't last forever.
That's just a short term phenomenon.
Nah, people aren't going to be attracted, you know, sort of one
O 1 to to a market that's that's uneconomic.
And that that plays out over over quite a while with with a
bit of sort of influence from, from governments, right?
Like you look at Indonesia and the government forced them to
build that, that smell to the Freeport one and those sorts of
things. So there's, you know, you see
that in in commodity markets. So tell us about the the two
assets that all in of buying off London?
Yeah. So what are they?
We'll start with the the Portuguese asset.
This was the one that the Aussie miners were rumoured to be more
interested in. So it's an underground
operation, polymetallic, it's Avms deposit, predominantly
copper and zinc sitting in that western part in Portugal of the
Iberian pyrite belt. We've sort of been hearing for
quite a while, but this will be kind of consolidated.
So the the 2024 guns like I said just under 30,000 tonnes of
copper and 115,000 tonnes of zinc.
C1 costs around about two bucks USA pound in copper terms plus
110 million in CapEx. So that is, you know, that is
not the norm. That is a big swing of CapEx to
get the operation kind of humming again.
It's got 2 processing plants. Given the polymetallic nature I
think of Adriatic and these sorts of operations, you've got
your copper and then your zinc which can do a bit of copper as
well, a 2.8 and a 2.5 million tonne per annum plant.
And it was interesting, they noted in the call, this one
actually produces a a dirty sort of con with elements that
attract a a penalty. What are they like arsenic or
what's? The, I'd imagine arsenic they
didn't sort of reveal, but yeah, they sort of household names
when it, when it comes to those sorts of stuff.
So underground mining's been happening here for over 30 years
now. So it's, it's got a long life,
but unfortunately four people have died in, in the past four
years. So not up to scratch, needless
to kind of say. And let's let's hope that can be
stopped going forward. Well, I didn't also call this an
asset that sits on the 75th percentile.
So it's it's not often a company will call out an operation that
they're buying as being between the 3rd and 4th quartile.
So I mean, good on them for that that sort of disclosure.
But yeah, by no means is this a stand out asset.
And if you just do back at the envelope math on 2024 numbers,
assuming a $4.00 a # copper price, this makes less than $15
million. Again, with the big caveat that
that is a large amount of CapEx and that's that's not the norm.
So cash flow should improve going forward, but high cost
curve like a few of the other operations that that Bulladin
own, which leaves you susceptible to the to the swings
in commodity prices. Then you've got the other asset
in Sweden, zinc proven. So again, polymetallic right in
Bullidon's backyard. Lundin actually bought this 20
years ago from Rio Tinto. This mine has a huge history.
It's been in continuous operation since 1857.
So it's deep now. Three shafts go down.
They're operating around 1300 metres below the ground.
And like I said, 80,000 tonnes of sync guidance with 5000
tonnes of copper guidance. In zinc terms, we're talking
cash costs of $0.45 + 65,000,000 CapEx.
So again, back in the envelope, that's about $100 million in
cash flow for the year. So not too bad at all.
And just on where this sits in the cost curve in the middle of
the second quarter, so much more competitive than than Nevis core
though and you know notably these assets don't have a
massive mine life less than 10 years where we're talking about.
It's based off current reserves but exactly but the like.
It's been operation since 1850s. Yeah, so keeps going.
So with zinc riven, there's a strong expectation that
resources will convert to reserve.
You don't have quite the same confidence with with Nevis
Cuovo, it's it's a bit higher. There hasn't historically been
as good a carryover from reserves to from resources to
reserves rather. But I think there's an
expectation in buying these assets, you know, that that the
life will go on for for a bit longer and.
What about the, what about the the price tag here?
Supporters paying US 1.5 billion, right?
That's yeah. When you kind of just like think
of the multiples here. Is it screen?
Is it screen fully valued? Is it screen cheap?
It's, it's kind of interesting, right?
