Proto Resources (ASX:PRW) updated the market on their Barnes Hill project in Tasmania, as their JV Partner Metals Finance (ASX:MFC) finally released the long-awaited feasibility study on the project. Metals Finance can earn 50% of the project by completing a feasibility study and by providing funding for the entire project.
The company announced the IRR has increased from 48% to 60% and the NPV12.5% is A$152M. We would like to emphasize that this IRR and NPV are based on a long-term nickel price of $10/lbs, which is approximately 30% higher than the current nickel price of $7.65/lbs. We feel more comfortable using Metals Finance’s ‘current commodity pricing’-scenario, which calculates the returns using a nickel price of $7.42/lbs.
When using the more conservative nickel price, the IRR drops to 24%, and the NPV12.5% decreases to a less exciting A$28M. It’s very clear the returns on Proto’s project are leveraged to the nickel price, as a nickel price of $9/lbs increases the IRR and NPV to 46% and A$103M respectively.
As said before, the potential DSO iron ore operations at the Barnes Hill project are NOT included in this DFS, so the overall economics of the project will be better than outlined in both press releases.
Full press release (Proto Resources) (pdf)
Full press release (Metals Finance) (pdf)
Disclosure: Proto Resources & Investements Ltd. is a sponsoring company and we hold a long position. The author holds no position in Metals Finance Ltd. Please see our disclaimer for current positions.
