On October 21st 2016, the company provided another commissioning update, again advising that they remained on schedule for Q4 2016 positive cash flow. In hindsight, this ended up being far from reality, however the company should be approaching cash flow positive in coming weeks, as as they continue to progress towards nameplate capacity.
As per announcement:
" In addition to the significant progress being made on site, the Company is pleased to confirm the appointment of Mineral Engineering Technical Services (METS) to support the material feed commissioning activities. METS have been a long-term partner with NSL during the initial design and equipment procurement phases, providing independent expert advice in support of the Company’s investment approvals process.
Personnel from METS will be arriving on site in the coming days. There will be significant technical, process and quality support coming from METS, China Huate and independent Chinese Research Institutes to ensure the material feed commissioning phase moves quickly and safely."
On the 26th of October 2016, the company provided an update on the progression of their steel plant joint venture.
By late November, commissioning of the wet plant was well underway. The company provided a brief update on November 24th 2016.
As per announcement:
"The Company continues to progress commissioning according to schedule, with the team having transitioned to the wet commissioning phase. Individual components are being no load tested with water, with pumping through individual components occurring and ongoing.
In addition, basic component full load commissioning utilising very low grade waste as the material feed is producing exciting results, with feed grade of approximately 20% Fe beneficiated up to 57% Fe.
This result provides further confidence in the process being able to achieve its desired high grade premium price product grading between 58-62% Fe, targeting 60% Fe. Normal ROM feed grade ranges between 25-35% Fe.
Current commissioning schedule anticipates full load commissioning by running low grade iron ore feed through the complete plant and producing high grade premium price product, grading between 58-62% Fe at the end of November."
By December 19th 2016, commissioning of the wet plant was well underway.
As per announcement:
"Further to previous wet plant commissioning updates, a number of key milestones have been achieved during the past two weeks:
Ball mill run times have increased according to the commissioning schedule, with 8 hour tests to occur in the coming week;
Classifier commissioning complete;
Conveyor system commissioning complete;
Low intensity magnetic separation commissioning complete;
Material handling system commissioning complete; and
Plant based pump systems commissioning complete.
The Company is installing the recently arrived high volume variable speed feed and recirculation pumps. The installation of these pumps will allow for the completion of the high intensity magnetic separation commissioning and the from commissioning to commencement of production ramp up to occur."
On December 22nd 2016, NSL Consolidated advised the market about a delegation visit to Andhra Pradesh, whom had an opportunity to meet with Chief Minister Naidu and discuss the steel plant project.
NSL closed out 2016, debt free however not exactly cashflow positive. Q4 2016 was technically cash flow positive. This was however not due to operating activities but instead financing activities, made possible by the conversion of listed options by shareholders.
Whether the company ever really expected to be cash flow positive from operating activities, is a question for capital hindsight to ask.
This brings us to 2017 and eventually to the present day.
As per announcement:
"Further to previous wet plant commissioning updates, a number of key milestones have been achieved during the past three weeks:
Ball mill run times have increased according to the commissioning schedule, with 6 to 8-hour single shift tests occurring;
Classifier commissioning complete;
Recirculation and fresh water feed pumps installed and commissioned;
Vacuum disc filters commissioning complete;
High intensity magnetic separation commissioning complete; and
All equipment commissioning complete.
The Company has now transitioned from equipment commissioning to complete plant process flow optimisation and commencement of production ramp up.
In a major safety milestone, and testament to the onsite team’s safety focus the phase two wet beneficiation plant project has reached 250,000 hours without a lost time injury (LTI)."
In January 2017, Mr Srinivasu Panchada joined NSL. Mr Panchada joined the company directly from offtake partner BMM Ispat, highlighting the close working relationship the two companies maintain. Mr Panchada had previously worked for companies such as JSW Steel, Essar Steels Ltd and Sesa Goa, over his 18+ year career in iron ore beneficiation and processing roles.
On January 31st, the company advised that its process optimisation results exceeded expectation and the full plant had been able to process beneficiating low grade iron ore waste as low as 14% Fe feed regularly to in excess of 62% Fe and up to 65.3%.
This provided a strong indication that the plant was operating efficiently and commissioning had been a success. However, the company’s ability to consistently process ore to level in excess of 62% was yet to be seen.
