AMC has an “Answer Team” team comprised of staff and public relations affiliates (Blythe Weigh) to respond to questions submitted to our web address of email@example.com. Our team’s intent is to provide shareholders with accurate and factual information. Price sensitive questions cannot be addressed in this forum in accordance with LSE regulatory constraints. Such information will be provided in an RNS. We look forward to your questions.
The Answer Team wishes shareholders and readers happy holidays and will be returning 7 January 2019.
” Have you given up on the creation of a battery ready product?”
Answer Team: The Company is evaluating the preferred pathway to revenue generation. Presently, we are evaluating the sale of concentrate or a Low Grade Matte. Both products are well suited for the generation of Class 1 nickel product which can be used in the manufacture of batteries for the Electric Vehicle (“EV”) market.
This means the purchaser(s) of the product will ultimately dictate what product the final smelted nickel will be used in at that time. With the anticipated growth in the EV market, a substantial amount of the Kun-Manie nickel would most likely make its way into this product.
To generate battery ready product, a sulphate nickel product must be generated. This entails the addition of additional facilities suited to convert the sulphide to sulphate. Not unlike what BHP (Nickel West) is undertaking in West Australia.
There are two pathways for the Company to get to the sulphate product. We construct a leach plant / refinery allowing nickel sulphate generation and its sale, or, we strike an agreement with end users that can undertake generation of the sulphate product from our sulphide product and its use in its captive EV market. All options are being considered.
However, the first step is obviously getting Kun-Manie into production and generating revenues at as low a capital cost as possible which will be reported within the Q1 2019 issuance of the Prefeasibility Study.
“What is the TEO report all about, is it the same as a Bankable Study?”
Answer Team: Please follow the link below, this provides an overview of the Russian mining documentation stages leading to production.
In Table 2, the third column provides the type and level of information required. We note that there is a “Preliminary TEO” which the Company completed to acquire its current “Detailed Exploration and Mine Production Licence”. The work we are speaking of now is the “TEO of Mining Parameters”. This is a much enhanced version which is similar to a Feasibility Study and includes most of the information required within a Feasibility Study and key portions are also suited for inclusion in a Detailed Engineering Study (Bankable Feasibility Study).
“Will England and Russia actually work together in developing projects? What was the mood at the Russian – British Business Forum in London held in November 2018 and was it of any benefit?”
Answer Team: This was the 4th annual Russian – British Business Forum themed “Partnership in Innovation”, the session was highly beneficial and informative to all attendees. The strength of this forum is its continuation to keep the doors of communication open between the businesses of Russia and Britain.
Such gatherings allow one to one and group communications to continue on an apolitical basis. Encompassing numerous business sectors beyond that of mineral resource and mining sector, we have provided links to the forum to provide a more informed understanding of the considerations and attitudes of the ongoing business relationships between the two countries. Please note the audio links fully cover the conference presentations which are done in either English or Russian, depending upon the speaker. The first 15 minutes of the introductory presentation provide an overview of the advancements made in the working relationship between Russia and Britain since inception of the forum.
“The Company presented at the Natural Resources Forum event “Investing in Mining Battery Metals Today To Fuel the Electric Vehicle Future” held in London on 26 November 2018, follow the link below to see the presentation by the CEO Mr. Robin Young.”
“What is being done on shareholder engagement? A commentator on one of the ‘Bulletin Boards’ has stated that the updates to shareholder policy need to be more fully implemented and that AGM meetings should be in London and not elsewhere.”
Answer Team: The Company has presented at Proactive Investor events over the course of the last several years. These events have been well attended by our shareholders but it is a shared platform with additional companies so direct one to one interaction is limited when a number of our shareholders are present and must share time with our team.
For this reason, we have decided to host an Amur only event allowing for a longer forum. This forum is set for the 26th of November. Please see our events page where one can register to attend. Depending on the level of interest and participation, we will consider continuing such Company hosted events allowing for a more direct and informative one on one interaction.
In addition, we will be announcing our Annual General Meeting soon. This will be the third consecutive AGM held in London. The previous two have been well attended and we have taken questions from the floor.
“In the Amur Completes the 2018 Drill Programme press release, you talk about external assaying by another lab, isn’t Alex Stewart Laboratories external? Why double our assaying costs?”
Answer Team: Final analytical results must be generated by external laboratories to ensure fully independent and unbiased results are generated. Historically, our primary laboratory source has indeed been Alex Stewart Laboratories based in Moscow. It is prudent for all companies to have a second certified laboratory to conduct a second independent assay for about 5% of the samples analysed by the primary laboratory. This second stage of assaying is designed to independently verify there is no inadvertent bias by the primary lab. As it is a reduced number of samples, our cost is not doubled but marginally increased for good reason.
The second lab (SGS Minerals in our case) is given samples but not the results from the primary lab so it cannot “match” results with the primary lab. This is important to ensure that the results used to compile resource estimates are based on quality information. RPM Global has confirmed the quality of our information through 31 December 2017 and these checks will be implemented again once all results from both labs are available.
On a scheduling basis, the primary results are completed before the second lab’s results are derived. During the course of the drill season, we have been able to submit samples for this important check assaying step. We anticipate that the results from Alex Stewart Laboratory will be finalised and certified in Q1 2018 with SGS Minerals completing its work thereafter.
“Have the incentives in the Far East improved the foreign investment environment there and for Kun-Manie?”
Answer Team: The source of foreign investment over the last few years has begun to shift from the West to the East. US and European sanctions have reduced the foreign capital inflow into Russia from its traditional sources in the West.
Sovereign funds, partnerships, joint ventures and cross border raw material agreements between Russian Far East-located companies and Chinese companies are being actioned. One of the benchmark accomplishments has been the formation of the China – Russia Direct Investment Fund (CRDIF) focused on development of the infrastructure in the Russian Far East. Numerous other sovereign funding groups have been created and are being considered today (Far East Development Fund, Russia-Japan Direct Investment Fund). China’s Belt and Road Initiative designed to link Eastern Europe with China is also beginning to look northward and is considering the inclusion of eastern Russia.
In summary, the decline of Western investment has coincided with Russia’s repositioning its Far East development with Asian countries and appears to be taking up the decline in the Western capital investment.
Russia’s Far East incentive programme has provided new opportunities creating cross border partnerships in the transportation, construction and mineral resource sectors, enhancing access into China from various areas throughout the Russian Far East. As we have stated on numerous occasions, being located in Asia, we are Asia-focused, which is where the three largest nickel-consuming nations in the world are located (China, Japan and Korea). Also, Kun-Manie is 100% owned by our wholly owned Russian subsidiary (ZAO Kun-Manie).
