Rambler Metals & Mining Share Discussion Threads

[snowydays] 17/4/2012 19:29

Chip, your post sounds good but does not actually say anything relevant.

Let me try to put things simply. From the PEA:

=- During the life of mine, after milling and recovery, approximately 980k
tonnes of copper concentrate (616M lbs of copper) will be produced with
193k ounces of gold and 851k ounces of silver


So 616M pounds of copper. For simplicity of numbers lets call that 1 billion pound copper equivalent over the life of the mine.

So $231m CAPEX, just for the Phase 2, plus around $80m already spent on CAPEX for Phase 1.

Taking just the $231m phase 2 Capex dividing by 1bn pouns of copper equals 23c per pound CAPEX over the life of the mine. However, we must also take into account interest which could be earned on that CAPEX so we must use a discount rate for the 1bn pounds of copper equivalent.

Exactly what discount rate was used I am not sure, but according to Mr Mercer the costs come to $3.10 per pound when CAPEX is taken into account. That cost is for the entire life of mine, not just the first three years. In fact in the first three years while still ramping up production we will produce less that 100M lbs of copper, so if we charged all the CAPEX to those first three years we would have to add $2.31 per pound (at least) to production costs.

EDIT:

I will edit my post to add something more.

The PEA gives a base NPV of $251m with average copper prices of $3.53, but it gives NPV of just $37.38 in metal prices are 15% lower. Extending that a bit further the project becomes worthless with copper prices at about $2.90 and has negative value if prices fall below that. Of course these figures are dependent upon discount rates used, and clearly the £3.10 costs use a slightly different discount rate.

[chipperfrd] 17/4/2012 18:53

snowydays

The PEA provided the figures to assist constructing a full earnings model including phase2.

The CAPEX is indeed phazed in over a number of years and, of course, sustaining CAPEX is over the full LoM.

But you seem to be missing the point of doing NPV's and calculating the IRR's.

They include all cash flows including CAPEX and reflect the net totals using the stated discounted cashflows over the LoM.

According to my model (which I tested against their figures) and using the current metal prices, the operational tax flow is positive from year 4 and settles at c. $59m (pre-tax) for most of the LoM.

But the model can obviously be wrong, Cu prices can fall, costs can rise, more CAPEX may be needed. There are no guarantees in this game! But it's what investing is all about.
Chip

[elban] 17/4/2012 18:18

I also had interpreted the footwall total LOM costs as $3.1 per lb.
Chip, are you sure that this figure is wrong?

This is the reason why I had not invested more.
I personally, didn't think that the footwall was presently that good of an investment.

I agree that the long term copper price will be strong.

[snowydays] 17/4/2012 18:18

Chipper, where in the PEA does it say that the CAPEX is paid off over 3 years? In fact it says the CAPEX will be spent over 6 years (or the life of the mine where the tailings expenditure is concerned), and it states that the IRR is just 18% or 14% when tax is taken into account. In my opinion 18% (14%) returns do not equate to paying something off over 3 years.

Yes I do believe that CAPEX must be added to production costs over the life of the mine. In my opinion such costs should be depreciated over the expected useful life of the assets they were incurred for.

We should also take account of interest which could be earned on the CAPEX costs if they were invested elsewhere. After tax returns of 14% are not very attractive when compared to low risk returns of 10% in some corporate bonds.

But that is beside the point. The point was that costs are over $3 not $1.94 per pound. That does not leave a large margin of safety.

[chipperfrd] 17/4/2012 17:52

snowydays,

From the PEA figures the initial CAPEX is paid off over 3 years (at current Cu prices) but the LoM is 20 years!

You surely do not expect to continue to add CAPEX at the initial levels over the full LoM!

As for the Cu price going forward. The Earth is not making any more of it and two of the Worlds largest economies by population are embarking on a multi-decade industrialisation.

Apart from anything else the US$ will surely decline under more QE-induced inflation. So it is far more likely that the Cu price will need to keep up with inflation as the US$ loses influence in pricing terms across the World's commodities.