So, but where I came to ultimately is that it's kind of
at the upper end of what you'd call fair, but there's, you
know, always many ways you can sort of slice and dice it.
So 1.3 billion is what they're paying upfront on a sort of cash
free basis. You might see 1.37 quoted.
There's a little bit of sort of money that'll sit in the account
that they'll kind of pay for as well, plus 150 million in
contingent payments. It's not subject to too many
things given it's not the core assets of either of these these
companies, but getting getting into the sort of multiple and
how they talk about it followed in forecast 300 million to 350
million EBITDA over each of the next five years.
So if you're if you're conservative on price forecasts
and therefore you don't assume the contingent $150 million
payment and you take the lower of the 300 to $350 million
forecast that they assume over each of the next five years,
you're talking about 4.3 times EBITDA.
Now that's you know that's, that's definitely worth looking
at a bit closer because these two operations did in 2023 a
$195 million in EBITDA. So if you're looking on those
numbers, just looking back 6.7 times and you know these
operations that have been working for for quite some time,
so you can get a good feel for it.
Like I said, they did come out of that cycle of heightened
CapEx. So that adds a bit of
conservatism to it. Interestingly, listening to the
call in that number 300 to $350 million, the company said
they've assumed no synergistic benefits and that that kind of
surprised me. It's good to say it's, it's
conservative. Like I firmly believe there will
be synergies here. You can say that because London
are paying Boledin right now, the TCRC, so that in time will
be scratched and there will be some sort of synergies.
But again you've got you've got more than $100 million
difference from what the operations did in 2023 to what
these guys are assuming going forward.
And you want to dig into that, you want to understand whether
that comes from the consensus pricing assumptions or are they
assuming cost improvements, volume growth, these sorts of
things. It was a little bit frustrating
on the call on this point because the company just kept on
referring back to the point that they don't own the assets yet.
They can't comment on costs, they can't come on on this, they
can't come on on this. So it was kind of hard to hard
to work out. And they also didn't specify
exactly what the consensus cost price forecasts that they're
using are. The one detail they did give
though, that it doesn't exceed the contingent payments, which
means it's below 4 bucks, 50 copper and retreating in the
coming years and on the zinc side of things below $1.40
rather a pound and retreating over the years to come.
Gotcha. I've got two points to make
there. One's just in relation to like
EBITDA, What's not captured there is the term CapEx.
Whenever, whenever a company runs a sale process on assets
that they're selling, I always assume that the seller halts a
lot of CapEx in the the six months before the the sale
complete. So there's probably some catch
up CapEx to to embark on here as well.
Completely, Graham, it's kind of the kind of the human thing to
do which makes it all the more interesting because of course
you know Bolodin are going to want to say they got a good
deal, but they were very firm in saying this has come at the end
of the CapEx cycle. 110 million is not the norm that, that is
big. But you know, like like we said,
it's, it's not a stand out asset and there's a good chance more,
more capital will need to go into it.
We'll, we'll kind of see. The other point is just on the,
the, the copper price there. So it's a contingent payment
above 4450. So yeah, this is one of the
interesting bits of feedback that came out of some of the the
analyst site visits to the like the Chilean kind of copper
assets of of BHP etcetera. That happened I think 2 weeks
ago now. It's like well reported now that
BHP is using a long term copper price in real terms forecast of
4 bucks, 50 to make investment decisions in, in real dollars,
which is so, yeah, pretty interesting.
It's above, it's above consensus, but that's that's
where BHP sits. And that will have an economic
model to to point to, to suggest that.
But yeah, 100% you've you've kind of got to got to have your
own views as a miner. I did see in the past couple of
weeks a few people dial back there the copper forecasts for
sort of 25 and 26 again as as you know China impacts and these
sorts of things that come into account it's.
Just when you look at the development assets you like the
all of these assets need like $5 plus copper to justify
developments. Yeah, absolutely.
