Good Morning,
Three of Energy Resources of Australia (ASX: ERA) directors resigned on Monday. The issues are fourfold, not only is the lease and likely extension of it going to be difficult to finalise, but the pollution (clean up), price of uranium and general outlook.
Unless ASX:ERA can find someone (anyone) to take on the liabilities of a five year clean up and that would want a project that has lost near £350M for Rio Tinto over 4.5 years, the stock is set for a finale that does not bode well for equity holders betting long. ERA should be renamed White Elephant!
Its perplexing to see why Central Asia Metals (CAML) have increased their stake in copper bay. There's not only the environment issues (not on a scale of ERA) but with the price of copper and likely return, CAML are at risking of diluting their niche.
Chañaral Bay Pre-feasibility Study (PFS) Results...as per the announcement.
Project economics are based on the mineral resources estimated on the beach and do not consider the material that may be identified in the surf and bay zone, and a preliminary capital expenditure estimate of US$88 million. Estimated C1 cash costs of operation are US$1.34/lb with a project NPV at 8% discount rate of approximately US$50 million after tax, with an IRR of 21% based on a long term copper price of US$3/lb. Future exploitation of the surf and bay zones may provide significant economic upside to the Project.
Unless CAML can identify a higher volume of mining, the risks for a 21% return don't stack up in comparison to Kounrad. Although low cost, one suspect the all in associated costs, are a smidge towards $2/lb. One however cannot go wrong with Dr Copper if you derisk along the way.
Save for a decent analyst spotting the plummet yesterday, what are the implications for the credits from copper producers? Especially those reliant on the sale of Molybdenum. Although paltry its going to hit the bottom line of most...Rio from memory produce near 10K/tpa of Molybdenum. Small but also contributing towards the bottom line!
More later...hopefully?
Atb Fraser
Hi Fraser- Yes, ERAs era is now over Im afraid. RIO have control and they have written off their investment, taken away their cheque book and so what hope is there of anyone else taking on the funding for ERA now? Perhaps mothballing is the only hope here, awaiting a major uranium price move. But that can only last for a year or so, given the other issues here.
ReplyDeleteRe CAML- The Chilean authorities view Copper Bay as a clean up operation, as the whole bay is effectively contaminated at present so the removal of the bulk of the copper shouldn't involve any long term environmental liabilities for CAML. The pics off the Copper Bay website show that the current PFS wasn't that comprehensive, but I agree that the numbers today aren't great and if that was all there was, CAML would have pulled the plug. They are moving forward into DFS as the capex for the current plan is low at $88m, and they see upside re the bay and surf zones, which haven't been assessed yet. So the jury is out but I can see Copper Bay being a cracking asset for CAML going ahead. But that's just me as a long.
http://www.copperbay.co.uk/
Cheers. The Leggie