“Could you please provide any links to presentations that have been made by the Amur?”
Answer Team: This is a timely question as the Minex Forum organisers have just provided a link to Mr. Randy Lewis’ presentation. The complete session is provided wherein much of it is presented in Russian. Mr. Lewis’ 15 minute presentation begins at about minute 38. The link follows: https://youtu.be/dOZOk1SXQj4?t=2299
“How big is this project, how much ground do we have? Could you put it in non-technical terms I can understand?”
Answer Team: Our licence has an area of 36 km2 (about 14 mi2) and it is about 16 km (about 10 mi) long. Within our licence we have identified the deposits of Maly Kurumkon / Flangovy (MKF), Vodorazdelny (VOD), Ikenskoe / Sobolevsky (IKEN) and Kubuk (KUB). The combination of drilling during 2017 and this year confirms that IKEN and KUB are now known to be one large deposit.
To provide an understanding of what has been accomplished, we have identified an approach where we bring our work into the realm of London which most of our shareholders are familiar.
The length of our licence is the approximate distance from Kensington Palace to London City Airport. Thirteen Hyde Parks would fit inside our licence.
The MKF deposit and the now unified Ikenskoe / Sobolevsky through Kubuk deposits are about the same length ranging from 4.5 to 5.0 km each (about 3 miles). If one were to go for a walk from the Gates of Buckingham Palace past Trafalger Square, the Old Bailey, St. Paul’s Cathedral to the Tower of London, you would have walked the length of just one of the two large Kun-Manie orebodies!
In relation to open pit mining, the deepest pit (from the bottom of the pit to highest elevation within a pit) is anticipated to be about 300 m deep (nearly 1,000 ft). In comparison, the Shard is 306 metres tall.
The total amount of currently defined (March 2018) nickel in the resource is about 1.2 million tonnes. If, we were to build a one metre thick wall of pure nickel around Hyde Park, the wall would be about 20 metres (60 to 65 feet) tall.
Lastly, if we were to lay all core we have drilled over the years (likely to exceed 115,000 m by the end of the 2018 drill season), it would stretch from Kensington Palace to within five km of Stone Henge.
“I see little direct relationship between Amur and the links that are provided on the “Electric Vehicles, Batteries and More” tab on your website. I note that some of the links require that I register to see the article that you think is important.”
Answer Team: The intent of “Electric Vehicles, Batteries and More” tab is to provide recent archive of news that may be of interest to the readers and to provide a place to go to read additional information related to the future demand of nickel. It is intended to provide information from a broad spectrum of potential influences that could impact the future demand on nickel.
As for the links that require registration, these tend to be related to copyrights. Obviously, if one does not wish to register to access the related news however it has been verbally reported to Amur management that they appreciate the option.
“I note that you have recently added a section called the Statement of Compliance with the QCA Corporate Governance Code which contains a series of Principles that you are to understand share holder needs and expectations as well as communicate openly. This seems to be a new addition, what are the plans to meet this QCA code to ensure we are updated?”
Answer Team: Yes, from 28th September 2018 as part of a change to the AIM Rules, the Company is required to maintain on its website details of a recognised corporate governance code, how the Company complies with this code and an explanation of any deviations from the code. Each company’s approach is company specific and varies to meet the configuration and objectives of each individual company.
This does not however mean that work in progress and inside information can be discussed before such information is released via RNS. The Company is currently considering various new ways of shareholder engagement, including periodic shareholder (and any other interested parties) evening Q&A sessions where we can more fully address questions related to public domain information.
“Could you please provide an update of Amur’s activities in Moscow at Minex and the Invest in Russia events? What was the outcome please?”
Answer Team: Amur participated at both events. AMC presented an update on our Kun-Manie nickel sulphide project at “Minex”. This is the largest mining-forum in Russia and has been held annually for the last 14 years. In addition to the presentation, we were able to network with various government officials, industry associates and Russian banking representatives.
AMC also attended the “Investing in Regions – Investing in Future” conference, also held in Moscow. Valentina Matvienko, former governor of St Petersburg and current speaker of the Federation Council (Russia’s senior legislative body) was a key speaker. The event was co-sponsored by the Russian Direct Investment Fund (RDIF) and the Agency for Strategic Initiatives (ASI). Key areas of discussion were focused on government initiatives to promote foreign and Russian investment into the various regions of the Russian Federation, especially the Far East which has been the region of prime government focus for development since 2012. Another key topic was the methods for enhancing PPP, or public-private partnerships allowing for the further development of the region.
“Bulletin board chat about R Young’s statement on Proactive is that we do not need a powerline tells me that we will not be building a smelter. Please clarify.”
Answer Team: One must understand that the mine site and the proposed furnace / flash smelter (“FFS”) locations are about 340 km from one another. The FFS is planned to be constructed at a rail station on the Baikal Amur line.
We intend to generate the needed power at the mine via Caterpillar (or equivalent) generator sets capable of producing 40 megawatts of installed power per year costing about $2.5 million per installed megawatt (roughly $120 million total capital expenditure). Whereas to construct a power line will cost closer to $350 required several years to design, permit and build. Therefore, there is a major upfront capital cost difference with onsite power generation being nearly a third of that just to build the powerline.
As for the smelter (possibly a furnace), it is to be located at a rail station on the Baikal Amur rail line where the existing power distribution network is available and also is the source of power for the rail system. The FFS may be able to derive its power from the existing rail linked power grid, however the Company plans that it will need to extend a power line from existing substations located about 15 kilometres south of the proposed FFS site.
The short answer, we will not be constructing a power line to the mine site, but we will take advantage of the existing power grid located near our planned rail station where the FFS may be constructed and this will require extensions from the existing power grid.
“Why did Amur Minerals not attend the Fourth East Russia Economic Forum in Vladivostok?”
Answer Team: We opted out of the Forum to focus on the Prefeasibility Study. Mr. Lewis’ Russian skill set is invaluable to the translation of very recently received Russian information related to the study. We are striving to provide an as accurate picture as possible of Kun-Manie’s potential. This is a complex and large scale project.
We also note that the “Improving Legislation on Geological Prospecting: Subsoil” session is one in a series of ongoing discussions held at numerous venues that have been held over the recent past and will continue into the future. We have been an active participant in the majority of these sessions and our position is well known. This has even included presentations to the State Duma.
“The IIHG resource is reported to be 0.87% nickel but the drill information reports a grade of 0.96%. Shouldn’t these two numbers be the same?”
