I too am quite disappointed how this has unfolded. I am not happy with the way management has performed and it's hurt our share price. However, I do think this is still a viable project. I've looked at a number of ways our project can be potentially improved.
At our "base" case in the feasibility study, Schaft Creek generated approximately $487M/year in operating profits.
Metal Prices: Obviously metal prices can't be controlled and they do have a huge impact on the project. At the current prices, our operating profits are reduced to approximately $363M/year. Factoring in an exchange rate adjustment should boost this number to around $414M/year.
Recoveries: One area that really hurt us is the reduced recoveries we saw in the feasibility study. If these numbers can be improved back to the PFS numbers then our operating profits should improve to $503M per year (current prices with exchange rate adjustment).
Waste Rock: Another area that hurt us the cost to move the "waste" rock that potentially contains mineralization. This impacted our operating costs by increasing the costs of mining. If we compare our project to Seabridge Gold, we can see that our mining costs are $1.45/tonne more than theirs. If we assume the waste rock gets upgraded, this will bring our mining costs down. Reducing our operating costs by $1.45/tonne will further improve our operating profit to $526M/year.
Sustaining Capital: Our sustaining capital costs also appear quite high. QB2 uses $34M/year and Galore Creek uses $30M/year while Schaft Creek is at $50M/year. Assuming our sustaining capital costs can be reduced to $35M/year, our operating profits will be improved to $553M/year.
Grades: This is definitely a more difficult item to quantify. There are several years that weigh down our project because that huge pit wall has to be moved back. A lot of that rock has not been drilled and is currently being treated as waste. If this rock turns out to be mineralized, it will help out our project immensely. Removing those lagging years and improving the grades to that of the more "normal" years will improve our operating profit to $676M. For comparison, QB2 will have an operating profit of $678M/year but will cost a lot more to build.
Combining all these items improves our NPV at 8% from $513M to $1846M despite the lower metal prices. Obviously not all of these improvements will be possible, but even if half of them can be achieved we will be in good shape. There is definitely hope for this project. I'm glad Teck is on our side now to help realize that value.
