king report

Level 4, 5 Mill St
Perth WA 6000
PO Box 7752
Cloisters Square WA 6850
ABN 46 008 942 809 Phone: (+61 8) 9322 2288
Fax: (+61 8) 9324 2164
Email: [email protected]
www.austresources.com.au
ASX ANNOUNCEMENT
18 April 2007
The Manager
Company Announcements Office
Australian Stock Exchange Limited
4th Floor, 20 Bridge Street
SYDNEY NSW 2000
Dear Sir/Madam
INDEPENDENT REPORT ON BALMORAL SOUTH IRON ORE PROJECT
Please find attached report on the Balmoral South Iron Ore Project which has been produced by independent consultant Mr James F King.
Mr King was engaged by Australasian Resources Ltd and specialises in the economic aspects of the iron and steel industry. Since 1982 Mr. King has maintained and published comprehensive information on capacities by plant. Regular reports with forecasts of the markets for steel and iron ore have been supplied to the industry and consultancy projects carried out for major companies around the world. Mr. King also maintains information on production costs for iron ore and for iron and steel and is the author of the regular service on steel costs published since 2000 by Metal Bulletin Research, London. Mr. King also contributes items on iron and steel to the regular services of the Economist Intelligence Unit, London and to the major steel industry internet website: www.steelonthenet.com
The Company wishes to note that the financial analysis in this report only considers the Balmoral South Iron Ore Project and makes no allowance for the Company’s nickel, uranium or base metal assets
Any queries can be directed to Darren Hedley on +618 9322 2288.
Darren Hedley
Managing Director
Spoutwell House, Spoutwell Lane, Corbridge NE45 5LF, England
Telephone/Telefax (0)1434 633646 e-mail: [email protected]
JAMES F. KING
INTERNATIONAL MINERALS JOINT VENTURE
FOR IRON ORE CONCENTRATES, PELLETS AND DIRECT-REDUCED IRON IN WESTERN AUSTRALIA
prepared for:
Australasian Resources Ltd
April 2007
This report is for the use of the parties
in the Australasian Resources Ltd project
and their holding companies
INTRODUCTION
This report has been prepared by James F. King1 for Australasian Resources Ltd (ARH). ARH engaged Mr. King to prepare an independent analysis of the company’s project for the production of iron ore concentrates, pellets and direct-reduced iron (DRI) in Western Australia.
The report is in three sections. Section 1 describes the project, known as International Minerals Joint Venture. Section 2 assesses the competitive position of the project with regard to operating costs. Section 3 analyses the financial viability of the project under specified assumptions. The analysis has been prepared in accordance with Australasian Resources announcement to the financial markets on 21 March 2007, detailing the transaction with Shougang Corporation, one of China’s largest steelmakers.
All monetary values in this report are in US dollars unless otherwise expressed. The analysis has used an exchange rate of A$ = US$ 0.78.
THE PROJECT AND ITS COSTS
The project is an iron ore mine, concentrator, pellet plant and direct-reduced iron plant in Western Australia, with proposed finished product sales of 5.2 million tonnes per year (m t/y) of iron ore concentrates, 4.9m t/y of iron ore pellets and 1.45 t/y of HBI (hot briquetted iron), a total of 11.55m t/y of finished products.
The project is based on mining rights over part of the Susan Palmer Orebody, part of the Balmoral iron ore deposit, located 80 kilometres south of Dampier in the Pilbara region of Western Australia. The iron ore reserves available to the project are assumed to be 1 billion tonnes.
A new open-pit iron ore mine will be developed to extract ore with magnetite content as mined of approximately 31.9%, equivalent to 23% magnetic iron. The mine will be designed to yield about 41m t/y of iron ore. At this mining rate, the life of the project would be a minimum of 25 years. Total material moved, including waste, will be about 67 million t/y.
The mine will operate using standard mining techniques and will deliver crushed ore by conveyor to a concentrator close to the mine site. In the concentrator the ore will be mixed with water, ground to fine sizes in rod or ball mills and upgraded by magnetic separation and flotation to produce an iron ore concentrate containing 70.7% iron. Waste material from the concentrator will be pumped to a specially designed tailings disposal area in compliance with good environmental practice. The concentrator will have a capacity of about 12m t/y.
