Rambler Metals & Mining Share Discussion Threads

[snowydays] 26/4/2012 16:04

"Newfoundland and Labrador's mining industry is providing unprecedented opportunities for business and careers," said George Ogilvie, chair of Mining Industry NL and president of Rambler Metals and Mining. "With continued supportive policy from our government we can continue our industry's expansion to create local economic and social benefits and supply the world with the products needed for our modern society."

[fangorn2] 23/4/2012 16:37

Tinma increase their holding a smidgeon.

[wellum1959] 22/4/2012 23:17

Snowydays, just to say i have worked in the chemical industry for around 30 years using flocculents and other reagents to settle processes. Yes, a change of ore does cause a difference in the process, but usually after a day or two, with help from labs people the right additions can be found. I don't see it as a great problem.

[snowydays] 22/4/2012 21:41

"Froth flotation is a relatively simple recovery process, but each system must be fine tuned to ensure the right reagents and flocculents are used to meet the specifications of the different ore types to be processed. It will take the Nugget Pond team a short time to optimise the reagent mix and through using the Lower Footwall Zone ore as a commissioning medium there is little risk of losing copper to the plant's tails."

Except that the chemistry and rock structure of the LFZ is very different to that of the massive sulphides. How can the process be correctly optimised using a different type of ore?

[killing_time] 22/4/2012 13:09

mdchand, Thanks.

[mdchand] 21/4/2012 22:38

Guys - a major snippit taken from a recent Ocean Equities broker note dated 12th April. Sorry if this has been duplicated elsewhere. Hope it helps with your calculations!

Copper Production – To Commence in Late May

Rambler has a stockpile of ~15,000t of Lower Footwall Zone ore grading 1-1.5% copper. This will be used to begin the commissioning process of the copper circuit at Nugget Pond once the gold production phase has been completed by mid May and the mill has been cleaned out. Processing the lower grade Lower Footwall Zone material first will allow Rambler to fine tune the concentrator process to maximise recovery rates.

Froth flotation is a relatively simple recovery process, but each system must be fine tuned to ensure the right reagents and flocculents are used to meet the specifications of the different ore types to be processed. It will take the Nugget Pond team a short time to optimise the reagent mix and through using the Lower Footwall Zone ore as a commissioning medium there is little risk of losing copper to the plant's tails. The team fully expects to achieve a 92% copper recovery rate at the plant. Rambler has now completed development of a dedicated haulage ramp to connect to the access headings already in place. There are already access headings at the 338 level, the 346 level and the 361 level. This ensures that Rambler will be able to develop sufficient ore in the mine to sustain throughput at the mill and plant during the commercial commissioning of Nugget Pond's copper circuit.

Ocean Comment

The continued exploration success at Ming demonstrates the potential of the Ming mine and the advantage that Rambler now has having developed access into the high grade ore zones. We fully expect the exploration success to continue from the 1806 and 1807 zones as well as from the Lower Footwall Zone. It has been known for some time that the earlier exploration efforts at Ming were production focused and did not get the full measure of the deposit. Rambler now has a de-risked exploration programme ahead of it with a secure revenue source and so it can broaden the exploration effort.

Making new discoveries of high grade massive sulphide lenses is a major success for Rambler and it is an easy win for the Company. There are few mines where such ore zones can be discovered a short distance from operational infrastructure. Moreover, these discoveries would be standout results for an exploration stage company, but Rambler has a fully operational mine so will be able to quickly turn exploration success into mineable reserves and operating
profit.

Gold production has continued as expected. Soon Rambler will breach the 10,000oz production mark shortly before starting the copper circuit at Nugget Pond. We believe that Rambler's operating costs are currently ~$1,000 per ounce and the Company is making a good profit during this initial gold production phase. Furthermore, this gold production counts against the gold loan repayments to Sandstorm Gold (TSX:SSL), getting the Company through the first year of repayment during which the repayment rates are highest.

Everything is now set for the start-up of the copper production circuit at Nugget Pond, which is the main event in the Rambler story. The off take agreement is in place, the mill is commissioned and operating, and the copper circuit has been dry commissioned and is ready for ore. In our view, start up of the first copper production phase is a major milestone for the Company, but it is far from the end of the story for Ming. Rambler's base case production scenario is for 6 years production as a small scale producer but we expect a transformation of the Company well before the end of that period. The early indications are that the Lower Footwall Zone would be economically viable to develop from only a very high level investigation of the ore zone. Continued exploration of the area is likely to demonstrate that the ultimate potential of the Lower Footwall Zone far exceeds its current limits, similar to the 1806 and 1807 zones that continue to deliver standout exploration results. Developing this zone would turn Rambler into a much larger copper producer and would likely allow the Company to have a dedicated gold production circuit as well.

