A big reason for watching Liam’s latest interview for many of us was trying to understand Shaun’s perspective on the DFS extension, so focusing on that:
What we saw from the last 12 months of results is that the SE Crescent is delivering HG at depth, HG pods in the N.Breccia, E.Breccia growing broader and higher in grade with the 'Link Zone' between the SE Crescent and E.Breccias proving to be mineralised and looking likely to figure in future mining plans. In Shaun's words 'when you start kind of filling in gaps with high grade material, I think that's very positive'. All this of course will be reflected in an updated resource estimate that will be implemented into the DFS.
*Benefits of DFS extension as discussed by Shaun include:
- Updating with a larger resource which is annually prepared for mid Feb 2023 by NCM for HY Results VS using 13 month old data in the DFS
- Implementing this larger resource into the mining plan to increase LOM and production
- Increasing the production profile to 3 mtpa from 2 mtpa as signposted since PFS utilising overtake lanes etc. in existing decline which is already in development
- GGP funding has been arranged with above requirements considered and the additional Capex should have the net benefit of lowering overall capital intensity of the project, 'i.e., you'll be getting more ounces and more NPV per unit of capital.'
- The above suggests that increasing the mine’s production capability delivers optimisation, thus feeding into a stronger business case for a DTM.
*Other areas:
- In the interview he also stated 'So there isn’t the additional CapEx of a whole new decline', I am unsure if this means that a secondary extraction method won't be included in this study? Perhaps leaving for a future study or he can't indicate this as a possibility as very market sensitive?
- Will we see production move forward into 2023? IMO the chances improve if the decline progress continues to deliver increased daily rates with a DFS that probably isn’t due until early 2023 now, so another potential benefit in the extension is more time to assess this.
*Lastly, NCM measures that should assist in combating inflationary effects in the DFS as detailed in last earnings call:
- Newcrest has fiscal policies around hedging and long term contracts for areas inc. fuel, manpower, infrastructure maintenance etc. which is BAU for any corporation
i) Market is forecasting some key costs such as fuel, power, shipping and steel to reduce in FY '24
ii) Supplier shifting and contract negotiations through to detailed demand management and inventory management
iii) Consolidation of contracts, volume-based discounts, rate standardisation, low-cost country sourcing
iv) Other levers like the use of digital enablers to increase efficiencies, something Newcrest has used to good effect in other projects.
Notes:
https://www.ggpchat.co.uk/viewtopic.php?t=592
