Hmmmm. Quite an interesting task and very tough for a junior.
What if instead of a billion $ mine, one builds a mine that generates a billion $$'s each and every year?
Start with the highest value material and mine enough tonnage to generate a billion dollars.
CH-6 kimberlite at Chidliak is grading 2.45 carats per tonne.
The initial valuation had a high value of US$236 per carat and at the time, it was indicated that the high value might be considered conservative.
Taking that value and converting it into Canadian dollars, you get (0.785 conversion) CAD$300 per carat valuation. For each tonne, you get a value of CAD$735.
How many tonnes do you need to mill in a year to get a crisp CAD$1 billion? The answer is 1.36 million tonnes.
The concept of Chidliak has been swaying between 500k tonnes per year and 1 million tonnes. To achieve a potential of CAD$1 billion in revenue, a 1.4 mtpa mill would be needed. That is still a reasonable sized mill.
How long can you sustain this?
Between surface and 260 metres below (including a 10 metre overburden), you have 4.6 million tonnes.
4.6 million tonnes / 1.4 mtpa = 3.3 years of generating CAD$1 billion a year.
Not a very long time..but big numbers.
Now you look deeper then 260 metres. From 260 to 510..assuming the steeply dipping pipes stay steeply dipping and the grade and valuation stay the same, you end up with another 4.6 million tonnes. That gives you another 3.3 years. Going from 510 to 760, another 3.3 years.
So, when you combine a pit/underground scenario all the way to 760 metres (similar to Renard), the total numbers of years at CAD$1 billion is 3.3 x 3 = 9.9 years or approximately 10 years.
That doesn't include any CH-7 material.
By the time Chidliak goes through all the economic studies and heads to construction, a mill at 1.5 to 2 mtpa blending a mixture of CH-6 and CH-7 could easily generate CAD$1 billion in revenue over a 10 to 12 year period.
The upcoming PEA will be using a limited pit with both CH-6 and CH-7 to generate a reasonable mine plan. The resource under 260 metres at CH-6 will probably be expanded to a bit deeper depth for a little of explorations dollars...but going down to 760 metres is probably a programme for much later.
CH-6 kimberlite at Chidliak is grading 2.45 carats per tonne.
The initial valuation had a high value of US$236 per carat and at the time, it was indicated that the high value might be considered conservative.
Taking that value and converting it into Canadian dollars, you get (0.785 conversion) CAD$300 per carat valuation. For each tonne, you get a value of CAD$735.
How many tonnes do you need to mill in a year to get a crisp CAD$1 billion? The answer is 1.36 million tonnes.
The concept of Chidliak has been swaying between 500k tonnes per year and 1 million tonnes. To achieve a potential of CAD$1 billion in revenue, a 1.4 mtpa mill would be needed. That is still a reasonable sized mill.
How long can you sustain this?
Between surface and 260 metres below (including a 10 metre overburden), you have 4.6 million tonnes.
4.6 million tonnes / 1.4 mtpa = 3.3 years of generating CAD$1 billion a year.
Not a very long time..but big numbers.
Now you look deeper then 260 metres. From 260 to 510..assuming the steeply dipping pipes stay steeply dipping and the grade and valuation stay the same, you end up with another 4.6 million tonnes. That gives you another 3.3 years. Going from 510 to 760, another 3.3 years.
So, when you combine a pit/underground scenario all the way to 760 metres (similar to Renard), the total numbers of years at CAD$1 billion is 3.3 x 3 = 9.9 years or approximately 10 years.
That doesn't include any CH-7 material.
By the time Chidliak goes through all the economic studies and heads to construction, a mill at 1.5 to 2 mtpa blending a mixture of CH-6 and CH-7 could easily generate CAD$1 billion in revenue over a 10 to 12 year period.
The upcoming PEA will be using a limited pit with both CH-6 and CH-7 to generate a reasonable mine plan. The resource under 260 metres at CH-6 will probably be expanded to a bit deeper depth for a little of explorations dollars...but going down to 760 metres is probably a programme for much later.
very interesting analysis and not unreasonable....however, we do know that pipes have very distinct facets so making an assumption that the values and grades remain the same throughout is a bit unrealistic? It might be better, it might be worse.
