Ann: NRW - Letter of Intent for Karara Mining, page-28

Hi ellimb ….. or set up an assays firm?
I think Perenti has one.
- A nice sideline service to offer those clients who are still exploring.

Speaking of which (exploring), I would be interested in what others here feel about the Karara Project.

Here’s the summary from MACA of their operations there, which will run to March 2022.

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https://www.maca.net.au/projects/karara/

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It appears, if the contract goes ahead, NRW and Action will take over the same work ?
Ie Load & Haul, Drill & Blast and ROM Re-Handling..
“In addition, the work includes train loading and rehandling of the product stockpiles together with miscellaneous dayworks at the mine-site, camp and access roads”.


To share some of the exploring I did last night, here’s an excerpt from the Australian last year on Ansteel (owned by the Chinese government) and Karara

It painted a picture of a project that was, in July 2020, mired in debt.​

Karara’s …. “interest bill in 2019 alone was $259m, and the company’s financial records show it is utterly reliant on its Chinese parent company if it is to continue operating.​

So far in 2020 Ansteel has helped Karara win a 12 month extension on a $US160m loan from the Shanghai Pudong Development Bank, due for repayment in February, along with a $US300m loan from the China Merchants Bank and a $US130m working capital loan from the Bank of China due in June.​

Ansteel itself also extended Karara a new line of credit worth about $374m in March.​

Karara booked $939.4m in revenue from the sale of iron ore in 2019, with operating costs including depreciation and amortisation of $862.9m.​

But while its accounts are still in a parlous situation, the iron ore price helped Karara to a far better performance in 2019 than the previous year, when it booked a $668m net less.​

Spoiler : Full story here

https://www.theaustralian.com.au/bu...e/news-story/b72e58439e63330b91a84ad369b7b952
China’s Ansteel is still bleeding cash at $4.7bn Karara magnetite mine


The Karara project is now heavily reliant on Chinese funding to stay in operation. Supplied

• NICK EVANS
  RESOURCE WRITER
  
• 4:56PM JULY 13, 2020

Chinese steel giant Ansteel is still losing money hand over fist at its $4.7bn WA magnetite mine despite the surging iron ore price, with the operation facing the prospect of refinancing $1bn worth of loans in 2020 while still losing money.

Despite selling its high-grade concentrate for an average of about $146 a tonne landed in China in 2019, Karara Mining still booked a net loss of $264.2m for the year – and said it had net cash outflow from operating activities of $146.1m after paying $259m in interest on its massive debts.

Karara is now wholly owned by Ansteel, after the Chinese steel giant took out ASX-listed partner Gindalbie Metals last year.
The Australian-registered company that owns and operates the mine recently filed its annual financial accounts for 2019, showing the project is still deeply mired in debt and is still bleeding cash, despite the surging iron ore price over the last 18 months.

Karara spent about $4.7bn building the magnetite mine, 200km southeast of Geraldton in WA’s mid-west region. When planned it was supposed to produce 8 million tonnes a year of high-grade iron ore concentrate, destined for Ansteel’s Chinese steel mills.

But its latest accounts show it is yet to consistently hit its nameplate capacity, producing 7.5mt of concentrate in 2019, seven years after it loaded its first ship’s worth of product in Geraldton.
But it is primarily Karara’s crippling debt that weighs down its operations.
According to its latest set of accounts the company has about $1.2bn worth of debt to repay or refinance in 2020, and another $3.7bn worth of borrowings to repay in future years.
The last tranche of its long-term debt falls due in 2030.

Its interest bill in 2019 alone was $259m, and the company’s financial records show it is utterly reliant on its Chinese parent company if it is to continue operating.

So far in 2020 Ansteel has helped Karara win a 12 month extension on a $US160m loan from the Shanghai Pudong Development Bank, due for repayment in February, along with a $US300m loan from the China Merchants Bank and a $US130m working capital loan from the Bank of China due in June.

Ansteel itself also extended Karara a new line of credit worth about $374m in March.
Karara booked $939.4m in revenue from the sale of iron ore in 2019, with operating costs including depreciation and amortisation of $862.9m.
But while its accounts are still in a parlous situation, the iron ore price helped Karara to a far better performance in 2019 than the previous year, when it booked a $668m net less.

NB the Karara debt must look more positive these days with $43om presumably paid back by the February 2021, deadline and likely the $130m due this month too?
And as far as it’ “utter reliance” on Ansteel goes, that seems it might be not so dreadful?
… Ansteel is chugging along nicely; As of April 2021 it is [set for a merger] that will make it the third largest steel producer in the world.
-So Jules likely has no fears of an Altura-like administration repeat?

But why would he take on this project and commit to capex of $130m up front?

- Thanks to @Gruntmeister we know the terrain chews up equipment and maintenance crews are constantly busy with repairs and tyre replacements (from Seek it seems Karara does all the maintenance itself).
….. and Seek indicates workers at the camp are unhappy with the food and the internet and especially the management - which belies the expectations of the 2012 ‘worker attractant’ video I have shared below (in case anyone wants an early camp overview) ;

Spoiler : The worker attractant video of September 2012

Was it a case of him pinching work from MACA, our BORR partner and well-known neighbour company?

Or was it a gentleman’s agreement between Jules and MACA’s, Mike Sutton to ‘pass the Karara parcel?’

Spoiler : My thoughts

I’m going with ‘gentleman’s agreement’.
I think Jules and Mike are likely long term mates and that Mike made a strategic decision against spending the necessary $130m on Karara capex.
All four Mining West projects cost $175m and he bought them knowing the Karara contract was up for renewal ( including new equipment), and that the FMG Eliwana one would not be renewed as FMG was taking over.
MACA has taken some project hits lately to do with Adaman Resources and I think MACA made an executive decision to save that capex.
-I think Mike Sutton has other fish to fry and, whilst it might just be a case or rampant confirmation bias, this theory is backed up by a poster on the MACA forum who wrote the Karara changeover has been an open secret for some time.
Seeing as I heard vague rumours recently too, and considering Dimensional Equities likely did also and yet upped its’ holding in MACA to around 6% on 26/05/21, (not long after MACA appointed a VICTORIAN-based director on 03/05/21), I think MACA may have unofficially asked NRW to take it on.
… which might mean there was no margin squeeze to win the contract?

Cheers