Author: WillP -- Date:1999-03-08 07:01:29
Subject: Another Day Older & Deeper in WSP
DiamondWillie:
Good question. I've danced around that one a bit...but since you've
re-asked it...let us formally tango on the issue. By the way, we will
dance in Canadian currency here.
First off...the MRDI value that is applicable here is the 10 year
plan...with a $104 million price tag.
That clearly doesn't include the cost of getting there. Getting there
has already cost about $12 million...as a guess...I'm not bothering
to look it up. This year will cost $12 million, plus whatever
additional monies are spent this fall. That might end the
pre-feasibility. Might not.
So...let's assume a bunch more drilling over the next 24 months...at
least on the scale of what has been done on the NW peninsula.
That proves up reserves (or lack) on the north shore, NW arm, SE
shore, under the lake...wherever. A reasonable guess for feasibility
is of the order of 50 million...maybe significantly higher.
The $104 million tag for open pit and later underground seems
reasonable. Let's develop a second, similar operation on the north
shore. Well, the processing plant needs to be doubled. The costs
to develop the site are similar. There are some savings...but not that
great. Let's say the additional, incremental cost is $75 million.
OK...turns out that the NE arm is a viable mine site...or the
southeast shore. OK...same game plan. Another open pit with later
underground mining. Same development costs as the north
shore...and a likely tag of $75 million.
Now...you're at 3000 tonnes per day...and have capital costs of
$50 plus 104, plus two hits of $75 million. That's a ballpark guess
of $300 million. Add in a 10% cost overrun factor...you're
approaching $350 million.
Thee are economies of scale here...but they're not that great.
Another place the economy of scale comes into play would be cost
of production. I have played with the idea of $120 per tonne cost
up to 500 tonnes per day...and add $50-60 per tonne for each
additional tonne. Mind you...that's really hypothetical since we
don't know how or where said mining would occur yet.
But...just playing with the number...the cost of 500 tpd is $100 per
tonne, the cost of 1000 tpd is $90 per tonne...the cost of 2000 tpd
is $75 per tonne, and at 3000 tpd...my estimated cost is $70 per
tonne. I don't have a great deal of confidence in these
numbers...but you get the idea. The greater the production...the
cheaper it would be per tonne.
Relatively speaking...a capital cost of $330 million for a 3000
tonne per day operation is minor. Given a 15 year mine life, say,
that equates to an overall capital cost of $20 per tonne. Of course,
that is recoverable from tax payable...so make it an effective $10
per tonne, approximately.
Good question! Now, I suppose you'll be asking what potential
earnings per share these operations might offer. :-)
WillP |