Answer Team: A Mineral Resource Estimate (“MRE”) includes preliminary mining considerations which are undertaken at the discretion of the independent mining consultant responsible for compiling and reporting the MRE. During the modeling process, internal waste which cannot be selectively removed during mining will be added into the ore zone. In addition, thin zones should also be “bulked up” to anticipated mining thicknesses.
At Kun-Manie, open pit mining is planned to be done on six metre bench heights. At the IIHG (Ikenskoe / Sobolevsky Inferred High Grade), ten holes were used to create the 3D models reported in March 2018. Detailed examination of the available drill results indicates that three holes required inclusion of internal waste (a total of 18.2 metres) with another hole requiring “bulking up” (an additional 3.0 metres).
Based on a 0.4% nickel cutoff grade, a total thickness of 332 metres of mineral was reported to be within the 10 holes providing a length weighted averaging nickel grade of 0.96%. The addition of 18.2 metres of internal waste and 3.0 metres of “bulking up” increases the total thickness used to construct the 3D wireframes to 355.2 metres (an increase of 6.3% to the volume). If you multiply the 0.96% nickel drill indicated grade by 93.7%, you get a reduced grade anticipated within the immediate areas of the drill holes to be about 0.90% nickel which accounts for the majority of this difference that has been noted in the question above.
The second factor that also impacts the estimated MRE grade not considered in the pure mathematical adjustment to drill data is related to the drill hole spacing. Each hole has an area of influence and when working with irregularly spaced holes, this means each hole will have a unique (not equal) impact on the grade estimation process further resulting in additional differences between model and drill hole grades.
“There is a PDF compiled by the “Far East Investment and Export Agency” (“FEIEA”) on investment opportunities and Kun-Manie is included with an investment of 72 million RUB. Is this correct?”
Answer Team: For convenience the Company provides the link to this presentation.
The Company notes there is no date on this FEIEA presentation. Information specific to Kun-Manie (page 11) states that there are one million tonnes of nickel equivalent. It also states the Capital Investment is in the order of 72 billion rubles.
To put this into context, this FEIEA presentation ties to the 29 June 2015 Operational Blueprint reported by the Company at which time, the evaluation was based on the construction and operation of a vertically, fully integrated operation including the Mine, Furnace and Refinery to produce saleable metal at a 999 level.
In the June 2015 announcement, the Initial Capital was projected to be USD 1.4 billion which equates to 72 billion rubles at the then May 2015 currency exchange rate of 51 rubles to the dollar. Therefore, the stated capital cost is correct for the fully integrated operation. The Company also notes that the resource was in the order of approximately one million nickel equivalent tonnes which, since 2015, has been substantially upgraded to 1.5 million nickel equivalent tonnes and was again updated in an announcement in March of this year. Therefore it is fair to say that the presentation is reasonable when considering the 2015 operational considerations which have substantially changed from the information contained within the document referred to in the above link.
Our recent announcements state that we are evaluating a fast track to production scenario which does not include the fully integrated option presented by FEIEA. This substantially differs from the unspecified operational design in the FEIEA document wherein the Company is assessing a toll smelting option and an alternative to construct an owner operated furnace capable of producing a Low Grade Matte. Both options require substantially reduced capital investment than that presented in the “dated” FEIEA document.
“Discussion on the bulletin boards is rife with projections on the expected Net Present Value (“NPV”) we can expect. Rumor is Mr. Young reads these and would be aware of the projections. Can you please confirm or deny these numbers so expectations do not get out of hand?”
Answer Team: We adamantly stress that any indication of the economic potential of Kun-Manie not sourced from the Company should be ignored for multiple reasons. Primarily, these can establish false expectations. In the determination of a project’s NPV, Internal Rate of Return (“IRR”) or Payback period one must include numerous parameters which interact with one another. Back of the envelop estimates often do not consider the key items, some of which are highlighted below:
- What is the design configuration, is it the Toll Smelt Option, the Low Grade Matte Option, the High Grade Matte Option or the Refinery Option? Each will have a distinct set of initial capital costs, sustaining capital costs and unique operating cost.
- What is the planned preproduction period (years) during which the operation will be constructed? When is the initial capital to be deployed and how is it drawn down on a time basis? What is the blend and cost related to the fixed vs mobile equipment by year? Is preproduction mining included to ensure ore is ready day one of mill operation?
- The sustainable capital expenditure must be scheduled to fit the configuration of the operation. This is not a flat line consideration and varies significantly by year. How much working capital must be deployed and over what period of time to cover the period from start up to first revenue payment?
- What is the annual production schedule by tonnes and grade on an in situ ore grade basis and a fully diluted mine grade basis? What is the stripping ratio and has it been balanced to prevent emergency mobile mine fleet purchases? These will differ within each ore zone based on its dip and thickness, not to mention it differs by deposit.
- Has the differing haulage distance and costs from the deposits been taken into account and the related mine to mill ore transport fleet been appropriately identified and costed?
- When is the underground mine operation phased into production and what is the interaction between it and the open pit? Have underground development costs been included and what part of these should be capitalised and what part is attributable to operating costs?
- Metallurgical recovery must be varied by grade (higher with increased grade) and by deposit, resulting in the generation of differing tonnages of concentrate per year which impacts the transport cost from the mill to the rail station. What penalties have been included for deleterious gangue materials such as magnesium oxide?
- Have payables been accounted for in the model and do they vary based on metal prices as is the case with most off take agreements? What metals are included in the payables? Is refining cost of the metal included?
- Transport costs from the rail station to an off taker or FOB location are required. Cost per tonne is about the same but how many tonnes of concentrate, Low Grade Matte, High Grade Matte or refined metal require shipment? Each will differ significantly depending on the configuration of the global operation.
- What method of depreciation has been used (straight line or double declining balance)? Has fixed capital and mobile capital been accounted for appropriately and over what depreciation schedule as these vary between fixed and mobile equipment purchases?
- Have the Net Profits Tax and Metal Royalty Tax been taken into account which varies almost annually for the first 10 years?
Please use discretion in propagating unverifiable projections. Also use of NPV as a standalone figure to evaluate a project can be misleading. In our opinion, a better number is the cost per pound required to attain a NPV of zero which can be compared to today’s price. This is a breakeven price and allows one to evaluate exposure to declining metal prices. The greater the difference between this breakeven price and today’s metal price the greater is the degree of comfort to the institutions that source of funds.
“Will drilling stop when you reach 20,000 metres as planned? I assume it has not because it would have been announced and by my calculations we should already have passed this total.”