The plant will have the capability to produce concentrates suitable for producing iron ore pellets used in direct reduction plants or blast furnaces. The grades of concentrate expected from the plant are some of the best in the world. The key parameters for iron ore products include high iron content and low content of the impurities alumina, silicon and phosphorus. Appendix 1 shows a comparison of the project’s grades with the grades of other major iron ores in the international market.
1 James F. King is an independent consultant specialising in the economic aspects of the iron and steel industry. Since 1982 Mr. King has maintained and published comprehensive information on capacities by plant. Regular reports with forecasts of the markets for steel and iron ore have been supplied to the industry and consultancy projects carried out for major companies around the world. Mr. King also maintains information on production costs for iron ore and for iron and steel and is the author of the regular service on steel costs published since 2000 by Metal Bulletin Research, London. Mr. King also contributes items on iron and steel to the regular services of the Economist Intelligence Unit, London and to the major steel industry internet website: www.steelonthenet.com. 1
Expected Concentrator Grades(% of dry weight)DR gradeBF gradeFe71.069.5Fe++23.122.5SiO21.53.5Al2O30.0040.092S0.0060.008P0.0070.009Na0.0150.019K0.0170.028Mn0.0100.013CaO0.0700.096MgO0.1480.202
It is expected that 5.2 million t/y of concentrates will be sold as a finished product to pellet plants without sufficient iron ore supply from their own mines (Shougang entities). The remaining iron ore concentrate will be processed at the mine site to pellets. In the pellet plant the fine-ground iron ore concentrate will be mixed with an organic binder and dolomite, formed into pellets and fired (indurated) using a modern straight-grate process fuelled with natural gas. The magnetite content of the iron ore provides energy for the pelletising process and reduces fuel consumption. The product will be a structurally strong iron ore pellet with iron content of 68.1% and low levels of impurities. The plant will have the capability to produce pellets for use in direct reduction plants (requiring low silica) and blast furnaces. For market reasons, explained below, production will be of blast furnace pellets and that is the basis of this evaluation. The pellet plant will have capacity of 7.0 million t/y.
It is expected that 4.9m t/y of pellets will be sold (to Shougang entities). The remaining pellets will be processed at the site to direct-reduced iron by a direct reduction process using natural gas. The DRI plant will have one module, with capacity of 1.45m t/y. Because of long-distance shipment the product will be in the form of HBI (hot briquetted iron).
Products will be delivered by a 30 km overland conveyor to a new port at Cape Preston on the Indian Ocean. The port will be developed to handle and load ships from 20,000 to 175,000 deadweight tonnes. It is assumed that the capital costs of the conveyor, materials handling equipment, port and associated dredging will be paid one third by the project and the remainder by other users. Process water required for the project will be supplied from a borefield or desalination plant. Electricity for the project will be supplied from a gas turbine power station using natural gas.
Including engineering, project management and miscellaneous items, the total capital costs for the project will be 2100 million (2.1 billion) US dollars. The sources of these cost estimates are turnkey bids for the adjacent Balmoral Central Block updated to 2007 prices from the key contractors and equipment suppliers for each stage, adjusted for the proposed scale of the project. It is possible that with Chinese participation in the project this capital cost could be reduced.
COST COMPETITIVENESS
Using information from the engineering for the Balmoral Central Block project, the operating costs of each stage of the project have been assessed. These are summarised in Appendix 2, Table 1.
The average operating costs at the plant is expected to be $18.76 per tonne for concentrate and $25.09 per tonne for pellets. Including delivery to the port, shiploading, administration and royalties, the operating cost, FOB on a ship at the port, is expected to be $24.41 per tonne for concentrate and $30.73 per tonne for pellets. For concentrate this is equivalent to 35.91 US cents per dry metric tonne unit (cents/dmtu) of iron (the conventional measure of iron ore prices) and for pellets 45.58 cents/dmtu.