Digging into how these guys are financing it is kind of
interesting. So they're going to pay for it
with a bridge line to start with and then they're going to
refinance this with a share issue corresponding to half the
value. So they're flagged straight up
that they're going to raise about, you know, what could be
US $650 million be replacement or or rights issue, which is
more common in in Sweden does need approval.
They need to speak with the the owners of the business and that
could be carried out in the first half of next year.
But it's not a super ASX type thing to to sort of see
different. Yeah, you're doing a
transaction, you're doing it today and you can raise capital
in six months time. That's not something you see
every day. And it, it also does beg the
question on the, the dividend. They've, they've paid dividends
for, for quite some time. They sort of consistently do
that, but they're expanding upon their net debt to, you know,
their gearing ratios on a few different sort of metrics going
out of the bands that they kind of provide, which does kind of
bring about the question like why didn't you just sort of
minimise or sort of pause the dividend if you knew you were
going to do a transaction like this?
And again, they, they sort of pointed to these kind of Swedish
rules where you can't speak with the owners of the business
whilst you're engaged in a transaction.
I hope it doesn't come from a place of apprehension to stop
the dividend kind of at all costs, because in the long run
that that just costs you more. You end up paying more in fees
to raise the capital, you know, via issuing yet on top of having
the overhang which could force the stock in itself down over
the next six months. But we'll see on that one is a
few sort of intricacies and a few learnings on on my part in
this one, given it's a a Swedish company and things that are a
bit different to how companies operate in Australia.
So overall your your takeaways on the deal, Good, bad,
indifferent. It's gone back from from
Bulletin's perspective to start from the from the buyers
perspective going going back to the price, these, these are
producing assets with a long history.
If we're conservative, we look at 2023 copper averaged about 3
bucks 85 a pound, zinc about $1.20 a pound.
That's a 7 times EV to EBITDA transaction.
Like I sort of said, that is at. Seven times EBITDA, you don't
have to say 7 times EBITDA. DLAV is the value.
My bad. That's right at 7 times EBITDA
transaction. So that that's the that's the
upper end of what you'd kind of call fair.
Looking at the brokers Navs, it gets kind of interesting.
There is a massive range. Obviously this comes down to the
the assumptions they've each plugged into it.
But you're getting some brokers calling it .7 times, some
calling it 1.6 times. Looking at the the blue sky
briefly, it's not not how we tend to kind of operate, but
there are definitely potential synergies.
Like I've sort of mentioned you've got potential commodity
outside and optionality in the mine lifes.
You know specifically looking at zinc ruven, there is a strong
likelihood that this will sort of see multiple cycles.
And operationally there was also this tone throughout the call
that they believe they can pull down OpEx.
They didn't say it explicitly, but they kept on kind of hinting
at it remains to be seen on that part whether they can do it.
All of those things are blue sky.
You don't want to have to pay for for any of them.
So that kind of feel is you wouldn't have wanted to pay any
any kind of more than they have, especially extending your your
leverage to buy assets that are in, you know, the 75th
percentile. That's that's a risky strategy
and can put you in a bit of strife down the track down the
track. Rather you know these these
multiples are. A lot higher than we talked
about with the coal sales over the over the past year.
No surprise in that one. But you know, I think there's a
chance that this one sort of turns out well.
They they make cash in their. Backyard, right?
These are Swedish miners that bought Yeah, good, you know, 200
year operating zinc mine in Sweden.
Yeah, they'll have a great understanding from it.
They've got smelters in in the vicinity particularly again on
zinc riven. I think it makes more sense than
it would have to any other minor out there.
You know, they they could reap more benefits from this than any
other name out there. So yeah, makes sense on that
part. And for the London side of the
equation, again, this was super expected, very much in line with
the the strategy that they've put forward.
And yeah, I mean, just helps them importantly de Lever before
that big CapEx cycle, it simplifies the business,
America's focus, they're not got assets in Europe anymore.