Answer Team: As we have announced, our drill plan was designed to accomplish three objectives. This included completion of detailed exploration drilling within limited areas from which mining is planned (note our licence is a “Detailed Exploration and Production Licence”) for use in mine design and use in the acquisition of mining permits, to drill the high grade zone located on the side of Sobolevsky Peak (a part of the Ikenskoe / Sobolevsky deposit) in order to determine the extent of the zone and its suitability for early stage mining and to acquire additional metallurgical sample. The drill plan for the season has been defined to be in the order of 20,000 metres to 21,000 metres to accomplish these objectives task.
As the Company is approaching the end of the month of August, it will determine a more finalised drill schedule. Spares, staff and fuel are already on site, therefore additional drilling could be continued if warranted by the drill results.
“I would like to see more information delivered from the Company and its key management, certainly all key information that is not inside information. What can you do to improve this situation?”
Answer Team: This is a timely question. Over the last weeks, the Company has been working with its Nomad (SP Angel Corporate Finance LLP) for the purposes of updating its website in accordance with the newly implemented Corporate Governance Statement (“CGS”) established for AIM companies. This is related to the Corporate Governance Code 2018 (the “Code”). The update is to include specific Principles (about 10) which need to be provided on all websites.
This long overdue addition will enable us to provide additional company related information. It is to cover strategies, business model, shareholder interaction, present risk management considerations throughout the Company, and address our corporate ethical value and behavior, governance and related processes are a part of the decision making process and how to update and communicate as much as possible with Amur’s shareholders and stake holders without violation of inside information.
“In the upcoming Pre-Feasibility Study (“PFS”), it will include considerations based on input from financial institutions. It would be helpful to understand what is being included. Can you provide more information as to what is included in these considerations?”
Answer Team: It comes down to developing the lowest initial capital cost operating scenario providing the fastest track to a stable cash flow substantial enough to allow for repayment of the project finance package, covering life of loan sustaining capital expenditures and ensuring that there is sufficient funds to cover operating costs during the lag period between mine startup and receipt of the first revenues (working capital). However, there are additional considerations that must be woven into the operational plan that is being funded. These include price volatility, variance from the design parameters, and variance between the planned and actual capital and operating costs. The earlier a company can assess a project’s exposure to the above considerations, the better plan to fastest cash flow can be developed along with sufficient robustness can be built into evaluation to ensure that extended low metal price cycles will not result in any shutdown or failure to meet financial obligations.
This approach may not result in a startup of a fully maximised money generator yielding the highest NPV but it does set the ground work allowing for a company to establish a firm financial footing enabling it to further expand into an even more profitable company through the use of funds derived from the startup design.
As we have noted in the past and based on public information, the fast track to cash for Kun-Manie is indicated to be an off take agreement for smelting of sulphide concentrates from which profits will be used to repay the financial commitments related to the funding package.
By taking a more detailed examination of the current information and having been provided with suggested guidance in discussions with financing institutions, the Company is finishing up the final review and the inclusion of its insights at this stage has allowed the Company to identify specific considerations in the life of mine project implementation schedule.
“How much benefit is received from the reduced Net Profits Tax (“NPT”) and Metals Royalty Tax (“MRT”) payments? Are these used in the current cash flow models?”
Answer Team: The following table presents a schedule of the reduced NPT and MRT for Far East projects. As you can see from the table below, mining of the highest grade materials during the first five years is very beneficial to a Company when the NPT and MRT ranges from zero to a combined total of 4% as opposed to the full combined total of 28%.
|NPT + MRTr||0||0||2||2||4||14||16||16||18||18||28|
In addition, the time value of money in the calculation of a project’s Net Present Value (where later dollar are worth less than today’s dollars) is a second critical reason for to move lower cost metal as far forward as possible.
As an example only and not including the impact of Depreciation and Amortisation which also impacts the NPT and MRT calculations of a project, let’s assume a $100 USD operating profit per ore tonne. During year’s one and two, a $100 USD operating profit remains intact as there is no NPT or MRT. Looking forward to say year 10, the same $100 USD operating profit ore tonne would be reduced as the NPT and MRT will be payable. The calculation (without Depreciation and Amortisation) for this tonne of ore can be approximated by the following calculation:
- MRT = $100 x 8%
- NPT = ($100 – MRT) x 10%
- Operating Profit less MRT less MPT therefore is approximately $82.80 per tonne.
“I am confused, does an offtake agreement with a toll-smelter have to be in place to enable Amur to build its own smelter.”
Answer Team: If a company does not have a fully integrated operation all the way from mining of the ore through the fabrication of 999 metal and its sale into the international market, an offtake agreement will be required. These offtake agreements will have specific and unique structures and schedules depending on the product sold by a company and how it will be processed, refined and sold onward to an end user. The agreements often vary amongst the offtake groups even if it is for the same product and is being treated using the same approach.
There are agreements which are not specifically referred to as offtake agreements that may be called something else. However, these sales / marketing agreements (and other utilised names) are in reality considered to be offtake agreement by another name. They function in a similar manner which is taking a slice or percentage of a sale and there are generally associated fees too.
As for our specific plans, there are various options available to us regarding implementation of an offtake agreement(s) which are dependent of our saleable product from which we plan to generate the revenue stream at Kun-Manie. We will require offtake agreements to be in place in one or more forms. These will be structured around the current operational plan and will include the following considerations:
- The generation of a concentrate for Toll Smelting will require one or more offtake agreements for smelting of the concentrate at a facility suited for the treatment of the nickel concentrate. Two typical companies based in China capable of smelting concentrate include Jilin Nickel and Jinchuan, there are also options available in Japan and Korea.
- If we generate a Low Grade Matte (“LGM”) at a Company owned furnace or smelter, offtake agreement(s) would be required with groups capable of treating, what is referred to as, an Intermediate product. Companies such as Jinchuan, Trafigura, Glencore and others are also available within Asian theatre throughout China, Japan and Korea.
- It may also be possible to have offtake agreements for both concentrate and treatment of the Intermediate product simultaneously depending on the timing of the integration of the furnace or smelter start up into the project if it is not operational on Day One.
“Several bulletin boards estimates of the Net Present Value (“NPV”) of the project are being thrown around. Can you please verify these results, some of which are as high as US$1.9 billion?”
Answer Team: We cannot comment on any projections of the financial potential in accordance with London Stock Exchange requirements. We will release our estimated NPV, Internal Rate Of Return (“IRR”) and project related information when we have completed the inclusion of the newly released mining potential, reported 28 June 2018, which is tied to the March 2018 Mineral Resource Estimate update for the Ikenskoe / Sobolevsky (“IKEN”) and Kubuk (“KUB”) deposits, and when we have the economic potential of the project, which is based on the Prefeasibility Study (“PFS”). This is not a simple plug and play scenario, it requires diligent work. These non-Company generated numbers discussed over several bulletin boards should be taken with a pinch of salt as they do not have the detailed information from which to make a statement or investment based on the numbers.