2
Production Costs - Iron Ore Products (operating costs, cents per dmtu, FOB)ItemAverageLow 25%ProjectConcentrates34.0< 26.035.9Traded Pellet59.4< 49.945.6
Information on the costs of production of existing iron ore operations around the world is maintained and published by King. These indicate that the expected operating costs of the project are highly competitive for the production of pellets. King’s information shows the average operating cost for traded iron ore pellets (i.e. excluding pellets used entirely within integrated steel companies’ own operations) in 2006 as 59.4 cents/dmtu, FOB on a vessel at the shipping point, and the lowest-cost 25% of capacity had operating costs below 49.9 cents/dmtu FOB. The project has operating costs of 45.6 cents/dmtu, among the lowest in the world. This provides a significant strategic advantage to investors if iron ore prices weaken in the future.
These fundamentally low iron ore costs are carried forward to DRI production. King’s information for the first quarter of 2007 shows that the average cost of production for direct-reduced iron was $139 per tonne, FOB plant. Most of the plants competing in the export market for DRI are the lower-cost producers. The lowest-cost 25% of capacity for DRI has costs below $92 per tonne. The project has operating costs for HBI , FOB plant, of $81.31 per tonne.
DR Iron: Production Costs50709011013015017019021023025005101520253035404550556065707580859095100Cumulative Capacity, percentProduction Costs, $/tonne507090110130150170190210230250world operating costsoperating cost curveproject costsProject cost = $81industry average cost = $139
3
FINANCIAL ANALYSIS
Capital and Operating Costs
Total capital costs of US$ 2108 million are taken from the analysis described above. Capital costs are allocated across a 30-month construction period. There is no major replacement of equipment over the life of the project and no residual value (recovery value) is realised at the end of the project.
Average production costs per tonne shipped of $35.20 are taken from the analysis described above. Final operating costs also include a commissioning fee of $1.00 per tonne and a 2.5% marketing fee on FOB product value payable to entities associated with ARH’s partner, Shougang Corporation.
Revenues
Revenues are calculated as the volume of sales (11.55 million tonnes) multiplied by the average FOB price of products.
Competitive market prices for the iron ore products of the project have been assessed. The market for iron ore is currently very strong and China is importing a massive quantity of iron ore. In the years to come we expect that the Chinese imports of iron ore pellets and concentrates for domestic pellet plants will expand greatly. It is therefore assumed, as in the recent transaction with Shougang, that Shougang entities will take all the products from the project. The project is evaluated on the basis of all pellet sales as BF pellets, but it is recognised that a further premium could be obtained in DR pellets were produced.
It is assumed that customers can receive ships up to 150,000 tonnes. If customers are limited to smaller ship sizes, the project is more competitive against long-distance iron ore suppliers and the average product prices would be higher.
In early 2007 new prices for iron ore products were agreed, with Chinese buyers acting for the first time as leaders in the price negotiations with major suppliers. Prices for fines were increased from 2006 levels by 9.5% and for pellets by 5.3%. The new benchmark price for fines was established at 80.42 cents/Fe unit, equivalent to $48.03 per tonne FOB Dampier in Western Australia, for Hamersley Iron’s fines. The new benchmark price for BF pellets was established at 117.96 cents/Fe unit, equivalent to $76.26 per tonne FOB Tubarao, Brazil for CVRD’s pellet.
The project’s concentrates and pellets have higher iron content than the benchmark products. In sales to China pellets from Australia also have a freight cost advantage, which could permit Australian sellers to command a higher FOB price than Brazilian sellers, while achieving the same delivered price to a customer in China. That freight cost advantage is estimated at $13.60 per tonne, but in this analysis no freight premium has been included.
The project’s prices will be established in relation to international market prices. For the purpose of this analysis reasonable FOB market prices for project’s products have been calculated as:
concentrates
- the 2007 benchmark price FOB Western Australia, plus
- a premium for the higher iron content of the project’s concentrates
pellets
- the 2007 benchmark price, FOB Brazil plus
- upward adjustment for the higher iron content of the project’s pellets
The result is a competitive selling price of $57.31 per tonne for the project’s concentrates and $79.53 per tonne for the project’s pellets. It is assumed that all sales are made at those market prices.
