Morgan Stanley: We think $4 billion capex for Ivanplats Platreef is a reasonable base case
According to Morgan Stanley:
Based on our conversations with Ivanplats management and our recent site trips, we see a lower likelihood of our bear case cost and capex expectations and have accordingly lowered our bear case probability to 20% from 35% previously and raised our bull case probability to 20% from 5%.* We think $4 billion capex for Platreef is a reasonable base case. Medupi power plant (2014) and Olifants River Water Resource project, providing bulk water possibly from Witbank coalfields, (2017) should be functional by the time Platreef production starts, improving local infrastructure. Further, Platreef has a simple MF1 concentrator flowsheet (single-stage milling) reducing capex requirements. Finally, underground mining should require less water than open-pit.
Base case assumptions summary: Our base case capex estimates of $7.5 billion ($3.2 bn capex at Kamoa for 7.5 mmtpy mill and $4.0 billion at Platreef and $350 mm to restart Kipushi) are based on similar projects in the industry, the PEA study at Kamoa for a 5 mmtpy option, and our conversations with the management. We incorporate ~75% of indicated resources and ~25% of inferred resources at both Kamoa and Platreef in our valuation. We have not modeled any resource increase at Kamoa, Platreef, and Kipushi, which could represent further upside. We are incorporating all of Kipushi resources in mine life due to prior operating history and high cut-off grade.