MOD Resources MOD 1

MOD Resources (MOD.AX) released the results of its feasibility study at the end of last month, and it does look like the T3 Project meets all criteria especially as the initial capital expenditures for a 3 million tonnes per annum operation are quite low at $182M. As MOD expects to produce 702 million pounds of copper, the capital intensity is less than $0.25 per produced pound of copper. Even if you’d include the $84M in sustaining capex (which works out to be just 12 cents per produced pound of copper), the total capital intensity per produced pound of copper remains just below $0.38.

This, on top of the expected C1 cash cost of $1.35 should result in an all-in and fully loaded production cost (including royalties, sustaining capex, initial capex,…) of just $2 per pound (the AISC is estimated at $1.56/pound, the total breakeven copper price was estimated at $2.15 per pound), making this a very healthy and attractive project at today’s copper prices. MOD’s consultants used a long-term copper price of $3.08 per pound as base case scenario, and this results in a pre-tax NPV8% of US$368M (no after-tax result has been disclosed in the summary).

MOD Resources MOD 2

The next steps are clear: MOD Resources will embark on a 60 hole infill drill program to increase its confidence in the ore zones although the 34.5 million tonnes that will be mined and processed are already in the proven and probable reserve categories. Additionally, some holes will be aimed to discover more shallower copper mineralization within the pit, which could boost the economics. Perhaps MOD should also look into further reducing the zinc and lead content of the otherwise excellent copper concentrate, as those two elements will very likely result in a penalty pricing on the copper concentrate.

MOD expects to be in production by the end of the first quarter of 2021 and although this is possible given the company already has completed its feasibility study, delays wouldn’t be too uncommon.

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The author has no position in MOD Resources. Please read the disclaimer



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