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Client Update – Donner Metals Feasibility Study Says to Me, Show Me The Money!
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September 07, 2010 04:17 PM
For those of you away from your desks over the long weekend, here is an update on Donner Metals* and their recent news of a Positive Feasibility Study, as well as the confirmation of an additional 2.07 Million Tonnes of Inferred Resources at McLeod Deep.
A positive Feasibility Study announcement for the Xstrata Zinc – Donner Metals Bracemac-McLeod zone tells us that the new mine, which has been under construction since July, is economic. By beginning construction back in July, Xstrata made it clear that the results of the Feasibility Study would be positive and in order to meet their own needs for mill feed, construction needed to begin to ensure the Bracemac-McLeod Mine would be ready following the closure of the currently producing Perseverance Mine (wholly owned by Xstrata). A few key take aways from the positive feasibility study include:
Rik Visagie’s Comment: “The feasibility study is a threshold study, which is essentially a very conservative case, prepared by a potential buyer of Donner Metal’s interest in the Project. We believe the metal prices used in the study are exceptionally low for the period of production. During the period 2013 to 2017, we expect zinc and silver prices to average 50% higher, and copper prices to be 20% higher. In 2009, the Mattagami mill operated at an average through put rate that was 12% higher than the rate used in the study. In addition, there is the Deep McLeod, the Inferred Resource and further exploration potential in and around the project which ultimately will add tonnes and life to the mine. Higher prices, greater throughput rates and lower costs due to the increased throughput rate, more reserves and longer mine life will all increase the value of the project.”
The project is sensitive to metals prices, exchange rate and capital costs. A 10% increase in metal prices translates to a 12 fold increase in net present value and a 2 fold increase in internal rate of return.
Industrial Alliance increased their recommendation on Donner Metals to $0.37 based on a 1.0x multiple of their estimated Donner NAVPS (7.0%, $0.90/lb Zn, $2.75/lb Cu, $16.00/oz Ag, & $1,000/oz Au). The increased recommendation price is derived from Industrial Alliance’s revised Bracemac-McLeod deposit NPV and discounted $0.045/lb attributable in situ value of the McLeod Deep zinc resource. According to Industrial Alliance’s analysis, given the increase in zinc prices generally expected over the next few years, the target price could underestimate the upside potential of the stock.
I want to stress that feasibility study is NOT a promotional document. It shows that even with the most conservative estimates available, this new mine is poised to make a great deal of profit before even considering what has been discovered over the past few months.
It’s important to note that the positive feasibility study was based on proven and probable reserves of 3.73 million tonnes grading 9.60% zinc, 1.26% copper, 28.25 grams silver per tonne and 0.43 grams gold per tonne and incorporated an average 19% dilution. Measured and indicated resources tally 3.39 million tonnes grading 11.31% zinc, 1.47% copper, 34.27 grams silver, and 0.50 gram gold. The scope of the feasibility study is on a threshold analysis and DOES NOT assess the extension of the mineralization – notably the 2.07 Million tonnes at McLeod Deep, grading 10.66% zinc, 1.33% copper, 41.72g/t silver and 1.21g/t gold. The extent of mineralization in the McLeod Deep zone is not defined nor has a connection of mineralization with the McLeod Zone been investigated. There is more potential expansion for both the Bracemac-McLeod deposit as well as the McLeod Deep area, which is not taken into account in the positive feasibility study.
Finally I would like to add that this is just one very small section of a 4,750 square kilometer property where exploration drilling is ongoing year-round. As part of the news about the McLeod Deep Inferred Resource, we also got to see some more exploration drilling results; the PD1 deposit is confirming historical results and shaping up nicely as potential open pit nearby.
http://www.grandich.com/
grandich.com
September 07, 2010 04:17 PM
For those of you away from your desks over the long weekend, here is an update on Donner Metals* and their recent news of a Positive Feasibility Study, as well as the confirmation of an additional 2.07 Million Tonnes of Inferred Resources at McLeod Deep.