4
Iron Ore Selling Prices(US dollars per tonne, FOB shipping point) ProductFe contentPricedry %wet %c/dmtu$/tonneConcentrate70.7%67.9%84.4457.31BF pellets68.1%67.4%117.9679.53DR pellets68.1%67.4%129.7687.48
The market for steel scrap was very strong in 2004-2007. International prices for DRI/HBI follow the prices of steel scrap, with which it is direct competitor. The price of HBI for supply to China and other countries of East Asia will be affected by the price of scrap in that region, which is higher than the benchmark price of scrap in the US market because of the continuing need for scrap imports into the region. In strong market conditions that premium is about $50 per tonne. Taking this premium into account a market price of $240 per tonne has been used for DRI.
The resulting weighted average selling price is $89.67 per tonne.
Base Selling Prices(US dollars per tonne, FOB shipping point) Productm.tPriceConcentrate - market pric5.2057.31BF pellets - market price4.9079.53DR pellets - market priceDRI/HBI - market price1.45240.00Total/average11.5589.67
Inflation
Inflation is assumed to proceed at 1.9% per annum throughout the period and all calculations are made in nominal terms.
Project Life and Depreciation
Given the quantities of iron ore reserves available, the project is evaluated over an economic life of 25 years after construction. Assets are depreciated over 20 years for commercial purposes and over 10 years for tax purposes.
Financial Structure
For the whole project, long-term loans are assumed to be equal to 100% of the capital cost, drawn down over 3 years according to the project’s requirements for cash. Repayments of loan principal start when the project’s free cash flow (before loan repayment and after tax) is positive. For the first three years 70% of the free cash flow is used for repayment of principal and for later years 40% of the free cash flow is used until the loan principle is repaid. The loan is interest-free. It is assumed that all the company’s available cash flow will all be paid out as dividends, subject to the project company meeting all payments of debt principal and having adequate cash reserves for operation at all times.
Results – Total Project
The results for the total project are shown in Appendix 2, Table 1, based on a financial analysis of the project over its whole life, from which the results for the total project and the partners are calculated. It is assumed that Shougang entities elect to proceed in accordance with Australasian Resources announcement of 21 March 2007. These are summarised in the tables, which show values in both US and Australian dollars.
5
International Minerals Joint VentureResults for Total ProjectItemA$USReturn on equity before tax%no equityno equityReturn on equity after tax%no equityno equityEarnings after tax in: first year of full operation$m.510398 first 10 years of full operation$m.55034292NPV after tax at 8% in Year 1$m.45573555NPV after tax at 8% in Year 5$m.59824666NPV after tax at 8% in Year 10$m.69245400
The table shows the financial results for 100% of the project company (Australasian Resources and Shougang combined). There is no equity investment (100% debt finance). Profits after tax are A$ 510 million (US$ 398m) in first year of full operation and cumulative profits after tax for the first ten years of full operation are A$ 5503 million (US$ 4292m).
Net present values (NPV) are also shown. These are the net present value of equity cash flows after tax calculated at various rates of discount. For example, at 8% discount the NPV after tax in Year 1 is A$ 4557 million (US$ 3555m). If the NPV after tax is calculated at Year 5, it increases to A$ 5982 million (US$ 4666m).
Financial ratios have also been evaluated. The long-term debt service cover ratio2 over the life of the loans is generally in the range of 2 to 4 and is positive in all years after construction. The loan life cover ratio3 is generally 3 to 7. These are strong financial ratios indicating that long-term debt can be comfortably serviced.
Results for Partner – Australasian Resources Share of Joint Venture (Partner 1)
It is intended that the project be established as a joint venture of two partners. Australasian Resources (Partner 1) would provide the mineral reserve of 1 billion tonnes as its contribution. The other partner (Shougang Corporation and associated companies - Partner 2) would arrange the long-term loan for the project and guarantee to take 100% of the production. Each partner would receive 50% of dividends following repayment of the loan principal.
On this basis the earnings of Australasian Resources are the dividends received from the joint venture. These are summarised in the table.
