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Guys

Disclosure: I am half drunk. So apologies for any hiccups.
But I think I was able to type most of the important points I heard during the interview. Lots of gems in this. Hopefully it helps someone.

Peak TV interview with MGT Technical Director Mark Eames.

Niv: Markgood to meet.

Mark: Likewise,Niv, it’s a pleasure.

Niv: Markyou’ve got a great CV especially in the mining background, can you tell us alittle bit about yourself?

Mark: Yeah,a little bit unusually I have worked for Riot Tinto, BHP and Glencore so I’vehad a great opportunity to get to know our mines and markets over a long periodof time.

I’ve been toa lot of Iron mines in different countries, and I’ve spent time in markets andI’ve found that a fundamental understanding is key to actually working out what’sgoing on in IO. So, most observers for example are pretty pessimistic about IO,have been for some time but the fundamentals in my view tell a very different storywe’ve seen for some time now that majors have been under-investing in IO while China’sdemand has been very strong so markets have tended to defy expectations andpose some really strong results.

Niv: And MarkRazorBack how does that stack up as a development opportunity based on the someof the projects that you’ve come across?

Mark: It’s arare combination of low capital high grade and long life usually like a lot ofthings you come across you only get one or two out of three but Razor back ticksall the boxes - exceptionally large resource which gives a long life. We havefound a processing route which gives us a very high-grade product around 68 %FE and it’s also we’ve been able to work on it so we’ve got their capital costdown to something that’s competitive and accessible.

Niv: Mark I justwant to talk a little bit about the numbers uh strong numbers coming out justrecently of your PFS, do you think it will make the project attractive toinvestors?

Mark: Webelieve so it’s always hard for investors to compare PFS results and the reasonis because standards of work and the way in which results are presented to varywidely. In our case we’ve used some of the best Ore-processing engineers in theworld we’ve done a very through and rigorous assessment of the resource and thecosts of development and so we actually work through a methodical andsystematic process we started by upgrading our geological resource, so we’vegot a large proportion of indicated ore. Next thing is we actually did miningstudies so we’ve actually declared a maiden ore reserve which is obviouslygives us a great basis for mining and then just as importantly we’ve workedvery carefully to actually develop a stage development with a relatively low-costentry so that we can start up this very large resource and start producingproducts and get to market at a fairly accessible price. So, the way that’sturned out is the capital cost for the project is less than half a billiondollars for a capacity of around 3 million tonnes of high-grade product and ourdevelopment timeline allows us to get into production in 2024so we think thatcombination of uhm numbers is pretty good. Way that plays out is when we actuallyran the numbers and looked at the profitability oof the business we’re able togenerate a post-tax IRR of 20 percent which in my experience for well-engineeredprojects is exceptional.

Niv: That exceptionaluh 20 percent IRR um really good job and just talk about the grades because we’re seeing the iron ore grade premiums actually increasing tell us a little bit more about what you’re seeing.

Mark: We’reseeing here two things coming together. So, we’ve got a long term trend on thesupply side of declining grades so if you look at the major producers in the Pilbaraor even Brazil what we’ve seen is a lot more material come onto the market atrelatively lower grades the benchmark price is quoted at 62 percent there isactually only one product in the market out of Australia that’s actuallyavailable in any volume that’s more than 62 % everything else is less. The mainsource of high grade these days is either Brazil or a small quantity ofprocessed ore and so that’s one part of the equation is that grades have beendeclining on the supply side and that means that on the demand side the steelmakers have to spend a lot more money on expensive coking coal to melt out the impuritiesand it makes their blast furnaces a lot less productive and lastly it actuallygenerates much more emissions per tonne of steel so in other words it’s muchmore environmentally unfriendly as well. So that combination of things hasmeant that high grade premiums have changed massively in the last 5 years so wehave typically seen the gap between the 58 % ore which is the sort of lowergrade products out of Australia and the 65% which is the highest regularly quotedgrade in the market place. That gap is normally about umm anything from 20 to30 dollars. What we have seen uh in the last few months and indeed it’s a trendwhich has been going on for some years now is that widened enormously so thegap now is up too about a hundred and ten dollars which uh given the uh priceis $200 that’s certainly strong but what it really shows is the returns forhigh grade producers are dramatically different than the returns that lowgrowth producers are going to see everybody’s doing well of course at today’sprice. But nevertheless, the place in the market you want to be is high gradeand where that will play out, we believe through as the markets evolve is thehigher grade prices are much less volatile than low grade prices. Which is kindof what you would expect you would expect that steel mills generally are goingto favour the high-grade products through the cycle and so we think cover timewhat that offers to razorback is significantly higher prices than the 62percent uh average but also more stable prices over time. So, I think that’s somethingwhich investors can feel very confident abut in terms of where we where we sitin the products.