[king suarez] 21/4/2012 14:23

Thanks Chip - I figured there must be some sustaining CAPEX, but wasn't sure whether that is already included in the cost per lb of production.

I did an after tax NPV as well, amortising the CAPEX over the 20 years, but I neglected to include the $60m of tax credits Rambler has to use up! This is obviously a bonus as likely won't be paying taxes for the first few years.

Just found this:


This is the same Sprott with which Rambler have a credit facility? Might give an idea as to the relative debt costs of part of the CAPEX requirement...

[chipperfrd] 20/4/2012 15:01

King Suarez

I found that I needed to add c. $10.5m of sustaining CAPEX per annum to make the PEA NPV(5) balance - which would appear about right for such a bulk tonnage operation. I also added c. $4.5m pa for concentrate transport and refining although clearly TC/RC charges will vary with supply/demand. Currently there is a shortage of concentrate relative to smelter capacity so $50/$0.05 seems about right although subject to change over time.

Don't forget to add in taxation if you are calculating a NPAT bottom line (I end up with c. $38m pa NPAT over the longer term with Cu at current levels) and I also included Interest & D&A before calculating tax charges. EBITDA was c. $47m pa over the last 15 years on flat Cu prices and costs.

It looks like it could be a long-term cash cow to me although it is still very early days and will need a full BFS to ascertain the final metrics.
Chip

[king suarez] 20/4/2012 13:01

I think I will reserve judgement on the possible LFZ expansion until further details are provided.

I did some more modelling last night, based on the info you guys have kindly corrected me on.

I used 1.4% Cu grade (worked out approx 20k tonnes of copper produced at 3,500tpd milling at full production), spread the Capex as directed by Snowy and Chip, used $1.97/lb as the operating cost and and assumed an average sale price of $3.4/lb each year.

From memory, the project started to become cash positive after 6-7 years, and once at "full speed" profits were c$60m p.a.

The pre-tax NPV at 5% discount was much higher than the PEA at $500m odd, and even at a 10% discount rate was still higher, so maybe there are some extra costs I need to be adding somewhere. I assume all ongoing sustaining capex etc is included in the $1.97 cost/lb production, but perhaps not?

I think $40m profit p.a is about right for the current zone, given the info in the interview recently (once at 1,000 tpd) and somewhere $25-30m at current rate of 650tpd.

Anyway - bit of optimism perhaps?!



KS

[snowydays] 20/4/2012 11:35

The $231m CAPEX is all new money which would have to be invested.

It is important to realise that the NPV stated in the PEA is not a new figure showing value added by mining the LFZ. Rather it replaces the existing project mining the high grade massive sulphides.

The PEA gives a NPV of $250m pre tax for the mine if the LFZ is mined, but that is based on dubious assumptions. The mining of the high grade ore, ignoring the LFZ will produce income of some $70m a year with cashflow af perhaps $40m pre tax for at least 6 years. It probably has a NPV of $150m or so using the same metals prices and discout rate used for the PEA.

So mining the LPZ does not add $250m in value, it adds a possible $100m pre tax at most. That is a great deal of expenditure and risk for very little reward.

[king suarez] 20/4/2012 09:48

Yes, thanks for that Snowy. Interesting, although nothing really new. I agree that it would be nice to see Ogilvie buying some shares at this point - to show some confidence, though obviously I don't know his personal financial position!

Does anyone think that part of the $231m Capex quoted in the PEA may be inclusive of the Capex currently being spent in preparation for copper production? (and later expansion of the mill to 1,000 tpd output).

I say this because in the interview above G.O mentions the LFZ adding 5 years onto the Ming mine life, and that the current zone for copper production is estimated at 5 years or so. The PEA mentions Capex and NPV for a 20 years mine life, i.e current zone + LFZ.

I guess details will become more clear as the PEA is updated..

In any respect, it appears that the current zone, planned for mining at 3-4% Cu grade will be very profitable, and was one of my original reasons for investing.

