Proto Resources (ASX:PRW) has announced the results of their long-awaited feasibility study on the Barnes Hill nickel project in Tasmania. The company reports an NPV12.5% of A$143.7M and an IRR of 51%.
However, we feel the nickel price of $10/lbs they used in the feasibility study is a tad optimistic, and it’s a pity the company did not provide a table with a sensitivity analysis to see what the NPV would be at a nickel price of $6-8/lbs. As the C1 cash cost is approximately $5.75/lbs, a nickel price of $7.5/lbs would very likely generate less than A$15M in EBITDA, thus prolonging the payback period to approximately 6-7 years. The company has identified several possibilities to optimize the operating expenditures, so we hope Proto will be able to reduce the opex to less than $5/lbs.
Proto also announced they entered into a strategic agreement with the Bergen Global Opportunity Fund, an institutional investor in New York. Under the terms of the agreement, BGOF agreed to provide up to A$4.35M in funding over the next two years to advance the company’s Lindeman Bore and Mt. Vetters projects. The first convertible security purchased by Bergen will have a face value of A$825,000 and is available from the execution of the agreement on.
> Feasibility Study (pdf)
> Financing (pdf)
Disclosure: Proto Resources & Investments Ltd. is a sponsoring company. Please see our disclaimer for current positions.