A further encouraging sign of progress/collaboration between NSL and the state government occurred at the start of February 2017, when the company announced that the Government of Andhra Pradesh had formally allotted 250 acres of land for the pellet plant and 750 acres of land for an integrated steel plant.
On February 28th 2017, the market reacted harshly to news that the company had experienced reduced iron ore slurry pump performance.
As per announcement:
"During the past two weeks of optimisation ramp up the operation has experienced reduced iron ore slurry pump performance. This is now being rectified with spare parts due on site in the coming days. Replacements are expected to be completed progressively this week.
Further to the positive results released to the market whereby the Company has been able to repeatedly beneficiate low grade iron ore waste as low as 14% Fe feed regularly to in excess of 62% Fe and with the confirmed imminent sales, the Company continues the process of employing shift supervisors, plant operators, and mobilising plant mobile fleet with goal of ramping up of throughput and production to a 24-hour operation over the coming months.
A complete second shift is expected to be employed early March and operational late March, with 24 hour operations scheduled to commence in late April."
Due to the harsh share price reaction to what was reduced performance of a single pump, the company were quick to inform the market of the issues rectification no more than ten days later.
As per announcement:
"Further to the announcement dated 28th February 2017, the Company is pleased to inform the market that iron ore slurry pump replacement parts have been fitted, with the pumps now operational.
Second shift operations are on track to commence late March with the recent employment of most of the required roles in the past two weeks, with the commencement of 24 hour operations anticipated late April.
Also, as announced on 28th February 2017, the Company continues to investigate exporting opportunities. The Company advises that it has sent samples of the NSL produced iron ore product to China for testing by customers. These samples have arrived in China."
In early April, whilst commissioning, testing and optimisation was still taking place in various different forms, the company advised the market that following months of meeting and communicating with difference Chinese EPC companies, NSL had entered into an agreement with Shandong Xinhai Mining Technology & Equipment Inc (Xinhai).
Coincidence or not, Shandong is the same part of China that Huate Magnetism are based. This opens up the potential that Huate Magnetism will remain a crucial player in future expansion following testing by Xinhai.
As per announcement:
"Xinhai will immediately commence comprehensive sample testing from samples already in China to finalise the process flow and equipment requirements to produce a routine operating concentrate grade ranging between 63-65% Fe, targeting 65% Fe.
Xinhai engineers will be on site in India in the coming weeks to review existing operations.
The results of the Xinhai site visit and testing, will then flow into the upcoming expansion projects as outlined previously in investor presentations, whereby, Xinhai as an EPC contractor will have the opportunity, based on acceptable commercial terms to:
Build an additional 200,000 tonnes of concentrate capacity, with commissioning targeted to commence in July 2017, subject to the above,
Build a 1 million tonne concentrate plant, with commissioning targeted to commence in December 2018,
Build a 1 million tonne concentrate plant, with commissioning targeted to commence in December 2019.
Xinhai will also optimise the existing beneficiation plant to produce a routine operating concentrate grade ranging between 63-65% Fe."
Per their website, the testing phase is typically around six months.
There are several announcements regarding both purchase orders and offtake agreements that I haven’t bothered to mention, as none of them eventuated or lead anywhere. So, with that in mind, please don’t feel like I am attempting to pretend they didn’t happen, there would just be little point in me discussing their details due to the fact they didn’t evolve into actual sales.
On July 18th 2017, the company advised that it had received a 4,000 tonne order from Minera Steel and Power Pvt Ltd (Minera), later redacted to be a 5,000 tonne order.
Six days later, following considerable criticism of lack of communication, the company provided a much-needed update to shareholders regarding current operations. This criticism was entirely justified, given the signification reduction in announcements and clarity by management in the preceding months.
As per announcement:
"Dispatch of the premium 60/61% Fe to Minera commenced on Saturday 22nd July. The fast turnaround of order, advance payment, commencement of dispatch, and coupled with Minera reconfiguring their plant to accept NSL product, highlights Minera’s intent.
The supply of the initial Minera order is expected to be completed in the following weeks from stockpiles. Minera have communicated with the Company they desire 15,000 tonnes per month of this premium 60/61% Fe product for their operations."
A further update was provided to the market on July 31st advising that dispatch had commenced.
