Some infos on AGO Ridley Magnetite Project (AGO Ann 14 April 2009, and PFS):
- Only 75km from Port Hedland, adjacent to Pardoo...Infrastructure in close proximity to the declared Goldsworthy Railway. ...Export alternatives include South West Creek, Anketell and trans-shipping.
- In-situ resource = 2 billions tonnes @ 36.5% Fe. - Reserve of 970Mt at 36%Fe1, DTR grade of 68.3%Fe & 3.8% SiO2, recovery = 37.2% - Mine life >20yrs, potential to 35yrs, 15Mtpa at $A36/t Opex, $A2.7Bn Capex
Points to note 1. DTR grade show a good concentrate product (+68%Fe), quality slightly higher than Mt Bevan (+67%Fe)
2. Cash cost of AGO Ridley Magnetite Project looks better than JMS Mt IDA magnetite project:
AGO Ridley = A$36.22/tonne of concentrate, or A$12.64/tonne of ore mined.
JMS Mt IDA magnetite project = $62.78 per tonne of magnetite concentrate produced (based on JMS figure scoping studing and also PFS)
3. JMS Mt IDA magnetite project is commercially viable, as scoping study showed it generates an NPV of $1,685 million @ an 8 % pa discount rate, and an IRR of 19.8% pa.
DCF valuations for LCY Mt Bevan project Using JMS's scoping study for base case scenario, my DCF modeling for LCY Mt Bevan showed the project is viable with an IRR = 25%, using a conservative FOB price for concentrate = US$110/t, well below the current spot FOB Iron Fines Price of US$173.66/dmt for West Australia 62% Fe...
Also Operating costs could be reduced based on the latest DTR tests..
So just for fun, I try to do some DCF valuations for LCY using JMS's scoping study for base case scenario:
Assumptions: - JORC 1.1 to 1.3b tonnes magnetite @ 30 - 40% Fe - Capex = $1,582m - Cash cost = $62.78/t - FOB price for concentrate = US$110/t - Royalty = 5% - LOM = 20 years - Production = 10Mtpa
- Parity US/AUD = 1
LCY has 60% stake in the project.
Notes: - Capex is based on the magnetite concentrator at Mt Ida with the concentrate pumped to a filter and dewatering plant located at a rail head at Menzies.
- Based on LOM = 20 years @ 25Mtpa, producing 10Mtpa of Magnetite Concentrate.
- Cash cost include Mining/Crushing, Concentrator, transports, port, admin, etc...
- Royalty of 5%, equity funding and ignoring taxation
- FOB Concentrate price = US$110/t
I came up with the following DCF results for LCY:
Result1 Assume LCY has got 500 millions shares on issues (currently LCY has 263 millions).
--> NPV @ 8% per share = $0.36 --> When production: NPV per share = $4.61 (using zero discount).
Result2 Using full Equity with no taxes (JMS assumptions)
- Capex of $1,582m will require 4,395 millions shares (using NPV per share of $0.36)
- Total shares on issue = 4,395m + 500m = 4,895m
--> NPV @ 8% per share = $0.36
--> When production: ---->NPV per share = $1.03 (using zero discount) ---->With P/E = 4, NPV @ 8% per share = $1.80
--> Project IRR = 25%
Also more infos:
1. GBG for its Karara magnetite project: Magnetite vs Hematite.
Latest Indian Iron Ore Fines Price - FOB (April 2011) Fe 63.5/63% = US$170
...Also the Indian government raised the tax on iron ore exports to 20% for fines and lumps (previously 5% for iron ore fines and 15% for lumps) with effect from 1 March, 2011
(20min delay)