CAY project update - DFS due in Q3-2025
Our Wise Owl Pick Of The Year Canyon Resources (ASX: CAY) just put out a project update.
CAY is developing its JORC 1BN tonne bauxite resource in Cameroon.
The project is advanced stage with feasibility studies completed, mining licenses granted and most of the work remaining to get funding/logistical solutions sorted.
What that can mean is that while CAY may not be putting out a heap of announcements there is a lot of very important work being done in the background trying to get the project into development.
Today’s project update gave us a good idea of what we can expect next from CAY.
Key points we noticed in today’s announcement:
1. CAY expects its Definitive Feasibility Study (DFS) to be ready by Q3-2025
CAY mentioned that the focus for the DFS on “optimising operational efficiencies” and “confirming the preferred pathway to production”.
The main point we noticed was that CAY was considering a two-staged development strategy which could mean earlier revenues from a starter operation which is gradually ramped up to the project’s intended capacity as rail upgrades are completed in country.
CAY mentioned that it was working with “internationally recognised consultants to refine and optimise the existing rail infrastructure required for the transport of the bauxite ore”.
What all of this tells us is that CAY is trying to get its project into production as quickly as possible.
We are hoping that the change in bauxite prices from then to now AND CAY refining the project’s production profile/timing can improve on the NPV numbers we saw in CAY’s 2022 study.
(CAY’s studies in 2022 returned an NPV of US$452M and CAPEX of US$253M over a 20-year mine line)
(Source)
2. CAY is in discussions with equipment vendors about delivery timelines
We noticed in today’s announcement that CAY is also “working with leading mining equipment vendors to define procurement schedules and delivery timelines”.
This tells us that CAY is at the stage of discussions where delivery timelines are being discussed and not just pricing.
A good sign that CAY wants to make the upcoming feasibility study as accurate as possible AND have a high level of certainty on when the project can actually get into production.
3. CAY in discussions with offtake partners
Another important update from CAY…
The announcement today mentioned the company was in “discussions with potential offtake partners”.
An offtake in the form of a long term sales contract would be a big unlock for CAY’s project as it would provide certainties to any potential financiers of CAY’s project.
CAY already has ~50% of the capital commitment of the project underwritten by its major shareholder.
See our note on that news here: US$124M in financing now underwritten - CAY can buy trains to get its bauxite to market - 50% of CAPEX
We think an offtake deal would make it a lot easier for CAY to go out and raise the rest of the required CAPEX to get its project into production.
What we want to see next from CAY?
The slide below from CAY’s recent investor presentation gives a pretty good overview of what we can expect to see next:
In the short term we are looking forward to seeing the results from the drill program, the upgrade to the JORC resource and of course the results from the updated Definitive Feasibility Study.
The last time CAY put out a study for its project, the bauxite price was ~US$45.22 per tonne.
Since then the price has more than doubled…
Prices out of West Africa have recently gone above US$110 per tonne.
We are expecting a big improvement on the 2022 study numbers which showed a net present value (NPV) of US$452M from US$253M CAPEX over a 20-year mine life.
(Source)