2 Cash flow from operations less tax as a ratio to the debt interest and principal payments in each year
3 The net present value of cash flows over the remaining life of loans as a ratio to the total of outstanding loans in any year 6
International Mineral Joint VentureResults for Australasian Resources' Share of JV - Base CaseItemA$USReturn on equity after tax%no equityno equityEarnings after tax in: first year of full operation$m.10078 first 10 years of full operation$m.22571761NPV after tax at 8% in Year 1$m.26832093NPV after tax at 8% in Year 5$m.35412762NPV after tax at 8% in Year 10$m.42693330Shares issuedm490490Price per share - initial$5.474.27Price per share - Year 5$7.235.64Price per share - Year 10$8.716.80Price per share at P/E of 12 - Year 10$7.035.48
Dividends are A$ 100 million (US$ 78m) after allowing for loan repayments in first year of full operation and cumulative dividends for the first ten years of full operation are A$ 2257 million(US$ 1761m).
At a discount rate of 8% the NPV after tax in Year 1 for Australasian Resources’ share of the project is A$ 2683 million (US$ 2093m). If the NPV after tax is calculated at Year 5, this increases to A$ 3541 million (US$ 2762m).
It is assumed that Australasian Resources will have on issue 490 million shares following full project funding on a fully diluted basis. In principle the value of a share is the discounted value (NPV) of the future stream of dividends that it will earn. On this basis the value of the share would be A$ 5.47 (US$ 4.27) per share at the start of the project, rising to A$ 8.71 (US$ 6.80) per share in Year 10.
An alternative valuation of shares is to consider the price/earnings ratio for companies of the same type and to multiply that ratio by the earnings of the company after tax. Leading financial analysts were expecting a price-earnings ratio for major mining companies of 12.0 over the period to 20084. Using that method of valuation, and recognising that the value of ARH’s shares is effectively 50% of the value of the joint venture’s net profits after tax, the table shows that the share price in Year 10 would be A$ 7.03 (US$ 5.48) per share.
SENSITIVITY
To examine the sensitivity of the project to alternative assumptions, the impact of separate changes upwards and downwards of 10% in the price of products, operating costs, and capital costs have been assessed. The impact on the financial results of Australasian Resources are shown in the table.
Compared to the base case, a 10% change in selling price changes earnings over the first 10 years by about 24%, while a 10% change in operating costs changes earnings by 9-10% and a 10% change in capital costs changes earnings by 3-5%.
The table also shows the impact, relative to the base case, of the sale of DR-grade pellets instead of blast furnace pellets. The higher price of DR pellets changes earnings over the first 10 years by 18.8%.
4 This is based on a published report by Morgan Stanley Equity Research of November 2004, forecasting a weighted average of the price/earnings ratio of 12.0 over the period 2005-2008 for the major quoted international mining companies: BHP Billiton, Rio Tinto, Anglo America, Norilsk, Xstrata, Lonmin, Antofagasta and Vedanta.
7
International Mineral Joint VentureResults for Australasian Resources@ Share of Joint Venture - SensitivityItemBasePriceOperating CostCapital CostDRI-10%+10%-10%+10%-10%+10%PelletReturn on equity after tax%no equityno equityno equityno equityno equityno equityno equityno equityEarnings after tax in: first year of full operationA$m.100851141059498101111 first 10 years of full operationA$m.22571723281724832064235921902682NPV after tax at 8% in Year 1A$m.26832179321328972493272326703085NPV after tax at 8% in Year 5A$m.35412865424238223280359735074073NPV after tax at 8% in Year 10A$m.42693415516146273941436442094945Shares issuedm490490490490490490490490Price per share - initial$5.474.456.565.915.095.565.456.30Price per share - Year 5$7.235.858.667.806.697.347.168.31Price per share - Year 10$8.716.9710.539.448.048.918.5910.09Price per share at P/E of 12 - Year 10$7.035.728.347.566.507.106.968.03Change in earnings in first 10 years%-23.7%24.8%10.0%-8.6%4.5%-3.0%18.8%
JAMES F. KING
12 April 2007 8
APPENDIX 1
INTERNATIONAL MINERALS JOINT VENTURE
COMPARISON OF IRON ORE QUALITIES
The charts in this section show the expected grade of iron ore concentrates produced by the project in comparison with the grades of other major iron ore products in the international markets. The comparisons are made for content of iron (Fe), alumina (Al2O3), silica (SiO2) and phosphorus (P).