Given the ongoing work, we highlight that we expect our benchmark to surpass what was set out in the 29 June 2015 announcement. In that announcement, it was projected that an NPV (at a 10% discount rate) was projected to be in the order of US$700 million and an IRR of 21%. Those financial projections were based on the Company generating refined metal at a global initial capital cost of nearly US$1.4 billion. This was identified as an Operational Blueprint.
Much has been accomplished since the Operational Blueprint was provided, and this has been incorporated into the current update to the PFS. This work includes our development of a pathway to earliest revenue generation and production in order to develop the most efficient approach to profitable production. This obviously would not be the full construction of refinery quality generated metal.
“Why is there a difference between the reported exploration nickel and copper grades reported in the exploration RNS and that provided in the mining potential RNS? The mining numbers are lower.”
Answer Team: The mining potential announcement, released on 28 June 2018, includes dilution whilst the exploration numbers, released on 5 July 2018, do not. Dilution is the external material with grades lower than the cut-off grade that must be removed with the ore. The amount of this diluting material varies considerably and depends upon mining method and the location, attitude, size, shape and wall rocks of the ore zone.
For our design work, we anticipate that waste from both the upper and lower boundaries of the ore will be mined and sent to the mill, “diluting” the grade of the ore. For calculation purposes, and using the open pit mining scenario, calculations indicate that about 1.5 metres of waste at both horizons will be added into the ore at a nickel grade of 0.0%. This yields the following mine diluted grade of:
Using the Maly Kurumkon / Flangovy (“MKF”) drilling reported in late June as an example, the exploration indicated grade at the 30 metre thickness of 0.80% nickel is adjusted to the mined grade per the following equation:
((Ore Thickness x nickel grade) + (Dilution Thickness x 0.0% nickel)) / (Ore + Dilution Thickness)
((30 x 0.80) + (3 x 0.00)) / (30+3) = 0.73%
Note that the indicated open pit mined grade based from the 28 June 2018 announcement at MKF is 0.72% nickel. Virtually no difference once unavoidable dilution is included. As dilution varies based on thickness of the ore, the impact of dilution on grade will vary by deposit and thickness within a deposit. Therefore, a simplistic use of a single percentage of all areas and all deposits should be avoided.
We also wish to confirm that all reported calculations related to financial parametres have always included this dilution factor as well as mining losses. Mining losses are defined as ore that does not get delivered to the mill due to spillage, displacement of the ore during blasting, ore inappropriately not delivered to the mill, etc.
“In the 28 June 2018 press release, it is stated that there is the potential to extend the mine life up to 23 years. Previous information says you are using a 15 year mine life. Which one will it be?”
Answer Team: As stated in the second paragraph of the announcement of 28 June 2018, “These results are being incorporated into the 15 year mine production schedule of the Pre-Feasibility Study (“PFS”) being compiled by the Company.”
The selection of the 15 year mine life is based on the current specific term granted within the Russian mineral resource agencies which is defined to be through to 31 June 2035. Given the time for funding, construction and project execution, this works out to about a 15 year mine life. The opportunity to extend the licence is available to the Company but is not presently in hand nor can it be guaranteed as a definitive, assured extension as this is a decision to be undertaken well into the future. We must work within known parametres.
We also note that Earnings Before Income Tax, Depreciation and Amortisation (“EBITDA”) estimated within a cash flow model should be discounted for the consideration of the time value of money. This is determined via the calculation of a Net Present Value (“NPV”) at various discount rates. If one assumes a constant EBITDA stream (are even variable as will be the case), EBITDA decreases with time. One does reach a point at the late stages of a mine’s life where the EBITDA contributes substantially less value than indicated by undiscounted cash value. Again, a 15 year life is a reasonable fit for our project assuming discount rates ranging from 8% to 10%.
“In the Robert Schafer’s statement in the annual report, he said “We have benefited in return by gaining current knowledge of the global markets for nickel and just as importantly, the end users of nickel. With those relationships in place, and new ones being developed, in 2018 we are in a strong position to undertake focused activities that will support the Company’s aim of attracting the right sort of strategic investment and partnering. Please be more specific if you can.”
Answer Team: We can provide a general overview but cannot be specific at this time as there is a great deal of work being undertaken by the Company in developing a best suited plan to move forward. However, we can provide some insight into our considerations.
We have presented at various public forums and stated in our announcements that we are. and will continue to, develop a more focused Asia centric policy. All too often, it is forgotten that nearly two thirds of Russia is geographically located in Asia and its longest border is with China. Direct rail links to China and seaport availability for short hop transport to the three largest nickel consuming nations in the world (Korea, Japan and China), geographically places Kun-Manie is what we call the ‘target zone’. This is where we are located and we fully intend to focus on this market through continued discussions with our current contacts and the development of new connections, as can be seen by our recent trips to Korea and China. We must look past our proverbial consideration of distance here in the UK as this project is most definitively a project of potential global impact.
Politics is always a consideration. We continue to maintain a highly positive relationship at the local, state and national levels. Locally, we already employ staff during exploration and will look to support the community once we are in development and production. The former governor of the Amur Oblast, Mr. Kozlov, with whom we have had numerous meetings, is keen to see our project developed has recently been elevated to a key position within the Far East Development Programme. The newly appointed governor of Amur Oblast, Mr. Orlov is also well acquainted with both Mr. Young and Mr. Lewis and is fully informed on the Kun-Manie project. He is also fluent in Chinese and provides an excellent conduit into China, the next door neighbour of Amur Oblast. These contacts are important, along with those we have established over the years with the Far East Development Fund, the Far East Import Export group and the Russia China Direct Investment Fund (funds source by both Russia and China).
Working with Medea Financial and other, as yet unnamed western and Asian organisations, we continue to develop additional and new contacts within the region. These include end users of nickel, construction and engineering companies, financial institutions and potential joint venture partners. Obviously, we cannot discuss any specifics regarding these relationships until we have a concrete agreement in place. Our desire is to maintain as flexible structure as possible to enable us to develop a best suited position for the Company.
