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@BenjaminCox @90bigpicture that was a flippant response to a very valid question. Clearly I can do better, and I might do better.
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@90bigpicture Plenty of information available in the press release to do a rough valuation analysis of this zinc transaction, people just need to read it carefully
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@Brandon I just posted this elsewhere, thought I'd share here too for those who don't frequent index or ~zinc: Finally: http://www.fireweedzinc.com/docs/20170316_FWZ_Prelim_Prospectus.pdf and http://www.fireweedzinc.com/docs/20170131_FWZ_43101_TomJason.pdf (as found on SEDAR)
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@cooperquinn_wy Congrats @Brandon! I know its been a ton of work.
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@drilltracker @BenjaminCox @90bigpiture Great question and well put together guidelines by Ben. I am doing a comment and run as I am heading out of contact for a week. An additional question is when do the integrated mining/smelting companies in China start buying up the 0.3% Cu deposits. For them it is more about maintaining smelter feed than making money on a mine. Even though there is a serious shortage of quality copper assets held by juniors the majors/mid tiers (codelco, FM) hold a bunch of undeveloped in-situ copper. FM could be a target for a Chinese buyer. If that happened they would have a good pipeline of concentrate feed. #copper #index
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@Brandon @drilltracker: for the integrated companies the ambition is total corporate profit, not divisional profit. In that case you have to consider not just how much money the mine will make, but as you say how it will affect the profit margins of a smelter. Smelter margins are tied closely to how close to capacity they operate at, so securing feed in a world where there isn't enough concentrate to go around can justify building what would ostensibly be marginal (or even slightly uneconomic) assets.
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@Brandon Thing is, the value created because the purchaser has a smelter, part of a SPP (Special Purchaser Premium) may not be able to be captured by the vending junior unless there are multiple bids for the asset. A marginal asset will be priced and sold like a marginal asset even if it is a great acquisition for an integrated miner as they may not have to pay any of that SPP to get the bid accepted. Juniors holding out for a big premium from a smelter company may be holding out forever.
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@MartinTurenne http://www.reuters.com/article/us-rio-tinto-ventures-idUSKBN16S206 "London bankers are vying for contracts after Rio Tinto said it had set up a new unit, Rio Tinto Ventures, to develop more specialized mining prospects as it seeks to reduce its reliance on bulk commodities. The big miners have traditionally relied on producing high-margin commodities, such as coal and iron, for the largest part of their earnings. At least three international banks have pitched for business with Rio Tinto's new unit, based on developing projects for various products ranging from lithium to soda ash."
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@90bigpicture
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@BenjaminCox Was going to post to the index today, but no energy to deal with the show. Been thinking about risk reward, and the value of good promotion
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@MiningBookGuy @BenjaminCox - i'll chat with you here if you've got a bit of energy left :)
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@BenjaminCox Cool, what do you want to chat about, I am kinda swamped with day work.
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@MiningBookGuy @BenjaminCox - oh, i've got to take care of something for ~10-15 minutes... your risk/reward promotion topic sounded good! you can elaborate on that and i'll get back to you for sure. but really, anything 'juniors' related is good to me :)
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@BenjaminCox My big issues is economy of scale this week, spending time thinking about relative processing costs of small vs large projects
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@BenjaminCox Some parts of a mill are linear in cost growth vs tonnage, and other parts are logarithmic,
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@MiningBookGuy @BenjaminCox - are you thinking about it specific to one or two commodities? or across the board?
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@MiningBookGuy Are you working with any specific examples that you can share?
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@BenjaminCox not really, spent a bunch of time looking at zinc projects for people under NDA, and then spent some time on gold flotation projects, part of the issue is most of the stuff I work on today just is not public domain
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@BenjaminCox but crush/grinding is energy, and flotation is volume driven.
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@MiningBookGuy that's fine, already helps to mention gold/zinc. so is a big part of this is metallurgy? relating that to small/large projects as well?
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@BenjaminCox I am more thinking about the comments from people that if large low grade projects don't work, then we should be going smaller higher grade
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@BenjaminCox This argument is commodity neutral,
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@BenjaminCox But the small er you get some costs go up linearly, and some costs are logarithmic.
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@BenjaminCox Take a health/safety guy, if he is on a project that does 10,000 ounces a year, or 100,000 ounces, in one case he costs $10 per ounce, and in the second $1..