ReplyDeleteGreat comment. The lower grade Kim-C at depth may/may not make up more of a %. That looks like a 1 to 1.5 cpt grade range. On the flipside, you also have a valuation model that could be conservative. Reality may be quite different, but having a junior even have this path as a potential is pretty unheard of. I suspect the mill size in the PEA will be X and the mill size in production will be X+Y as the final mine plan matures. Mill size will be an NPV driver.
Deletehow difficult(expensive) is it to increase mill size a few years into project?
ReplyDeleteGood question. If a scalable mill at Chidliak is a possible, I think it would be a great avenue. I think a good reference is all the images from the Renard mill -- https://twitter.com/SWYDiamonds Being in the North, you have to pick a default footprint for the mill building. Maybe you can build it bigger and scale up the mill equipment inside? But, then are you going to want to halt production to install new equipment? I think another option is to have 1 main mill with a beef up recovery circuit and another skeleton mill that has basically a DMS unit and not much else. Assuming you go Underground, you can also look at a pastefill plant..that can be independent of the mill...so not a biggie.
DeleteWhen do you anticipate this project progressing to production? The share price looks a bit depressed.
ReplyDeleteThe current estimate available is for some production to occur in 2020. The deep water port in Iqaluit is scheduled for use in 2020 as well. It doesn't sound like they would get much use of the port in the construction years. A delay of 1 year for other reasons may work in favour of getting the port. I think 2020 is still reasonable..just a matter of that small bit of financing. The PEA will be key in what opportunities are opened for the next step. All the NPV calculations on this site don't just discount to the project start...but discount to present day.
DeletePage 21 of this presentation has a rough timeline - https://www.pdiam.com/assets/docs/articles/2015-01-26_chi_presentation-to-pangnirtung-public-meeting.pdf
DeleteHave you actually seen any work progressing at the property, or is it just sitting dormant, hoping the funds will materialize? Do you know if corporate is actively seeking funding? Except for your website, management is not being very forthcoming with details.
ReplyDeleteThere is definitely a deep breath happening with the PEA. It should hopefully be a big milestone to get the $$'s into the project. At the AGM, I did find out that they prefer to drill off the ice in the April/May timeframe versus the July/August timeframe. Any geotech/further definition drilling sounds like it will be next April. Trenching could also happen in the Feb/March timeframe. I'm not optimistic that anything gets done at Chidliak this summer. They are also still unraveling the details of CH-7 with significant help from Mineral Services. That data is needed before any further drilling on that pipe. As for financing/funding...they will not be announcing any active talks, etc. and will only announce once a deal of any sort is confirmed. I understand that with the PEA, there is good chance of some analysts getting involved in assessing Chidliak and with those analysts comes clients with $$'s. Mgmt IMO knows what they have and are still not allowed to give a whisper of economics to anyone. They are doing this by the NI43-101 Book and waiting on that third party, independent study called a PEA before talking economics. If you want to talk to Tom or team, give them a call. They are pretty good at returning calls within a few days....unless it is a blackout period or such. Also, google Northern Miner Chidliak PEA. Tom just did a phone interview with them and the details are available on the web.
DeleteHave you actually seen any work progressing at the property, or is it just sitting dormant, hoping the funds will materialize? Do you know if corporate is actively seeking funding? Except for your website, management is not being very forthcoming with details.
ReplyDeleteOne cannot read the article, without paying for a subscription. $114/yr. US to read is a bit high, rather buy more stock instead! I realize it would be a valuable resource, but still... too bad they don't charge by the article.
ReplyDeleteI agree. I don't include a link to the article...because sometimes if you google, you will get your 'free' weekly preview and see the whole article. I will send an email to PGD and see if they can get permission to repost it on their own site.
DeleteHere is the authorized reprint -- https://www.pdiam.com/assets/docs/articles/2may16-northern-miner-peregrine-diamonds-on-cusp-of-pea.PDF
Delete