Mr Gupta knows he has limited hematite and magnetite for his Whyalla steelworks from his SIMEC (iron ore) mines in South Australia. Hence the keen interest in Havilah’s iron ore assets (in particular the Grants Iron Ore Basin).
Reminder: based on the 1 May 2019 SSA, the $17 million conditional funding option of “SIMEC purchasing direct equity interests in the [Havilah] iron ore assets prices at $1.2 million for a 1%” interest, on a 100% basis equates to a $120 million ‘valuation’. If the ‘Independent’ Directors go to Plan B and try and sell SIMEC just the Havilah iron ore projects, this should be the starting price of those negotiations. Not what is in the BDO Independent Expert’s Report, which puts a very small value on them, a value that would not even cover Havilah’s sunk costs (>$3.4 million has been written-off the balance sheet over the years relating specifically to iron ore projects).
I have said it before, Mr Gupta is running down his hematite and magnetite resources from SIMEC’s mines in South Australia. and has less than 8 years supply to his steelworks in Whyalla and for export to China.
This is demonstrated via the Middleback Ranges 31 December 2018 Annual Compliance Report re estimated mining lives:
- Iron Chieftain 2 years
- Iron Knight (South) 1.5 years
- Iron Duchess (North) 5 years
- Iron Duke/ Magnet 8 years (until 2027)
Note: operations above include both hematite and magnetite.
SIMEC's also has two new mining leases for Iron Sultan and Iron Warrior mines in the Middleback Ranges for hematite not magnetite. Iron Warrior is expected to export about 1.5 million tonnes a year of direct shipping ore over a nominal lifespan of 19 months. Iron Sultan is expected to supply 600,000 tonnes a year of hematite ore for blending into the Whyalla Pellet Plant magnetite concentrate feed to help lower the cost of steelmaking:
The Iron Sultan iron ore resource is 13.6 million tonnes at an average resource grade of 52.2% Fe. The Iron Warrior iron ore resource is 4.2 million tonnes at an average resource grade of 57.0% Fe. This was based on Arrium Mining’s June 2016 JORC compliant declarations in the Mining Proposal dated 23 June 2017.
Finally, SIMEC acquired the Wilgerup and Kimba Gap iron ore assets from Centrex Metals Limited (ASX: CXM) on 22 March 2018. For an analysis of these iron ore assets see my Post # 36217557
As far as I am aware, SIMEC is only undertaking iron ore due diligence on Havilah's iron ore assets in the Braemar.
Cheers
These are only my random thoughts and it does not constitute investment advice. Before acting on any information you read and before making any financial or investment decisions, you should always consult your advisor(s) or other relevant professional experts.
HAV Price at posting:
15.0¢ Sentiment: Hold Disclosure: Held
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