And you know, from an earnings perspective, you're giving up
that short term. I think analysts were sort of
calling it 20% of their EBITDA in the near term for the Vicuna
optionality for the big price in the long term.
And, you know, I think that's the kind of right way to go
about it. I think it was the one.
I don't know which one might be, I don't remember which London it
was, but there was like a quote that every every mine that he
ever sold, he regretted. It was like, you know, a quote
about that. And that's why the family has a
reputation of being like very long term thinkers because
there's but you know, you're making this decision to sell
these mines because you've got the bigger picture long term in
mind in in Vicuna. Yeah, yeah, there's a trade off
you can you can see on their websites just scrolling through
like 10K in the, in the DSA was one of them.
There's yeah, there's a number of them and it's interesting
history for this this company. But yeah, we sort of say you've
got to kind of give up, give up one thing to keep it all in
balance to to go for the bigger prize.
Next one, absolutely, just chatting.
We've got a lot happening all over the world as part of this
deal. We've got, you know, selling
base metals assets in Sweden and Portugal, put in that money to
copper assets in South America. I mean, the only guy I know
who's this global, other than the very infamous Mr Worldwide
people is Minings. Mr Worldwide, Steve Tarr from
CRE. I mean, look at it Tari, Tari
sorting out insurance policies for all sorts of mines, all
sorts of commodities all over the world.
And not just I know we talk about the producing mines a lot
with CRA, but they can help out at the explosion and development
end as well. But also even all the drilling
engineering and all the other contractors that you know
service these projects too. So they're bespoke and
comprehensive if. The service providers need
insurance big time. Everyone needs insurance.
Everyone needs it. Sometimes people don't pay like
you just got to be you have insurance.
Got to be all over it. So you want the CRA team on it.
It's bespoke, comprehensive, it's tailored to your project,
your business. What more could you want?
Ellie, I can't just say it's a bit peculiar to me that you you
draw out the parallel between Pitbull and Taree because while
Taree is CR ES Mr Worldwide, I actually think you're doing an
injustice to the big man MD Dave Harrison, whose best I can tell
from this image here, could in fact actually be Pitbulls long
lost brother. Actually it could be Pitbull
himself. Dave, it's Pitbull.
Get in touch with CRE. Look at that.
Go CRE and go CRE all righty, Let's go down the the market cap
scale and. Just a little bit.
And bring it back home to to Western Australia as well.
And talk about Boab Meadows Boab.
Yeah, mate, this is, yeah, a story for the small cap silver
bugs out there. JDL.
It's, it's some of those projects it's been kind of
hammering away for, for years trying to get finance, but it's
never quite gotten there. It's Boab Boab Metals and
they're Sobby Hills silver lead deposit right at the top of of
WA there. It's, it's near the NT border
and it's about 50 kilometres north of of Kananara.
Boab. They, they own 75% interest in
the, in the Sobby Hills project, but they also have an option to
acquire the remaining 25% too. And it's just got a mere market
cap of $35 million. The stock went up 15% today on
the back of a a prepaid deal with traffic Euro commodity
trader. And in a nutshell, traffic has
agreed to give Boab US $30 million upfront.
Traffic will will get paid back within a five year term
following like a 18 month interest only period at a cost
of so far plus 5% margin. The key here is like traffic
will get their their hands on 75% of Sorby Hills concentrate,
which is, you know, at the moment Boab's kind of entire
share. And if Boab actually ups for you
know, alternatives or the OR financial close doesn't isn't
achieved, traffic still gets a share of the concentrate.
So as usual, the trade is always a win, but sometimes you could
win too. But.
You've got to put fur on the table, so let's look at the
Sorby Hills project Economics. If you look at the project on
100% basis, Sorby Hills has a has a reserve that contains
19,000,000 ounces of silver and 531,000 tonnes of of lead
contained. The grade doesn't shoot the
lights out like 3.5% lead and 39 grammes per tonne silver.
But it was a, you know, a feed study in July which suggested a
pre tax MPV of $411 million, pre tax IRR of 37%.
