- BlueJay are making good progress towards the start of production next year.
- Valuation: we are raising our NPV valuation to 37p/s today in response to the high grade and purity levels of BlueJay’s ilmenite concentrate product.
- Production: While BlueJay plans to start production next year we assume sales start in 2020. We escalate the mining rate from 1mtpa in 2020 to 2mt in 2021, 3mt in 2022. We then see a further jump in production to 5.5mtpa from 2026.
- Capex: we assume a $60m capital cost to start followed by a further $100m for the second phase expansion. We assume a 10% discount rate by way of standardisation. The project gives a 43% IRR on these metrics.
- Pricing: We assume BlueJay could receive $200/t for its product, up from $180/t previously though management reckon they will get higher price levels.
- Upgrading: we have also assumed the upgrading of material at the first sieve to 18.5%. This has the double benefit of raising the input feedstock grade reducing costs and improving throughput rates.
- Feasibility Study: A number of consultants are working on more detailed plans for the process plant and related infrastructure.
- Costs: we assume relatively high mining, processing and loading costs for a dredging operation given its location in the north of Greenland. These costs should come down as the operation proves itself. We assume $3.25/t for mining, $5.0/t for processing and $4.5/t for loading. The loading cost is particularly high given that it should simply require a longish conveyor belt to reach a ship parked in the Fjord, though it should cover the use of a tug boat to manage passing ice bergs.
- Offtake: management are in Hong Kong presenting at the ‘TZMI’ Titanium and Zircon Congress for mineral sands producers. We expect discussions to continue on offtake with Chinese producers and assume 60% of BlueJay’s Ilmenite concentrate may be sold in China with the rest to be sold in the West.
- TZMI conference: BlueJay presented at the major Titanium industry ‘TZMI’ conference in Hong Kong yesterday.
- Price view: Feedback from the conference is that titanium feedstock supply is much tighter than previously thought indicating that prices are expected to rise strongly over the next three years with a major supply constraint 18 months out.
- MSCI Index: BlueJay are to be included in the MSCI World Micro Caps, effective 30 November 2017.
SP Angel Conclusion: “BlueJay is fortunate to have discovered the World’s largest, known, high-grade, ilmenite mineral resource. The sheer scale and consistency of the high-grade mineralisation is extraordinary and while the location in Greenland presents some challenges these appear relatively easy to overcome from an engineering and production perspective.”
Here is the full note: Bluejay_Mining_Valuation_Upgrade_flash_note.docx
*SP Angel act as nomad and broker to BlueJay Mining. An SP Angel mining analyst has visited the Dundas (formerly Pituffik) ilmenite sands project in Greenland.
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