The rapidly advancing Electronic Vehicle (“EV”) market is a game changer for many nickel companies, especially sulphide nickel producers which generate a “Class 1” lower cost nickel product suited for EV battery manufacturing. This presents additional opportunities ranging from royalty agreements (possible for each separate commodity that we may product including nickel, copper, cobalt, platinum and palladium) to that of direct sales into the energy market which includes renewable energy sources (solar, wind etc.) and large scale energy storage facilities such as that built in Adelaide, Australia. We must not forget that stainless steel production (now representing from 60 to70% of world nickel consumption) is expected to grow and high consumer appetite is expected to be sustained in the long term. It is a wide berth of opportunities which must be systematically and methodically considered.
One must bear in mind that we are a British Virgin Islands domiciled company, which owns Kun-Manie through its wholly owned Cypriot company, Irosta Trading. We receive continual updates from our legal representatives (Norton Rose Fulbright LLP) based in Moscow which provides an avenue of information to potential political complications which have not impacted us to this point in time.
It never has been, nor will it be, a simple decision to select one option that best benefits the Company. As stated in the past, patience is a virtue. We will continue to review our options to extract the maximum value of Kun-Manie with regard to the selection of a strategic partner or partners.
“In the 13 June 2018 announcement on drilling it was stated that, the large high grade Inferred Mineral Resource block located at Ikenskoe / Sobolevsky could provide two to three years of production. If infill drilled and it becomes an Indicated resource, AMC says it will be moved forward in the production schedule improving the project economics. What will the impact be?”
Answer Team: To provide an answer to this question, we must complete the ongoing open pit analysis for the area included and between the deposits of Kubuk (“KUB”) and Ikenskoe / Sobolevsky (“IKEN”). Once finalised, these results can be consolidated with the already defined mine potential defined at Vodorazdelny (“VOD”)and Maly Kurumkon / Flangovy (“MKF”) establishing the licence wide mining potential based on the March 2018 Mineral Resource Estimate (“MRE”). This estimate includes all drilling completed through 2017.
The current open pit analysis is intended to accomplish two objectives. The first is the identification of the total mining potential (Measured and Indicated resource only) suitable for use in project financing with the second allowing the Company to effectively plan its 2018 infill drill programme. The second goal includes the identification and conversion of the largest (29 million tonne Inferred resource) block of Inferred resources at Kun-Manie.
With regard to project financing, a mine reserve life covering a period being 150% the life of a defined funding instrument is typically required. Assuming a two year drawdown on the funding facility and a five year repayment structure, the life of mine reserve design is targeting a total of about 66 million ore tonnes derived from the Measured and Indicated resource categories. Presently, 118 million tonnes of our 155 million tonne resource fall within the Measured and Indicated category and are available for reserve determination.
By allowing the open pit design analysis to include Inferred resource, we can identify what portion of the Inferred resource is potentially economic and therefore requires infill drilling to confirm its grade and tonnage. At this time, and based on historical pit analyses and strip ratios, we are aware that a substantial portion of the Inferred resource is of a grade and thickness suited for future inclusion in the mining potential. Though not definitively known without the pending Measured, Indicated plus Inferred pit design results, we can proceed with infill drilling of the Inferred ores located nearest the surface and characterised by lower stripping ratios. Once the current open pit design is available, the detailed final drill plan for this Inferred block of higher grade material will be established.
With regard to confirming that the IKEN Inferred area contains nickel grades approaching 1.0% nickel of mineable thicknesses, this year’s drilling could, and is anticipated to, beneficially impact the project Net Present Value (“NPV”). With successful completion of drilling, the newly upgraded resource could well replace lower grade ores that may be scheduled for early production. By recovering more metal in earlier years, the NPV can be substantially increased. There is also further benefit by moving this material forward as there are reductions in both the Net Profits Tax (“NPT”) and Metals Royalty Tax (“MRT”).
“How many batteries could be made from the nickel at Kun-Manie?”
Answer Team: There are numerous Electronic Vehicle (“EV”) configurations related to battery designs each of which contain varying amounts of nickel. Presently and for our purposes of answering the question, we have assumed an automotive EV battery contains about 50 kg’s of nickel. The Company’s average resource grade is 0.75% nickel. Assuming 80% metallurgical recovery to our concentrate, about 8.3 tonnes of ore is required to produce the nickel to manufacture one of these typical EV batteries.
This is an interesting metric which can be used to get an indicator for project comparisons. Let’s call this a ‘Tonnes Ore Per Battery’ factor. As an example, Royal Nickel’s (“RNC”) Dumont project would require 43.1 tonnes of ore to manufacture the same battery based on its reported average grade of 0.27% nickel and its metallurgical recovery of 43%. This comparison indicates that we would have to mine about 20% of the tonnage that RNC would have to mine to make the same battery. In an open pit production comparison scenario, our surface mining fleet would also be far smaller in size and the associated mine fleet capital cost expenditure.
We also note that our average cobalt content is 50% (averaging 0.015%) higher than RNC’s 0.010%. Again, this is indicative but it does provide another method where projects can be compared.
“Will recycling of batteries have an effect on the nickel market and eventually the anticipated nickel boom will not be as good as everyone thinks it will be?”
Answer Team: It is the Company’s view that eventually the recycling of nickel batteries will have an impact on the market. However, this source of nickel will not likely have a significant impact on the nickel market in the near term, the Company estimates from 10 to 15 years.
The current life of the EV batteries is between 10 to 15 years. This will be the point in time when the majority of the current, existing batteries will begin to enter the “recycle phase”. The current inventory of EV’s represents about 1.5% of today’s world nickel consumption. Conservatively, EV growth (new nickel needed) is projected to increase by approximately 3% per annum. This means recycling of today’s batteries will have a minimal impact on world supplies for the next decade, as demand will substantially outpace the battery recycle component.
“The C1 reported costs for royalties and taxes are very low? Aren’t Russian taxes and royalties higher from what I can see in my web searches?”
Answer Team: Yes, Russian Net Profits Tax is 20% and Metal Royalties are 8%. However, as a part of the Far East Development programme, companies (Russian and / or foreign based) qualify for “discounted” rates for both cost centres. For example, the Net Profits Tax is set to zero for the first five years, then 10% for the next five year. Also, Royalties are zero for the first two years and then increase by 2% in two year intervals until they reach the 8% level. You can see the impact of this mechanism in the Company’s projected C1 costs when you look at the annual cost per annum chart contained in the following link:
If you examine this chart, in year 10, and beyond, the reduced Net Profits Tax and Metal Royalties Extraction fees are no longer in effect and are reflected in increased C1 costs per pound of nickel.
“Can you please inform us more exactly what level of detail will be contained in the Pre-Feasibility Study (“PFS”)?”