As per announcement:
"As announced on 24th July the Company advised that sales and dispatch of product direct to Minera Steel and Power Pvt Ltd (“Minera”) had commenced. These deliveries were pursuant to an initial 5,000 tonne order of 60/61% Fe filter cake, on commercial terms similar to other orders. The exact terms remain commercial in confidence and it should be noted the 5,000 tonne order size is representative of the Indian industry norm.
The Company is pleased to further advise that both Minera and the Company have implemented a recurring business cycle of regular advance payments deposited by Minera, and continued dispatch of product by the Company. Approximately 1,000 tonnes have now been delivered in the week as the process has been established and implemented.
Dispatch of the premium 60/61% Fe filter cake to Minera commenced on Saturday 22nd July, with supply into the initial order expected to be completed in the following weeks from stockpiles. This fast turnaround of order, advance payment, dispatch and now repeated cycles, coupled with Minera reconfiguring their plant to accept NSL product, highlights Minera’s intent to continue to work with NSL. In addition, Minera has communicated that they desire 15,000 tonnes per month of this premium 60/61 Fe product for their operations.
The Company expects customer sales to increase progressively month on month from August, of between 5,000 -10,000 tonnes per month, to achieve a run rate of 200,000 tonnes per annum during October 2017. Sales negotiations for the Company’s product are ongoing with various other customers, including JSW Steel, Gerdau Steel, Srikalahasthi and other smaller steel plants."
On August 11th, the company advised that their outstanding court case had been sent to judgement, which will likely take months to be completed. Long story short for those unaware of the case, the company have been in a several yearlong legal dispute over potential milestone payments regarding their coal tenements in Queensland.
The claim against NSL is for a AUD $2.5 million, however the company have not settled and have remained confident and steadfast in their position for the duration of the trial. Having read all case material, I remain personally confident, although I am not qualified and at most have done an “Introduction to Business Law” unit at university. Therefore, I am about as qualified to give an opinion on the matter as a broomstick.
Further to previous announcements, the company provided the following update on August 16th 2017 regarding their sales to Minera.
As per announcement:
"As announced on 18 July 2017, the Company expanded its customer base with receipt of an initial 5,000 tonne purchase order directly from the Indian steel industry’s Minera, noting that the order size is representative of the Indian industry norm. On 24th July 2017, the Company advised that sales and dispatch of product direct to Minera had commenced.
On 31 July 2017, the Company further advised that both Minera and the Company had implemented a recurring business cycle of regular advance payments deposited by Minera, and continued dispatch of product by the Company. In addition, Minera had reconfigured their plant to accept the NSL product thus highlighting their intent to continue to work with NSL.
The Company is now pleased to advise that Managing Director, Mr Cedric Goode recently met with Minera’s Managing Director and owner to further discuss the business relationship and was advised that since the commencement of the supply of wet plant product, Minera has utilised approximately 2,000 tonnes into their steel plant process and are very complimentary of the results, with the filter cake producing a high quality pellet with excellent pelletising characteristics and physical properties which has then been successfully fed further into the steel process.
Minera has communicated that they desire a minimum of 15,000 tonnes per month of this premium 60/61 Fe product for their operations, which currently require between 70,000 and 80,000 tonnes per month of iron ore."
As a recommendation to increase grade consistency and water recycling, Xinhai recommended to the company that they introduce a thickening circuit to the production line.
This was then followed up on September 4th 2017 with an update the company has since dispatched 5000 tonnes of product, despite monsoonal rains impacting operations. They also advised that the previously recommended thickening circuit was now being commissioned.
As per announcement:
"The Company expects sales to continue to increase progressively month on month to achieve a run rate of 200,000 tonnes per annum during October 2017."
"The thickener circuit project continues on schedule, with fabrication, construction and erection complete. The project has remained on schedule during trying monsoonal conditions, and with an unrelenting focus on safety that has seen an incident free project to date.
The project has now commenced commissioning. Full operation of the circuit is expected within 10 days.
The initial steps of commissioning require a 48-hour leak test followed by final painting and sealing, rake alignment, pump testing, then hot commissioning with tailing slurry.
Contractor support to date has been excellent, and a smooth project completion is envisaged. The following images show a sequential summary of the thickener construction and erection to date."