But it's the, it's the CapEx that there's always been the big
obstacle for the longest time for, for Bo Lab to, to find a
way to fund upfront capital in the latest study is
$264,000,000. So when you think about, you
know that kind of capital intensity or even you know, just
your NPV to CapEx ratio, it's not, it's not the world's most
financeable project on, on current assumptions.
And then a 35 mill market cap as well makes that challenging too.
100% we, we, we cut our teeth in the, the equity kind of it's
like, yeah, to finance a project, you always think about
like a big chunk of the, the financing is going to come from,
from equity in some way, shape or form.
And, and your ability to stump up enough equity into the
project. It's like directly proportional
to the size of your market cap in a lot of ways.
Because, yeah, that's how much dilution existing shareholders
are willing to do. That's how you know that it's
just the lower your market cap, it gets really, really, really,
really difficult to, to raise efficient equity to fund these
chunky kind of CapEx numbers. Not that, not that $264,000,000
is a chunky CapEx number, but when you've got a 35 million.
Dollars in relative terms to those things.
Yeah, it. And Once Upon a time I thought
Knife was going to stamp up some money, but you know, I had a
look and it feels like things have gone a bit quiet on that
front for the last few years, which begs the question at the
assume commodity prices in the in the study, like the lead
revenue is about 3 times what the what the silver revenue is
in this project. So it's really a majority lead
project, which for the silver bugs out there just means that
the project actually has a negative all in sustaining cost
per silver oz after the lead credits.
But that's not how you should think about these things.
We know that it's. Hub for way round.
Don't let that get out. Granted, like the the spot
silver price is about 28% higher than the study price, but it,
you know, swings the other way for the lead price assumption.
So, you know, swings and roundabouts here.
So it's all up, what have you kind of come to with with the
project now I. Think there's just a few things
to keep in mind here. Like remember how I said Bulb
has an option to buy the remaining 25% of the project?
In order to do that, they'd have to stump up stage payments that
aggregate to $23 million to get there.
But that object is that that option is subject to Bulb
reaching FID by about September next year too.
They could always extend that longer if they agreed.
But kind of, you know, keep in mind this, there's, there's
there's a goal to announce FID by, by September, you know, to,
in order to be able to, to get that option over the line.
If, if they can build on the financing momentum from, you
know, the announcement today, maybe, maybe they can get there
too. Like I remember Sheffield had a
similarly insurmountable task trying to finance Thunderbird,
but they found a way and they, you know, that this, you know,
funky JV and you know, strategic partner and knife came in and
all of a sudden it's very undemanding market cap got like
sufficient CapEx to fund the development of, of Thunderbolt,
which seemed like impossible. So yeah, knife would make a
massive difference, but I'm not filled with confidence given
the, the, the lack of discussion about knife for a few years now.
Actually, I think of it as a really advanced call option,
like like if silver saws on the back of solid demand and, and
LED managers to hold up and it's a really advanced project that
can kind of get into production pretty quickly.
There's a lot of work that's been done here and you know, you
can, you can move pretty quickly in that environment where you've
got your ducks in order, right. But if, if commodity prices stay
where they are, then I think it could be a tricky proposition in
the near term to actually get the, the, the financing required
to, to build the project. Personally, I think the supply
and demand outlook for silver is is it's really healthy, but I'm
a bit more trepidatious about lead again, what do I know?
It's my commodity price forecasting this side and we we
can't not forget that like ladies, the vast majority of the
revenue. Yeah, I think it's, it's one to
keep on the watch list, but don't be surprised to see it
trade like a call option if silver moves.
Like I remember in in 2020 after COVID, this thing like like 540%
in like 3 months just because like silver, silver squeeze was
on for a period there and it's kind of giving up all of those
gains. You know, that's just the way
that kind of, you know, call option type projects trade,
right? All 5 silver names on the ASX
did I remember. Crazy shoot through the ceiling.
