- Annual throughput - 10 Mtpa (previously 4 Mtpa).
- Average LOM nickel production - 20,000 to 25,000 tpa.
- Average LOM copper production - 20,000 to 25,000 tpa.
- Life of mine (LOM) C1 cost payable nickel - US$2.00 to $2.30 per lb.
- Life of mine (LOM) AISC payable nickel - US$2.90 to $3.30 per lb.
- Oz Minerals is proceeding to the next stage of the earn-in agreement, whereby Oz Minerals can acquire 51% of the project by spending $19 million within 18 months.
Analyst comment: this is a significant step forward for the West Musgrave project, as the increase in the size of the processing facility (10 Mtpa) moves it into major mining operation territory.
Without Oz Minerals' involvement (earning up to a 70% interest), it's unlikely Cassini would have considered a project of this size, given the capital constraints (Capex: $730 to $800 million). However, with Oz Minerals on board this capital risk has been significantly reduced.
Standout results from the study include the exceptionally low operating costs (LOM C1 cost payable nickel: US$2.00 to $2.30 per lb), driving a very healthy annual EBITDA (TSI av. years 1- 5: US$250 million pa - 100% project). Interestingly, we note that on a copper-equivalent basis, the LOM C1 cost payable Cu is US$0.20 to $0.40 per lb, making West Musgrave potentially Oz Minerals' lowest-cost operation.
We also note that despite the increase to the processing facility's capacity, the study outlined an initial 8 year mine life. Given this mine life excluded the inferred resource from the Nebo & Babel deposits (565,000 t of contained nickel and 635,000t of contained copper) as well as the Succoth deposit (943,000 t of contained copper), which are both likely to be included in future studies, it's conceivable that once production commences, West Musgrave may continue operating for more than 30 years.
The information in this email should not be the only trigger for your investment decision. We strongly recommend you seek professional financial advice whenever making financial investment decisions.
Valuation: we increased our valuation for Cassini to $0.34/share (previously $0.20/share).
This valuation was determined using a DCF with a 10% discount rate. We do, however, note the limitations of the DCF method of valuation for long-life, major mining operations such as this, since it does not fully account for its long-term value. Nevertheless, we consider DCF the most appropriate means of determining a valuation for Cassini at this stage.
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About Cassini Resources Ltd
Cassini Resources Limited (ASX:CZI) is a base and precious metals explorer and developer. The Company's flagship West Musgrave Project, located in Western Australia was acquired from BHP Billiton in 2014 and hosts a number of nickel and copper deposits as well as providing significant exploration upside.
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Oz Minerals Limited
Cassini Resources Ltd