"Why would NFC underwrite without a benefit"
Joe NFC have circa $400-500M of Capex expenditure by IBG to "benefit" coupled with the 20% purchase of Citronen. Hardly peanuts especially when you consider the following figures
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Thursday, April 06, 2017
THE INSIDE STORY: If our Prime Minister was to pay as much attention to the resources sector as he should, he would most probably declare that we are currently in a very exciting time to be a near-term zinc producer.
Global zinc demand is being forecast to increase on the back of the closure of major mines in recent years.
The list includes some heavy-hitting producers, including the Century mine (500,000 tonnes per annum), Brunswick (200,000tpa), Perseverance (128,000tpa), and Lisheen (167,000tpa), contributing a huge expected shortfall in the immediate future.
The zinc price has responded accordingly with a near 60 per cent price rise in the past 12 months.
Enter Ironbark Zinc (ASX: IBG), which is developing its 100 per cent-owned Citronen base metal project in Greenland.
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The Citronen project boasts a JOCR 2012-compliant Measured and Indicated, high-grade Resource of 30 million tonnes at 7.1 per cent zinc within a total Measured, Indicated and Inferred Resource of 132 million tonnes at 4.4 per cent zinc and lead.
In a recent research note, industry analysts Hartleys ran its eyes over the latest numbers for Citronen and came up with some impressive calculations for the project.
Hartleys estimates pre-tax NPV of $650 million on spot prices, assuming a capex spend of around US$500 million over two years.
Using a zinc price profile lower than spot, Hartelys calculated pretax NPV at approximately $230 million.
At spot prices, this pretax valuation came in at around $650 million with Hartleys estimating an average generation of $200 million EBITDA per annum.
“We have seen credible forecasts for zinc to peak near US$1.80 per pound,” Hartleys said.
“While forecasters do not anticipate zinc could remain at such levels for long, we estimate that IBG could generate A$500 to A$600 million EBITDA per annum if zinc held that level in the early years of production.
“At such prices, capital payback would be less than two years.”
Ironbark Zinc took a major step in the development of Citronen earlier this year, when it was granted a Mining Permit for the project by the government of Greenland.
The importance of the Mining Permit should not be overlooked as it provides Ironbark the right to mine the world-class project for a period of 30 years.
“The granting of the Mining Permit has been a long time coming, but the benefits it brings to the project make it well worth the wait and all the hard work we put into achieving it,” Ironbark Zinc managing director Jonathan Downes told The Resources Roadhouse.
“It provides us with the platform to move forward with the development of the project and brings us closer to realising our goal of becoming a major mid-tier mining company.
“Although we may have fallen off the radar screens of some investors, our timing in receiving the Mining Permit could not have been much better, given it coincides with a period of growing tightness in global zinc supply and demand dynamics and a corresponding rise in the zinc price.
“We are now very keen to advance development and financing activities that will pave the way for the company to become one of the world’s largest zinc mining companies.”
Ironbark didn’t waste much time heading down that track by striking an agreement with China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd (NFC).
Under the agreement, Ironbark appointed NFC to incorporate current Chinese equipment and construction costs into the Citronen Feasibility Study.
NFC will also prepare a project study report in compliance with the financing requirement of China's banks, while ensuring technical criteria follows local laws, regulations, standards and codes in both Greenland and China.
NFC will also be charged with helping Ironbark secure Chinese project debt financing for the project under the terms of an earlier Memorandum of Understanding.
“We consider NFC to be an ideal fit for development of the Citronen project,” Downes said.
“They are one of the world’s largest construction engineering groups and have the relevant experience and the capability to provide key equipment for the project.
“Most importantly, NFC has a strong relationship with the Chinese banking sector that we expect to provide an excellent basis to achieve debt funding objectives for 70 per cent of the capital for Citronen.”
Ironbark Zinc Limited (ASX: IBG)
...The Short Story
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329 Hay Street
Subiaco WA 6008
Ph: +61 8 6461 6350
Email: [email protected]
Web: www.ironbark.gl
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Jonathan Downes, Peter Duncombe Bennetto, David Kelly, Gary Comb, Jason Dunning
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