True, Centrex did manage to get the deal away. However, WISCO bought up to 1Gt, of which Centrex does not have any of it as a modern Inferred Resource (they currently have 231mt of old stuff).
Their exploration target is up to 400Mt, so I don't know Centrex would get all of the $360M. Currently they are due about $40M - which would help them build the mine at Wilgerup and not much else. I don't know how much effort I'd put in for 18c a tonne in cash to keep 50% of the profit from a magnetite deposit.
Sure, Ridley is better quality magnetite, but the deal if stuck on a Centrex JV basis and not the bizarre GBG/Ansteel symbiosis basis, would result in Atlas getting $360M cash, but then being liable for $800M in Capex to build a modest magnetite concentrator (as 50% share of the Ridley deposit) or electing to dilute further and see no upside from the Ridley deposit but getting out of having to co-contribute to the capex for the mine.
If the Port Hedland Fines price sticks above US$70/t, the Ridley concentrate would nett around US$30/t to US$35/t profit after OPEX (depends on what the PFS says, but consider GBG proposes to make its con for A$69/t or US$40/t). Split 50/50, and after capitalising A$1.6Bn of plant and equipment to get into production at 6Mtpa or 8Mtpa, that's not a lot of money left over for Atlas.
So, the deal essentially is this: we the Chinese pay you a deposit of $360M for 50% of the deposit. You then put that money back in to the pot to build a mine, and take on $400M debt to cover your 50% of the CAPEX. We handle the rest of the debt because the Chinese government is good for it. You then get 50% of the profit from your essentially free mine you couldn't otherwise afford. This works out as better than having a gigantic chunk of unsaleable rock.
6mt x $15 = $90M p.a. to cover ~$400M debt? Could be worse, but the cat is not in the bag yet. Atlas hasn't even really mentioned any nmes as to which of the major Chinese steel consumers is going to hop into bed with them. Centrex is tied up with WISCO, GBG with Ansteel, GRR is tied down, AXO is, CFE is...who's left?
AGO Price at posting:
$1.08 Sentiment: None Disclosure: Not Held