[randombutton] 20/4/2012 07:05

Snowy

Thank you for the link

regards

[snowydays] 19/4/2012 22:06

$3.53 as an average may be ok, if on the highj side. $5.25 for year 1 is not, and $3.77 for the first five years is not.

George Ogilvie interviewed on World Business News Broadcast today. Over 10,000 oz gold poured so far. The interview ends with Ogilvie explaining why he believes investors should buy Rambler shares now, it does not mention that he has bought none himself.

[chipperfrd] 19/4/2012 19:44

snowydays

This is getting a bit boring!

If they have Cu prices averaging $3.77/lb over 5 years and then $3.45/lb over 15 years, the average works out at $3.53/lb.

But they say 'trending to $3.45', so we don't know whether that is year 6 or year 10 ... or any other year for that matter. The further out it goes the lower the earlier prices would be to maintain the average.

As far as I am concerned, $3.53/lb as an average for the LoM is just fine.

Perhaps we should leave it there as we have likely bored any other readers witless!

[snowydays] 19/4/2012 19:27

You are misreading. They have not used the price prediction of £3.50 for year 1 and $3 for year 2. They appear to have used the predicted price of $5.25.

This is clear from the Rambler press release. Average prices of $3.53 over the 20 year period and prices of $3.45 (trending to)used for the last 15 years. That only makes sense if you use ridiculous prices for the first few years.

[chipperfrd] 19/4/2012 18:48

snowydays

I suggest we are 'dancing on the head of a pin' over much of this.

Regarding the copper forecasts: as Macquarie were forecasting $3.5/lb for 2013 (ie year 1) and $3/lb for 2014 (ie year 2) I can only re-iterate what I have already said regarding the negligible impact on early cash flows and the resulting NPV for the LoM.

Please remember this was just a 'preliminary' assessment, interesting though it is. There would be much to do to bring this enlarged project up to a Bankable standard. In the interim they have cash flow from 1806 and are soon to have copper concentrate from 1807. Let's see how that all goes first.

They might well defer/suspend/no nothing about commencement of the LFW project, so getting too concerned about it at the current time and before a BFS and BoD decision regarding go-ahead does seem somewhat premature.
Chip

[snowydays] 19/4/2012 18:32

Chip, no responsible analysis reduces the discount rate used simply because the distant years become irrelevant if the normal rates are applied. There is a reason the distant years become irrelevant, which is that they are irrelevant, at least to most investors.

No one reading here is investing in Rambler in the hope they will make a profit in 20 years time. Some of us probably won't be alive in 20 years. The low discount rate used is suspect at best.

As for the high metals prices being used in year 1&2 being irrelevant you are wrong again. Using a ridiculous price of $5.25 for copper for the first year adds at least $20m to the NPV. It also means that the need for borrowing CAPEX can be ignored.

But my real objection is that Rambler was not open about the prices used in it's press release. It stated that an average copper price of $3.53 was used and hid the fact that unreasonable prices must have been used for the first few years. Deceptive and dishonest.

As for my being bearish about this stock, don't worry. Companies I am enthusiastic about usually go bust. Do the exact opposite of me and you will probably make a lot of money. But actually I am optimistic for Rambler as far as the massive sulphides are concerned, I just hope that they do not throw it away with a risky project expanding to the LFZ. I think there are better ways to proceed.

[chipperfrd] 19/4/2012 17:47

snowydays

Years 1 & 2 are part of phase1 with only c. 8kt being produced. Whereas the total LoM output in the PEA is 284kt Cu. Frankly, the difference in the NPV would be negligible.

As for the discount rate of 5% used for the NPV. For such a long model a higher rate would make it pretty useless as an investment guide. 10% is usual for 10-year projects but as 10% represents a halving over just 7 years. If you apply such a rate to a 20-year NPV the latter years are adding just 1/8th and are becoming vanishingly irrelevant. Even 7% would mean discounted cash flows are halved over 10 years and fall to a quarter over the latter years.

You certainly are incredibly bearish on this stock. Are you similarly bearish on the rest of the stocks in the sector, or is it just RMM?

[snowydays] 19/4/2012 17:16

Here is something very interesting from that PEA, and something which I suggest shows that Rambler have been less than forthright about the details.