That's the point for all 5 silver names.
The ASX is like it doesn't have silver names and the the actual
silver mine is like not like, you know, we like there are
pureplay kind of silver miners out there or majority pureplay
silver miners out there. They ain't listed on the ASX.
Yeah. Good stuff man.
No, So it's so Trevor. It sounds like it's a pretty
advanced project. It actually reminds me of a chat
we had yesterday as well. I.
Think I know what conversation you're talking about, Ali?
Is it? Is it the one about the the team
that helps companies with advanced projects get past all
the red tape and get their deposits into production ASAP?
I think it is exactly that conversation.
It's actually what you think about it's actually pretty
awesome, right, Because say you're sitting on a project,
It's it's it's an advanced project, but you you don't know,
but you know, there's still going to be a fair bit of work
to get done in order to get the tick off to actually start
mining. Yeah right.
You can have things advanced, but there's there's still a
bunch of stuff you need a bit of help to get in order, right?
That's where a seriously capable technical services team comes
into the mix. I think I know which guys and
gals you're talking about. Is it MMS?
Absolutely. MMS got their new technical
services team. I'm even wearing the T shirt.
You've got the polo today. Love it.
We all know MMS are just the best open pit mining contractor
on the block right now, but it might have been used to people
that they have built out a technical services team that is
akin to the Australian Test cricket team of 2006.
Jeez, that's a big call. Love it.
They they just don't lose. You know that just like that
test, they didn't lose. Look at the highs lately, right?
Nathan, Nathan Ram, Emma Edwards, Wanderoo see Rob Seal
like catches win matches LAJAD and this Tech services team
takes a lot of catches. Well said.
So if you need an elite team to help you get the the house in
order to start moving the dirt, it's these guys and then you've
got the open pit expertise that overlays it all for a full turn
key solution. What more could you want?
Go MMS love the T shirt. All righty.
Last one for the day develop. It was little Ding Ding Ding for
me. So this is developed basically
completed all the docs for their $100 billion loan prepaid
facility with Traffic Gura 2 stories another another Traffic
Gura 1 today. Market like this one too.
Yeah. I wasn't sure if it was this
whole China thing going on because everything else was
maybe a bit, probably a combination.
Yeah. So they announced that like I
said before, all the documentation completed for AUS
$65 million prepayment loan facility with traffic to fund
the restart of the Woodlawn copper zinc mine up around
10:00-ish percent last time I looked.
And so it's basically the financing plus that's associated
off take agreement. All of this to be fair was all
announced back in back in August.
So it's not so much new news here, it's more the fact that
all the documentation is complete itself.
So Woodlawn is sort of now fully funded through to production,
just a bit of a high level refresher of the key term.
So traffic will give develop around $100 million Aussie in
the form of a prepayment slash loan facility.
The interest on that is BBSY, which is basically a base rate
plus a 2% margin and and props to them for actually stating the
margin. This is for a term of about 4
1/2 years from from drawdown. And as part of the financing,
they've also entered into a five year off take agreement and this
is for 100% of the copper, zinc and lead slash precious metals
cons produced from Woodlawn over this period of time.
That'll be all of the all of the con, right?
There wouldn't be anything, Yeah.
And so repayment of this prepaid loan facility can be done by way
of a set off against the payments against the off take
agreement or they can just pay do quarterly cash payments and
there's no repayments required for the 1st 18 months of the
loan. And the last couple ones is
develop also has the option to sell up to 20% of the output or
the OR the project, the Woodlawn project 2, two third parties and
no mandatory hedging is required.
So we'll just flash up the key terms for that, those two ones
there. At 20%, that's something that it
was talked about for a long time is, is selling down 20% of
Woodlawn. But yeah, it's kind of it's
been, it feels like it's been a long time he's been talking
about that maybe, maybe, maybe this is the catalyst.
