Focus Ventures (FCV.V) has now told the market it is currently reviewing the updated pre-feasibility study at the Bayovar 12 project, which should be released within the next few weeks. As part of this updated study, the company will now very likely release a mine plan based on one large processing plant rather than the smaller starting plant.
This will increase the initial capital expenditures of the Bayovar 12 project (you should keep a new capex of $175-200M into consideration) but due to the fact the project will immediately start producing phosphate at a higher production rate, the higher capex will be compensated by unlocking value from additional economies of scale. Indeed, Focus is now also incorporating a mine fleet with a higher capacity per vehicle and has re-thought the layout of the tailings storage facility.
On top of that, the Bayovar 12 project will see an increased level of pre-stripping which will allow the company to ‘simplify’ the mine plan. The main unknown factor right now would be to see by how much the pre-stripping costs will increase (the pre-stripping expenses were $23.2M in the previous PFS). Depending on the pre-stripping expenses, we would expect the after-tax IRR to come in between 22 and 27%, which would be a decent improvement compared to the sub-20% IRR in the current pre-feasibility.
Bayovar 12 still is one of the most impressive phosphate projects we have seen, and we hope the updated pre-feasibility study will allow the company to re-gain some trust from the market. The IRR will now very likely meet our standards with an Internal Rate of Return in the mid-20’s, and we would also expect the NPV of the project to increase due to the efficiency gains.
And of course, this new pre-feasibility study should help the company to find a solution for the Sprott-loan which will have to be repaid in September of this year.