Answer Team: RPM Global, one of the Company’s independent consultants has a good breakdown of what should be contained in the study. Generally, it is an intermediate study step in the engineering process allowing a Company to evaluate the technical and economic viability, and potential of a mining project. The PFS is an important component for project development as it represents the minimum prerequisite for conversion of a geologic resource into a reportable reserve.
Total engineering at the PFS stage is still limited, often representing less than 10% of the total engineering effort, but should increase the level of accuracy in the cost estimate to ±25%. The engineering objectives of a PFS are to study a range of development options to reasonably assess the following:
- Mining method and production rates
- Dilution and extraction estimates
- Processing method, processing rates and recovery estimate
- Tailing and waste containment
- Hydrology studies
- Marketing requirements
- Environmental and permitting requirements
- Social License
- Governmental requirements
- Legal concerns
- Detailed financial analysis and project economics with sensitivities
- Capital cost estimates
- Operating cost estimates
At the PFS stage adequate geology, drilling, sampling and QA/QC (to verify the accuracy and precision of the assay test work) and mine engineering work has been conducted to define a resource that may be convertible to a mineral reserve pending positive economic outcome of the PFS.
Significant metallurgical test work, typically involving Locked Cycle Testing (“LCT”), and which may include pilot testing, has been performed on representative ore blends of all significant rock and mineralisation types based on selected composites, representative of key years in the life of mine schedule. In addition, the feed grade-recovery relationship for major ore types and thus blends is established.
Mining and processing parameters should be sufficient for flow sheet development, production and development scheduling and major equipment selection. Typically, flowsheet modelling is conducted, particularly for the comminution circuit.
With regard to infrastructure and planned operations, potential issues with important environmental and social considerations must be assessed to determine the potential show stoppers such as the existence of critical habitat and the level of involuntary resettlement required for the Project.
Capital and operating cost estimates utilise vendor quotes on major equipment, but other construction costs are often factored.
The economic analysis of a PFS is of sufficient accuracy to assess various development options and overall project viability.
“The nickel price is over $14,000 per tonne ($6.50 per pound). In the past, AMC reported results on the economic potential of the project using $16,500 per tonne ($7.50 per pound). What will be used in the future because the Electric Vehicle market could result in much higher prices if projections are reasonable?”
Answer Team: AMC has historically used the long term nickel price of $7.50 per pound. Over the last five years the Company has seen pricing range from a low of about $3.50 per pound to a high of about $9.50 per pound.
The Company will be using a range of nickel metal prices to assess the sensitivity of Kun-Manie to metal price volatility. As AMC has always used the $7.50 nickel price, it shall continue to include this price as it falls within the range of prices that are being included in the Company’s study work. This will allow for a direct comparison to previously reported economic potential allowing for everyone to determine how much the project potential has been improved over time which includes AMC’s resource growth and acquired technical information since the Company last reported its financial potential in June 2015.
Alternatively to this $7.50 AMC benchmark price, industry approaches to project financing and assessment of the economic potential often use a consensus long term pricing derived from multiple sources. AMC’s most recent forecast indicates the long term price (three years hence) to be in the order of $8.00 per nickel pound. Hence, the PFS economic assessment will likely utilise this nickel price as its base case. A project’s potential is assessed at a range of prices (±25%) to determine financial exposure to metal price fluctuation. In this scenario, AMC anticipates that the economic section of the PFS will include nickel metal prices ranging from a low of about $6.00 to a high of $10.00. The Company’s historical $7.50 benchmark price falls within this sensitivity range.
“In the Mining Potential Update (16 April 2018), the projected EBITDA for the Ikenskoe / Sobolevsky and Kubuk deposits used the February 2017 resource estimate. Two weeks later, the C1 projected costs were reported also based on the mining potential from the 2017 resource at these two deposits. When can we expect an update on the EBITDA and C1 costs including the 50% expansion on to the resource we discovered during the 2017 drill programme?”
Answer Team: This question is very similar to one answered last month. To further elaborate, this can be completed once the final open pit designs are reported by RPM Global (“RPM”) and an updated production schedule is compiled. From the RPM results, various pit options will be identified and the Earnings Before Interest, Tax, Depreciation and Amortisation (“EBITDA”) can be calculated for each deposit. The determination of C1 costs on an annual basis requires a production schedule to be compiled and requires additional detailed work thereby resulting in AMC being able to provide updated C1 costs.
“Why have you not informed us of the 1% loans that are available to us? We should know about this, it is important?”
Answer Team: This information has been presented in numerous open forums including Proactive Investor presentations and interviews, on our website and has been highlighted to the international press. This is not new information. For those who would like to have further but limited information, see the following link.
We further note that Mr. Alexander Krutikov, Deputy Minister of the Russian Federation for the Development of the Far East is keen for the programme he spoke about to be implemented by September 2018. It is important that the programme of which he speaks is not in place today and that the Company prefers to stay focused the reporting fully implemented and approved options.
Do not despair that this specific plan is not yet in place or may not be approved, there are current opportunities available at such low rates in place now. Again, we have noted this numerous times as stated. This potential implementation of this opportunity is yet another indication the Russian Government wants the Far East Development programme to a success. Low cost opportunities and the potential to obtain loans does exist through the Far East Development Fund, the Russia Direct Investment Fund, and others.
“The following commentary from our participation at the “Battery Materials – 2018” conference held in Shanghai, China on 18 / 19 April 2018 follows:”
Comments from Robin Young: The most interesting session was held during the morning of the first day as it was focused on nickel. Much of the remainder of the conference and presentations were lithium focused, with scattered sessions related to copper and cobalt.
- All Things Chinese: The growth potential in the EV market in China alone is very impressive. They are already buying 55% of the world’s 1.2 million EV vehicles purchased last year with a million planned for purchase this year. They intend to reduce fossil fuel consumption by 20% within the next two years. They are planning to build a new city called “AutoCity”!
- EV Battery Comments: At the current design of 6 (Ni) : 1 (Li) : 1 (Co), the shift to 8:1:1 is already well underway. Designs to increase the nickel component are also underway that could result in a 9.5:1:1 battery pack. Work is needed on this 9.5 battery to ensure a stable and safe design at this higher nickel content. The future solid state batteries will require the same three commodities of nickel, lithium and cobalt, so no loss there for these markets. It is projected that EV battery material requirements will increase about 45% per year at the current design configuration and growth in the EV market. Recycling of the EV batteries will take time to develop. The longer life of the EV than that of an ICE (Internal Combustion Engine) means longer periods to the reaching the recycling stage projected to have no effect on the market for 10 to 20 years.