This is what it says in Note 2 of the PEA press release, hidden away in the small print as it were:

Commodity pricing for years 1 and 2 are reflective of Macquarie's
published forecast report, November 2011. Long term pricing
beyond year 5 trending to $3.45 per pound copper, $1,200 per
ounce gold and $21.96 per ounce silver. For the life of mine the
average copper price is $3.53 per pound, gold price is $1,320 per
ounce and silver price is $24.16 per ounce


OK, so the average copper price used in the report is $3.53/lb. But from year 5 onwards they are using a figure of $3.45/lb. That means that the average price used in years 1-5 must be $3.77/lb. Or to put it another way, about 10c/lb higher than todays copper price.

But looking even closer, the note refers to "Macquare's published forescast report, November 2011. Now here is something Rambler have omitted to tell you:

Macquire were forecasting average copper prices of $5.25/lb for 2012.

Here is a little table, I stress that this may not be the exact 2011 report referred to as I cannot find that on the internet. This is from Macquire predictions in May 2011.





So it may be that the values given in the NPV are actually based on unrealistically high metals prices for the first few years.

NPV's can often be adjusted to provide convenient results. I always thought the NPV given in Ramblers PEA was suspect, using a low 5% discout rate and being quoted pre-tax. Now it seems it may also have been based on metals prices which were convenient. Note how they use Macquires pricing only for years 1 and 2, presumably it was not convenient to use it after that.

I pointed out in an earlier post that metals prices are far more important in the first few years as that is when large debts can be built up or avoided.

Are Rambler being completely open in their PEA press release?

[king suarez] 19/4/2012 17:02

Agree with that point Chip. Hopefully they would be able to feed the gold hydromet with ore from the Maritime Resources tie in, or any other independent deposits like the Tilt Cove one.

Are there other mines in the region that may wish to use the facilities at Nugget Pond for processing in future?

[chipperfrd] 19/4/2012 16:08

Break even on phase1 is at $1.7/lb according to RMM (which is a bit of a no-brainer!), so they will have to take a careful assessment of all aspects of phase2 before embarking on the substantial extra inward investment required.

Their future notifications and actions will be very interesting as they are hardly likely to commit to such a major project expansion unless they are reasonably confident of long-term success.

However, given the restrictions imposed by the single crusher at Nugget Pond I would imagine that, irrespective of the LFW zone copper, a parallel dual feed (gold and copper) throughput will remain highly attractive given the number of small stranded deposits around their area of operations. So there may well be a strong investment case for a separate 2nd crusher and flotation circuit if they can gain sufficient gold & copper ore feed from their local partners.

So they can increase their options by eventually having the gold hydromet plant being fully independent from copper concentrate production.
Chip

[chipperfrd] 19/4/2012 15:50

King Suarez

I make NPV break even at c. $2.8/lb Cu.

But that obviously chimes with my earlier post regarding this whole issue of C1/C2 costs where I made the worst case $2.82/lb by adding all the total costs over the LoM and dividing by the predicted production.

Perhaps some of this will become clearer when the full PEA is published on SEDAR. I had a look today but it has not arrived yet. RMM said 'by the end of April'.
Chip

[snowydays] 19/4/2012 15:43

Yes, using that particular model in the PEA the breakeven price would be about $2.97 rather than $3.10. There is no exact correct figure it depends on the assumptions you make and discount rates used. The point is, it is a cost which applies for the entire life of the mine and costs are around $3.

[king suarez] 19/4/2012 15:37

That sort of begs the question - how can the NPV be positive at a copper price of $3/lb if the average cost of production is $3.1/lb?

[chipperfrd] 19/4/2012 15:15

snowydays

No need to take figures from my model for metal price sensitivities as they were already provided in the PEA.

At -15% (ie Cu @ $3/lb, Au @ $1122/oz, Ag @ $20.53/oz) the NPV is $37.38m

At +15% (ie Cu @ $4.06/lb, Au @ $1518/oz, Ag @ $27.78/oz) the NPV is $465.61m

At base case (Cu @ $3.53/lb, Au @ $1320/oz, Ag @ 24.16/oz) the NPV is $251.49m

So it all depends on your bull/bear view on metal prices relative to the USD.

Clearly, anyone who thinks prices will decline would not be investing in most resources producers. But equally, anyone with a bullish forward view might well find the upside potential attractive in this and some other producers/developers.

As ever, it's all down to opinion!
Chip