Niv: Absolutelythat uh investors like us want to see high prices and I now we touched aboutthis but the low capital and the long life uh focus for MGT what does itactually mean in the context of the iron ore project and uh also from your experience?

Mark: Sowhat we saw you know if we go back to the last ore boom um which sort of cameto an end effectively in 2015 was in the period from 2000 too 2015 we saw a lotof new mines start up around the world in some far-flung mines in places like Africaa number of local producers started up but what we found was a lot of them thatdidn’t have the long life of their competitive ore bodies have effectively goneout of business. And so and then there were some other projects floating aroundthat had very high capital cost and those actually didn’t make it far enoughdown the development pathway to actually get into business so what we essentiallysaw was by the end of 2106-2017 almost all of the new suppliers had effectivelystopped producing for a variety of combinations and a lot of the promiseproduction from places like Simondo for e.g. in guinea never made it onto themarket so for us what important is we think the combination of accessible capitala reasonable development timeline and a very disciplined approach todevelopment means we will get into the market and we will stay in the marketthrough the cycle and that’s been our focus as a business we actually been ableto demonstrate in the PFS that we can keep going as long as we get uh pricesover about 50 dollars which is essentially means we can make good money whilethe sun shines and we can still survive through periods of more difficultprices and still generate cash flow for our shareholders.

Niv: And markyou recently completed a really strongly uh campaign in term of the placementand you’ve got some really notable uh institutions inside so you’re fullyfunded straight to DFS which is very exciting what improvements are you workingon also why is it investors should be buying the stock what are you mostexcited about right now.

Mark: So westill got some refinement too doo the mining side which for us is reallyexciting so if we look at the PFS results our ore body average grade and mass recoveryis reasonable but uh we think we can do a lot better now when we went throughthe PFS we were effectively mining in most of our cases at resource grade so inother words there a great opportunity to selectively mine the ore body or usetechnologies like ore sorting to dramatically increase a head grade increasefrom plant throughput overall efficiency of the process will increase and sowhat our cost will go down and that is a great opportunity for us so one of thethings we are doing now is we’re actually taking our core library and puttingit through detailed high resolution metallurgical testing and what that’s goingto doo is actually give us a much finer differentiation of grade through theresource and allow us to look selective mining much more carefully and wereactually imperilled with that doing some more drilling which is going to expandour knowledge of the resource there is a very promising part of the resourcecalled IRON PEAK which is currently not siting in reserve and so it just needsa small amount of drilling to upgrade it that’s looking very promising so thatwill again add to both tons and we think give us improved head grade and then we’reactually working on de risking the project as well so were commencing a programof water drilling uh in the areas we’ve identified that uh host the groundwaterwe intend to use were working through a process of consultation and discussionwith the landholders which is going well and last but definitely not least wereimproving and generating better relationships with stakeholders and in particularwe intend to work very closely with the naturally people who are thetraditional owners in the area where the mine is located and our intent is towork both cooperatively and fairly to generate outcomes that work for bothsides.

Niv: Mark werebig supporters so thanks very much for joining us here at PTV.

Mark: It’s apleasure Niv thank you for the invitation.

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