- Why Would You Buy a Chinese Car? An interesting discussion presented the scenario that we should all be ready to see Chinese cars on our roads throughout the world. The analogy is taken from the advent of the Japanese auto industries move into the international markets in the late 1970’s and early 1980’s. Why not, the EV will revolutionise the world and the Chinese will be at the front of its development allowing it to compete aggressively in this market. Wow! And looking further down the road, a key selection criterion to buying a car will be not that it is electric and can take you to your destination autonomously, but what options you will have while getting there. With computerization and electrification of the EV, the choices are projected to include the type of entertainment centre, your ability to work on line whilst in transit and more. Imagine buying a car based on the quality of the surround sound and video image of the onboard theatre.
- Utility Energy Storage on the Up: Renewable energy needs to be stored for later use. The move to these energy sources is increasing the demand for cost effective large storage capacity units. The City of New York planned to replace a substation at a cost of $1.0 billion, but implementation of a state of the art storage system reduced the cost to $200 million at no degradation to the delivery of power. The US is leading the field in this storage effort where a total of 66 gW of federally mandated storage is planned for 2022. Within Asia, South Korea leads the pack with a planned storage capacity of 0.5 gW by year end. Japan, Australia and China are pushing hard to upgrade their capacities as noted by Tesla’s storage facility having been completed and on line in Adelaide, South Australia. The UK is presently the 7th largest world participant.
- Vanadium as an Alternative to Nickel for power grid storage: This could be a way of the future but presently is does not meet the needs. Bankable was the word used by the speaker. As yet, it has not been proven to be scalable for utility use and has a limited retention time on the charge.
- The Participants and Attendees: As a company, we were highly please with the business sector blend of the conference participants and attendees. This included companies looking for off-take agreements, market analysts projecting a positive picture for all of our commodities to be generated, suppliers, engineering and construction contractors, regulatory groups, numerous mining companies from which some are looking for additional projects and joint venture projects, the technological groups that make and sell EV batteries (also looking to ensure long term reliable sources for their raw material needs), and fund management groups including institutional investors and large scale international banks that fund resource development projects.
This conference and its field of participants further increases the options, potential, and opportunities available to us, our shareholders and for the development of Kun-Manie. As we continue to ramp up our activities in China, Korea and Japan, we anticipate the development of a competitive environment related to the project. We look forward to providing additional updates as the picture evolves and develops with the increasing Asian centre focus of the company. Regards, Robin J. Young
“The mining potential RNS contains open pit ore at Ikenskoe and Kubuk based on the February 2017 numbers. With the increased resource we discovered last year, will the underground mine and open pit tonnages from the new ores be about the same? The underground production seems to have a higher profit than the open pit production, so can we extrapolate similar numbers for mining of the new ores.”
Answer Team: We cannot provide a definitive answer to this question at this time. This requires a staged and successive approach. We must first complete the open pit analysis based on the reported 20 March 2018 resource estimate and then undertake a tradeoff study to optimise the production assuming the use of both open pit and underground extraction methods.
We note that the pending open pit optimisation evaluation being compiled by RPM Global is progressing well. Their results will be providing two open pit scenarios for consideration. The first pit designs will be based on Measured and Indicated resources only with the second including Inferred resources which will generate a much larger pit design. Once these results are available, we can then proceed to identify the proper blend of open pit and underground production by completing an underground evaluation of the deeper ores within and below the pits.
We shall be reporting the open pit results assuming that open pit production is the preferred and only way to proceed with mining at Ikenskoe / Sobolevsky and Kubuk. At this time we believe it will most likely be a blend of open pit and underground. We also note that after last year’s drilling (2017), the areas of underground potential are flatter lying in orientation than at Maly Kurumkon / Flangovy. This could require modification of the Long Hole Open Stoping method (maybe even selection of a different mining method) to optimise underground extraction of the ores.
“In past, we were ranked in the top nickel deposits in the world. Where are we now in comparison to other potential green field (new) and brownfield (old mines with restart potential) given our massive resource increase just reported (March 2018)?”
Answer Team: Per your request, our comparison is further limited to nickel sulphide projects only. We have also constrained our basis for reporting to the average grade of the nickel. By-product commodities vary from deposit to deposit so the reporting based on a nickel equivalent could be somewhat misleading.
As reported in March 2018, our JORC compliant, independently estimated resource contains 155.1 million ore tonnes averaging 0.75% nickel. This is based on a cutoff grade of 0.40% nickel only. Kun-Manie contains 1.157 million tonnes of nickel. In the chart below, Kun-Manie is shown in cyan. The red line on the CRU based April 2017 graph indicates the same contained nickel tonnage at varying grade and ore tonnes. Any project that falls above this line has more total tonnes of nickel than Kun-Manie contains.
There are 10 deposits of potential (green field and brownfield) that contain more than our 1.157 million tonnes of nickel (above the red line). Only 3 of the ten have higher average grades than Kun-Manie. Of even greater interest, the average grade of 6 of the ten projects that have more total tonnes than Kun-Manie is less than our cutoff grade of 0.4% nickel! We believe that substantial portions of these deposits are uneconomic even at much higher than today’s nickel price and could be overstated when it comes to future projections.
“In the November 2017 FAQs, you state the Zepplins have a lifting capacity of 50 tonnes and so you’d need to make 20 round trips a day to achieve the required annual transportation capacity. However, AEROSCRAFT (the company with whom there is a signed MOU in March 2014) make an airship with a 500 ton payload capacity. The March 2014 RNS stated the ML 868 airship was under consideration, which (according to Wikipedia) has a 250 ton payload, however the ML 86X has double that. Both significantly more than the number you’ve quoted in the November 2017 FAQs. https://en.wikipedia.org/wiki/Worldwide_Aeros_Corp Does this 90% reduction in the number of round trips required warrant the reconsideration of the airship idea?”
Answer Team: Firstly, the Wikipedia link to which you refer is very dated. It is also noted that these were planned designs. These units are not available.
As for the potential of our using zeppelins, simply put, today there are no operational zeppelins capable of supporting an operation at the industrial scale that we require. The 250 and 500 tonne capacity units of which you speak were on the drawing board when we entered into the MOU and at that time it was planned to have been tested, approved and placed the them into production about now. This is not the case as the approval of the Aeroscraft prototype (limited lift capability – much less than the current 50 tonne ability) allowing for the production of the larger tonnage lift capable units was damaged when part of the hanger within which it was housed collapsed.
We will monitor the development of this fledgling technology and will consider it, if it advances more rapidly than we anticipate and it can be proven to be a viable alternative to our constructing the road to support Kun-Manie.