So perhaps, more likely that the Cu price will remain relatively static in real terms. Which would be OK as far as RMM and myself are concerned - as the UK£ will be following the US$ in it's slow decline whereas the RMM earnings will be directly related to Cu market rates.

It's all down to probability and opinions. But the above scenario has played out to plan elsewhere in my portfolio over the last 10 years or so.
Chip

[chipperfrd] 17/4/2012 16:24

snowydays"steady falls in copper prices"?? Guess it depends on how long a period you are looking at..

[killing_time] 17/4/2012 15:53

Agreed timberwolf3,

" Av annual cash opp cost of $1.94 per equivalent pound copper ".

Taken from PEA study 15/March/2012.

[ned] 17/4/2012 15:49

Cheer up snowydays

CESCO:Rio Tinto Copper Unit CEO:China Growth To Hold At Current Rate

[timberwolf3] 17/4/2012 15:46

i thought production cost was $1.94 USD per llb

[fangorn2] 17/4/2012 15:29

Further L&G news...

[snowydays] 17/4/2012 15:07

Well that's disappointing. L&G will not be making a bid, and probably won't want to increase their holding much now. Back to waiting to see if Rambler can come up with the goods as far as copper production is concerned.

Meanwhile, the steady falls in copper prices might mean that it would be hard to justify expanding into the LFZ where production costs would be above $3lb.

[fangorn2] 17/4/2012 10:20

Looks like L&G bought some...

[redhill] 17/4/2012 08:58

Yes,announcements suggest there is more than one!

[snowydays] 17/4/2012 08:19

"Miscellaneous high priority announcements" That's a new one on me.

So Henderson Global Investors have sold their stake, or at least part of it. But who to? Hopefuly someone who will make a bid for Rambler. Whatever people may say about not selling out for less that £2 a share, I bet most holders reading this would be happy to accept a bid of 60p if it came tomorrow.

[timberwolf3] 15/4/2012 12:54

Yep, common theme amongst Sprott, Tinma and Sandstorm is that not only have Rambler got a very good asset, but that the Rambler management are quality .

[ethelwalch] 15/4/2012 11:03

Agreed Saucepan, the nutters will come. I would have expected their vanguard on that volume however. Perhaps they're not interested in solid well-run Canadian miners with a plan, a future, Sprott, a Chinese offtake partner and an imminent milestone event?

[snowydays] 15/4/2012 10:49

There has been surprisingly litle publicity for Rambler. It looks like just the sort of share which should be mentioned in tipsheets or Sunday newspaper columns. A tipster can make their reputation with shares such as this. If it goes wrong then forget about it, but if Rambler becomes a multi-bagger then the tipster can keep metioning it years into the future that they tipped Rambler when it was just 35p or so compared to £12 in 2015.

[saucepan] 14/4/2012 23:08

Enjoy the peace while it lasts. Eventually the nutters will arrive. With a Rolling P/E 2 of just 2.71 (ShareScope), the Rambler rerating has a long way to go.

[ethelwalch] 14/4/2012 19:51

Huge buys going through are creating volume not seen in RMM for over a year, but this board is still as quiet as a church mouse. I can't decide whether I like it or not.

[killing_time] 13/4/2012 13:18

I see that two more big trades went through at 12.25, starting to get interesting. Expect a holding RNS soon.

[lucky_punter] 13/4/2012 13:14

Investors continue to get behind dual-listed mine developer Rambler Metals & Mining (LON:RMM, CVE:RAB) as the Ming copper-gold mining operation continues to beat expectations.
Today on AIM Rambler is up 3p a share, almost 9 per cent, trading at 37.5p each. This followed a fairly rise yesterday which coincided with an encouraging update.

[dukedosh] 12/4/2012 20:26

Canada following nicely in London's foot steps this evening with exceptional trading volume backing up this break out.

So far this session: 341,500
Avg Vol (3m): 29,706

[redhill] 12/4/2012 19:43

Rambler up strongly again in Canada this afternoon.