The content of iron should be as high as possible and the project’s concentrate has the highest grade of any of the iron ores in the chart.
The content of alumina, silica and phosphorus should be as low as possible and the project’s concentrate is at the bottom end of the range in each case.
1.1
Iron
Fe by Mine50.00%55.00%60.00%65.00%70.00%75.00%Mt Goldsworthy- LGOTaharoaRobe River (Mesa J)YandicooginaBrockman Det FinesHope Downs FinesMt Goldsworthy- HGFHope DownsMarandoo FinesArea CHope Downs LumpWest Angelas Ore Body 18Marandoo LumpSNIM-MauritaniaHamersly FinesWhyalla FinesHamersly LumpMt Goldsworthy- HGLHam Fines (Plan)Newman FinesBrockman Det LumpParaburdoo LumpParaburdoo FinesSSFNibrasco PelletsCapanemaWhyalla LumpHam Lump (Plan)Carol LakeCarajas FinesIscor FinesTubarao ANewman LumpBailadila FinesTom PriceIscor LumpCarajas LumpTamandua (MBR)KudremukhBailadilaRomeral (Spec)PeruInternational Minerals% Fe in ProductIM project
1.2
Alumina
Al2O3 by Mine0.00%0.50%1.00%1.50%2.00%2.50%3.00%3.50%4.00%International MineralsCarol LakeRomeral (Spec)PeruKudremukhNibrasco PelletsTamandua (MBR)Hope Downs LumpTom PriceWhyalla LumpBailadilaNewman LumpYandicooginaArea CMt Goldsworthy- LGOSSFCarajas LumpIscor LumpHam Lump (Plan)Hope DownsMarandoo LumpCarajas FinesWest Angelas SNIM-MauritaniaHope Downs FinesParaburdoo LumpBailadila FinesMarandoo FinesHamersly LumpMt Goldsworthy- HGLTubarao AIscor FinesParaburdoo FinesHam Fines (Plan)Brockman Det LumpNewman FinesOre Body 18Whyalla FinesHamersly FinesMt Goldsworthy- HGFCapanemaRobe River (Mesa J)Brockman Det FinesTaharoaCVRD% Al2O3Al2O3IM project
1.3
Silica
SiO2 by Mine0.00%2.00%4.00%6.00%8.00%10.00%12.00%14.00%16.00%18.00%20.00%Carajas LumpBailadilaInternational MineralsCarajas FinesTamandua (MBR)Romeral (Spec)PeruBailadila FinesBrockman Det LumpTom PriceHope Downs LumpWest Angelas Area CHam Lump (Plan)Brockman Det FinesHope DownsWhyalla LumpMarandoo LumpTubarao AHope Downs FinesKudremukhNibrasco PelletsNewman LumpCapanemaHam Fines (Plan)Paraburdoo LumpParaburdoo FinesIscor LumpMarandoo FinesWhyalla FinesTaharoaYandicooginaIscor FinesNewman FinesOre Body 18Hamersly LumpMt Goldsworthy- HGLCarol LakeRobe River (Mesa J)SSFHamersly FinesSNIM-MauritaniaMt Goldsworthy- HGFMt Goldsworthy- LGOCVRD%SiO2SIM project
1.4
Phosphorus
P by Mine020406080100120140160International MineralsPeruKudremukhCarol LakeBailadilaRobe River (Mesa J)Romeral (Spec)Nibrasco PelletsBailadila FinesMarandoo LumpTamandua (MBR)Newman LumpIscor LumpWhyalla LumpYandicooginaSNIM-MauritaniaMt Goldsworthy- LGOHope Downs LumpMarandoo FinesWhyalla FinesTom PriceHope DownsArea CHamersly LumpMt Goldsworthy- HGLHam Lump (Plan)Hope Downs FinesOre Body 18Newman FinesCarajas LumpCarajas FinesIscor FinesWest Angelas Brockman Det LumpParaburdoo LumpSSFHamersly FinesMt Goldsworthy- HGFHam Fines (Plan)Brockman Det FinesParaburdoo FinesTubarao ACapanemaTaharoaCVRD% P*1000IM project
1.5
APPENDIX 2
INTERNATIONAL MINERALS JOINT VENTURE
RESULTS FOR THE PROJECT
2.1