Yeah. And look, yeah, like you said,
Trevor, it's, it's sort of a pretty common bullet point that
pops up in the last few, you know, investor prezzos and
things like that, that So perhaps now that this financing
is in place, that might be the the catalyst for that actually
in the other catalyst bank. So you know what's actually real
new information in today's announcement.
So they advised the processing plant refurb is 50% complete
now. I believe GI Engineering is
doing that. They're on track for first
concentrate production in the June quarter next year.
So all production from the underground is scheduled to
commence in the March quarter next year.
So the quarter before and the developed board has now actually
made a formal FI you know, FID final investment decision to
support the Woodlawn race start plan.
So I want to just briefly revisit the the project
economics for Woodlawn. Sorry I'm laughing just because
you're you're revisiting it, but I remember how many revisits
developed to themselves because it felt like every couple of
months there was an updated restart study with with a
higher. Maybe it's a pun intended.
So, so they put out an update in August when they initially
announced this financing package with with traffic and this is an
update on the April numbers, which basically was what's
changed is basically the change in the CapEx costs.
And because of the recently agreed off take terms with
traffic they incorporated that and that would really deliver
the main improvement in a lot of the economics because the TCRC,
the trim and refining charges were improved.
The commodity price assumptions actually they kept the same as
what they had in April. So what are we looking at sort
of pre production capital which you know includes working
capital 78 million and April was 67.
So not too big of a change there, but a pretty chunky
change in the pre tax NPV from 6:58 to $728,000,000 there as
well. And in light of yesterday's
conversations about commodity price assumptions and things
like that, I wanted to actually take a look at that here for for
Woodlawn. So they've, they've got a nice
little table in that release from from August, which, which
shows the average realised mine plan, commodity prices and you
know, over, you know, the 10 year mine plan.
But really I think the more important period to look at is
what are they assuming in the first sort of few years based,
which is the arguably the riskier period of the of the
mine life when they're ramping up, when there's debt repayments
due and things like that. So, so I wanted to look at how
did their assumptions in the first three years compare
against current spot prices and sort of consensus economics
forecast. And for those who don't know,
consensus economics basically averages out all the different
various banks forecast commodity prices.
And when I had a look, they actually in pretty much all
instances what developer forecasting in those first three
years below current spot prices and below what consensus
economics forecasts as well. With the exception of LED LED's,
what they're saying for LED is around where spot is at the
moment and what consensus economics is forecasting.
Zinc assumption, developed zinc assumptions are largely in line
with consensus economics. But Spot actually is trading a
bit high and will flash up what they've what they've got in
their schedule there, so. So all up, quite quite
comforting. Yeah, it's it's encouraging.
You'd you'd rather some conservatism and wriggle room as
your base case. And you know what if spot or you
know, whatever that price is at that point in time, in that
first second or thirty is more, you know how good's that you
know that's a bonus. But that's The thing is that's
that's an upside. It shouldn't necessarily pay
your base case. You know what I'd love to say,
Ali, is what's that is, is now adjust those commodity prices
for the, you know, for all of the terms and conditions where
traffic takes a little bit off of it, you know, the qualifying
period look backs and all that. Yeah.
So, you know, there's that to think about as well.
And the other, the other sort of key thing to know is the first
two years of production already fully developed and the grade
control drilling has been completed and all the
underground capital infrastructure has been
installed. So, you know, as we all know,
and we've, we've, we've spoken a bunch about on, on the podcast
is restarts and Rev hubs are not without their risks.
But things like this, you know, you know, advancing development
grade control drilling being, you know, sensible when your
financial modelling are all you know a few over many things you
can do to certainly help mitigate those risks as best you
can. And Speaking of Risk Alley, like
one of the things that maybe get some restart projects or
whatever on stock is use a bunch of debt, But you know, instead
of instead of funding it with equity, like, you know, we saw
with, you know, maker or blackout and stuff recently
develops sort of maintained their their desire to to to, you
know, to basically debt fund a good the majority of this
project, right? What do you think of that?
