Concise post Mac.
A couple of things to add:
1. A.V. was previously CEO of Baosteel Australia, so when the WPIOP does go ahead:
a. The port used is very likely to be Cape Preston (which BCI has a 20 year lease), making BCI a port operator. Note acquisition multiples for port operators have been ~30 EV/EBITDA.
b. There would be a rail line built to Cape Preston to support WPIOP. BCI could potentially utilise that.
c. BCI has a royalty agreement with RIO. There is a growing view that RIO/BHP will need to increase mine replacement in the near term to hold current production levels. The BCI tenement is within RIO's next likely development area (Koodaideri).
However for Buckland, as they will have their own private haul road, they could utilise up to 500t trucks, which have much lower opex than the iron valley mine (and shorter distance to port).
Forecasting the time frame for commencement of the WPIOP is difficult, though whilst the I/O price is elevated, it makes the project more likely to proceed in the near term than say 12 months ago. Buckland is a fair chance of being announced as viable and proceeding (10-20mtpa, bigger than AGO)
For Buckland's to proceed, it is very likely to utilise contractors money to build the OPF, supply the mining kit and develop the port (also alluded to in the AGM announcement). Whether the market is receptive to a new iron ore project remains to be seen, however it is likely they are working hard behind the scenes to get the project to FID, with very little of their own capex. Baosteel could also be a potential JV partner, which would give it a lot of weight; or MIN, who have done several deals with IOH (including AV) in the past.
There was an earlier question on the debt. If you look at the AGM presentation, BCI indicated they were $27m net cash at end of Sept (adj. for the raising). This makes the EV very low, at under $50m. If they come in at the top end of guidance, they are trading at less than 2x EV/EBITDA.
The best investments have: 1) growth, 2) upcoming catalysts, and 3) most importantly, re-rating potential. The re-rating potential at BCI makes is a 2-3 bagger alone, IMO.
Also if you look at the recent upgrade, it was a 50% upgrade at the top end of the range, a 300% upgrade at the bottom of the range and the midpoint of guidance an ~100% upgrade, yet the stock only rallied 20% on the day. IMO, it should have run harder.
The thing holding it back is that most insto's see I/O falling materially from current levels (which may or may not be right), however the other factors like Bucklands and the potential huge rally if WPIOP goes ahead are being completely ignored. Also due to the market cap and liquidity, not many insto's have interest say relative to an AGO (which has large upcoming production issues with Wodgina close to running out of I/O).
Happy to take the I/O price risk and remain very long.
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