Table 1INTERNATIONAL MINERALS JOINT VENTURESUMMARYItemDateA$US$FINISHED PRODUCTS SHIPPED000t11550Iron ore concentrate000t5200 to partners000t to third parties000t5200Iron ore pellets - blast furnace000t4900 to partners000t to third parties000t4900Iron ore pellets - direct-reduction000t0 to partners000t to third parties000t0DRI/HBI000t1450 to partners000t to third parties000t1450REVENUE PER TONNE SHIPPED$/tonne114.9689.67Iron ore concentrate - partners$/t FOB73.4857.31Iron ore concentrate - third parties$/t FOB73.4857.31Iron ore pellets - blast furnace - partners$/t FOB101.9679.53Iron ore pellets - blast furnace - third parties$/t FOB101.9679.53Iron ore pellets - direct-reduction - partners$/t FOB122.5295.57Iron ore pellets - direct-reduction - third parties$/t FOB122.5295.57DRI/HBI - third-parties$/t FOB307.69240.00OPERATING COST PER TONNE$/tonne45.1335.20Iron ore concentrate - FOB WA port$/tonne31.2924.41Iron ore pellets - FOB WA port$/tonne39.4030.73DRI - FOB WA port$/tonne114.1489.03EXCHANGE RATES Exchange rates - actual for operating costsUS$ per A$0.78 Exchange rates - actual for operating costsA$ per US$1.282 Exchange rates - actual for capital costsUS$ per A$0.78 Exchange rates - actual for capital costsA$ per US$1.282 Exchange rates - base for calculationsUS$ per A$0.78 Exchange rates - base for calculationsA$ per US$1.282PRODUCTION BY STAGEMaterial moved000t66883 Iron ore mined000t40535 Iron ore concentrate000t11922 Iron ore pellets000t6930 DRI000t1450FIXED CAPITAL COST BY STAGE$m.27032108Mine + production plants$m.17091333Infrastructure$m.963751Project management + engineering$m.3124EMPLOYMENT575
2.2
Table 1 (continued)INTERNATIONAL MINERALS JOINT VENTURESUMMARYItemDateA$UFINANCIAL ANALYSIS - TOTAL PROJECTPercent long-term debt - main loan%100Loan coverage of start-up costs%0Loan termyears10Loan drawdown patternyears3Principal repayment holiday years0Capitalisation of interestyears0Debt interest rate% pa0.0Construction periodmonths30Depreciation period - commercialyears20Depreciation period - taxationyears10Project evaluation periodyears25Inventorydays' sales30Accounts receivabledays' sales30Accounts payabledays' costs30Corporate tax rate%30Inflation rate% pa1.9Return on equity before tax% pano equityReturn on equity after tax% pano equityResults in First Year of Full OperationSales revenue$m.14201108Earnings before depreciation, interest and tax$m.807629Earnings before interest and tax$m.669522Earnings before tax$m.669522Earnings after tax$m.510398Results in First 10 Years od Full OperationSales revenue$m.1559312163Earnings before depreciation, interest and tax$m.89036944Earnings before interest and tax$m.75315874Earnings before tax$m.75315874Earnings after tax$m.55034292NPV TableNPV after tax at 8%, calculated at:Year 1$m.45573555Year 5$m.59824666Year 10$m.69245400NPV after tax at 10%, calculated at:Year 1$m.34552695Year 5$m.48413776Year 10$m.58684577NPV after tax at 12%, calculated at:Year 1$m.26742086Year 5$m.39893112Year 10$m.50403932 2.3