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@BenjaminCox Grinding once you get to scale, should have very similar opex, (capex per tonne goes down as you get larger)
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@BenjaminCox Floation should have lower capex/opex as tonnes grow.
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@BenjaminCox Mining, is not linear in cost increase as grade goes up, and scale goes smaller.
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@BenjaminCox There is a step function there
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@BenjaminCox Same with water/logistics: if you need a road, the minimum cost is x dollars before the first tonne, same with a well for water or a pipe.
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@BenjaminCox Zinc is what is driving this for me, the shear number of Zinc projects I am seeing, that are "now" economic is scary, and the owners are right each one of them are economic, and lots of them are weeks/months/quarters away from restart..
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@MiningBookGuy @benjamincox - ah ok, good to know you are specifically thinking about zinc. that will be interesting to continue to follow, and compare the small and large projects here
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@BenjaminCox @MiningBookGuy I actually am not, I am doing the same work with low grade gold
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@BenjaminCox If gold goes to $1500 per ounce USD, the same stuff happens
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@MiningBookGuy @BenjaminCox - oh of course. but i think the 'zinc momentum' makes for a more interesting story this minute. you can definitely apply to both zinc and gold. but zinc is 'hot', and this is the type of talk that furthers great commentary/analysis from @ocotilloredux & others in ~zinc
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@MiningBookGuy but i know more about gold, and inherently have more interest there as well :P
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@MiningBookGuy so i'd like to dig into that unless other people chime in
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@MiningBookGuy @BenjaminCox - so i may have missed something. but if you say "same stuff happens" with gold going to $1500 per ounce USD, you mean that a lot of projects come out of the woodwork that are ONLY economic as we get to that price level, correct? and that many could be smaller, higher-grade, and even close to production?
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@BenjaminCox Yes to a degree
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@BenjaminCox Lots of marginal supply turns on/off with price on a global basis, but understanding the opex, and capex, and what drives it, and can you make it slightly less marginal
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@MiningBookGuy @benjaminCox - ok, so you're trying to figure out what components are most influential for improving these 'marginal' projects. and some of the 'logarithmic' costs are key to understanding why seemingly 'ok' smaller, high-grade projects might still be a bad idea, compared to larger ones that costs can more easily be contained/reduced? did i make a mistake in any of that?
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@MiningBookGuy i think it would be interesting to point out how 'smaller/high-grade' could be worse than 'larger/low-grade' (both marginal) across various commodities
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@MiningBookGuy for reasons that go beyond saying "well building a small mine is as complex as building a big mine"
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@MiningBookGuy and also showing a positive for the larger, lower-grade that are very much out of favor across the board
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@MiningBookGuy but that's just my side thoughts. you might not be trying to make any of these points
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@MiningBookGuy @BenjaminCox - i'll be back later. i'll add that i have very little interest in smaller, marginal gold projects (optionality). I also have little interest in VERY marginal large gold projects. but i am interested in 'somewhat marginal, larger gold' projects. this has been discussed on other parts of ceo.ca. the primary way i see the 'somewhat marginal, larger gold' projects improving economics is by finding higher-grade, satellite deposits, and incorporating those into a new study. but IF you're implying that there are clear ways to reduce capex that might actually apply MORE to these types of projects than the smaller ones, that's a very interesting specific point to me.
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@BenjaminCox Actually I am on a completely different tangent, that came from a question that I was asked at one of my two day jobs, what is different about how they are going to do it up this time. So many of these reboots have very little technical innovation behind them, they are just dumb reboots, and that is the scary bit. Some projects get rebooted 3-4-5 times, with limited learning. So my question is if there are leverage points to make these higher cost reboots less risky, and is it repeatable. But this is more with my Outotec role then the junior mining role.
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@MiningBookGuy @BenjaminCox - ah ok, thanks for clarifying. still interesting to me, but not as directly
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@BS Gold price is much less dependent on simple mine supply & demand than other metals (including zinc) because of the large above ground stock. Therefore restarts can work this time around, but #gold price could also drop well below the marginal cost of production for extended periods of time. That's not the case with #zinc, which is used, not put in a safe or jewellery. For industrial commodities significant increase in supply will likely put a ceiling on prices. Technological advances can have the same result. Look at #oil since the shale revolution
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@BS Interesting question would be: what kind of mines would benefit the most from technological advances? Both restarts and new mines. Are there any other commodities that will likely go into oversupply for extended periods of time, like oil, as a result of, say self driving technology, or spectral ore sorting, or other technological improvements/revolutions?
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