A positive Feasibility Study announcement for the Xstrata Zinc – Donner Metals Bracemac-McLeod zone tells us that the new mine, which has been under construction since July, is economic. By beginning construction back in July, Xstrata made it clear that the results of the Feasibility Study would be positive and in order to meet their own needs for mill feed, construction needed to begin to ensure the Bracemac-McLeod Mine would be ready following the closure of the currently producing Perseverance Mine (wholly owned by Xstrata). A few key take aways from the positive feasibility study include:
- Proven and probable mining reserve, including dilution, of 3.73 million tonnes grading 9.60% zinc, 1.26% copper, and 28.25g/t silver and 0.43g/t gold based on indicated and measured resources (massive and semi massive sulphides) of 3.39 million tonnes grading 11.31% zinc, 1.47% copper, 34.27g/t silver and 0.50g/t gold.
- 4 year life of mine at a 2,500 tonnes per day production rate, with production expected to begin in late 2012 – early 2013.
- Total capital cost on a 65% (Xstrata) / 35% (Donner) joint venture basis will be US$163.7 million.
- Capital requirements are split with approximately US$115.6 million (2010-2012) in pre-production development for the Bracemac zones followed by US$48.1 million (2012-2014) to be incurred concurrently with production and cash flow from Bracemac as the McLeod zone is developed.
- Economic threshold analysis of the project on a joint venture basis (after tax) returns a 8.1% internal rate of return and an NPV7 of US$3.4 million using zinc: $0.80 $US/lb, copper $2.50 $US/lb, silver $12.00 $US/ounce and gold $1000 $US/ounce with an exchange rate of $CDN 1.04 to the US dollar.
Rik Visagie’s Comment: “The feasibility study is a threshold study, which is essentially a very conservative case, prepared by a potential buyer of Donner Metal’s interest in the Project. We believe the metal prices used in the study are exceptionally low for the period of production. During the period 2013 to 2017, we expect zinc and silver prices to average 50% higher, and copper prices to be 20% higher. In 2009, the Mattagami mill operated at an average through put rate that was 12% higher than the rate used in the study. In addition, there is the Deep McLeod, the Inferred Resource and further exploration potential in and around the project which ultimately will add tonnes and life to the mine. Higher prices, greater throughput rates and lower costs due to the increased throughput rate, more reserves and longer mine life will all increase the value of the project.”
The project is sensitive to metals prices, exchange rate and capital costs. A 10% increase in metal prices translates to a 12 fold increase in net present value and a 2 fold increase in internal rate of return.
Industrial Alliance increased their recommendation on Donner Metals to $0.37 based on a 1.0x multiple of their estimated Donner NAVPS (7.0%, $0.90/lb Zn, $2.75/lb Cu, $16.00/oz Ag, & $1,000/oz Au). The increased recommendation price is derived from Industrial Alliance’s revised Bracemac-McLeod deposit NPV and discounted $0.045/lb attributable in situ value of the McLeod Deep zinc resource. According to Industrial Alliance’s analysis, given the increase in zinc prices generally expected over the next few years, the target price could underestimate the upside potential of the stock.
I want to stress that feasibility study is NOT a promotional document. It shows that even with the most conservative estimates available, this new mine is poised to make a great deal of profit before even considering what has been discovered over the past few months.
It’s important to note that the positive feasibility study was based on proven and probable reserves of 3.73 million tonnes grading 9.60% zinc, 1.26% copper, 28.25 grams silver per tonne and 0.43 grams gold per tonne and incorporated an average 19% dilution. Measured and indicated resources tally 3.39 million tonnes grading 11.31% zinc, 1.47% copper, 34.27 grams silver, and 0.50 gram gold. The scope of the feasibility study is on a threshold analysis and DOES NOT assess the extension of the mineralization – notably the 2.07 Million tonnes at McLeod Deep, grading 10.66% zinc, 1.33% copper, 41.72g/t silver and 1.21g/t gold. The extent of mineralization in the McLeod Deep zone is not defined nor has a connection of mineralization with the McLeod Zone been investigated. There is more potential expansion for both the Bracemac-McLeod deposit as well as the McLeod Deep area, which is not taken into account in the positive feasibility study.
Finally I would like to add that this is just one very small section of a 4,750 square kilometer property where exploration drilling is ongoing year-round. As part of the news about the McLeod Deep Inferred Resource, we also got to see some more exploration drilling results; the PD1 deposit is confirming historical results and shaping up nicely as potential open pit nearby.
http://www.grandich.com/
grandich.com
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