Yeah. I mean, it's I mean, certainly
pretty different to being what to what's been happening in the
gold space, obviously. But I think a couple things in
the sense that they're not perhaps like some of those
examples, you know, like the Spartan makers butt cats of of
the world, you know, develop on a single asset developer.
You know, they've got other sets, they've got their mining
services business as well, which you know, they're saying, you
know, you should should be making, you know, some good
money to, you know, help during that period as well at the the
proportion of debt compared to their market cap.
I think it's like their market cap today is like 660 million
Aussie. This this is AUS $65 million
facility. It's a pretty small proportion,
not like say some of the other examples where you know, some
people are getting debt facilities that are the same
size of their market cap or if if not more.
And the reason I say that is because say something did
happen, you needed to raise equity, needed to do something
to to sort that situation out. Would you be better positioned
if it was a smaller percentage of your market cap or two times
that? So those are some thoughts, but.
There's another thought I had too, which is.
What did you guys think? It's like share price is what
today is like 222-4240. 2. Share price has been as high as
kind of maybe 5 sixes, I can't remember what.
They were definitely fours and fives, yeah.
Shareholders would probably, yeah, not, not want to raise
money at twos. No to yeah.
A bit anchored, yeah, Yeah, no, there's, there's definitely a
bit just just on your, your point as well, Ali, completely
appreciate what you're saying though.
If the market does suspect that there's a raise because there's
debt trouble, then that doesn't go from being, you know, 10% of
the equity that goes down. It does go quickly a bit more
right. But sort of see, see what
happens, you know, it was been very adamant that there's not
going to be equity dilution and that's how he wants to go about
things. So or sort of sort of track it.
Yeah, came to, came for them to be producer.
Absolutely, yeah. What do you guys think?
One final question, what do you guys think about having the
financing and the off take all tied up from the same party?
Pros and cons? Because you could see it as
alignment, but then you could also see it as you know, if
something were to go wrong, you know that they've got the off
take, they've got the debt as well.
How do you guys think about that?
It's. Part and parcel of doing
business with commodity traders like.
Yeah, it's, it's also another, you know, it's a kind of
ramification of a lot of the big banks moving away from from
financing projects. You need to go to different
sources. And, you know, since then, we've
seen the emergence of streamers of royalty companies of
commodity traders funding projects like this and cruelty
and streaming. They come with with different
problems, you know, so kind of got to pick your poison.
Yeah, it like does beg the question though, if you could,
if you if there was a world which you could sell 20% for
whatever, like some some highest multiple of NPV, then why not
put that money into find the restart or or maybe there's an
assumption that that's also going to go to the restart.
But you know, you could you could basically fund up with a
strategic sell down and not not have debt as well and not that
would. Yeah, that's got to be on the
table. Yeah, right.
Yeah. Whether whether the capital for
a sell down goes into the restart or if it goes looking
for the opportunity, I think it's TBA.
Yeah, I know what I'd do. Yeah.
Well, who knows now that they've kind of, you know, done the FID
and they've got the financing, I don't know whether it'd be too
late to if they did get that for like a strategic partner, sell
down, replace the financing that's currently in place with
those funds. Yeah.
I don't know how difficult it would be to unwind that I don't.
Know if you would have executed the financing if that was your
plan because trying to get to keep the off take and why would
you want that if you didn't need to do anyway.
Difficult, but no. It would be exciting to see them
become be producing again at Woodward.
Absolutely. Well done, Ali.
All right, couple, couple partners to thank and wrap it
up. Big thank you to couple sponsors
in the show, Mineral Mining services and CRE Insurance.
Also big thank you to Grounded Sand, big ground support, K
drill, Daysat, Saltbush contracting and the mighty Get
wet solutions guys. Information contained in this
episode of Money of Mine is of general nature only and does not
take into account the objectives, financial situation
or needs of any particular person.
Before making any investment decision, you should consult
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