agm report., page-5

Hi (Pythagerous)

They seemed very confident.As Don has said,they are comfortable with 3.3 billion cost.

As Don also said,they need to concentrate on drilling high grade iron ore.
The more people that are interested in the high grade,the more high grade they need to have proved up.
It could be more and more enquiries are coming in for high grade,so have to prove up more to guarantee each one a minimum amount to start with,before signing off on off-take agreements and funding.
Put it this way,if they had one company interested in high grade.Over 200 million tonnes already known to be there would be enough to last four years if they started off being able to ship 50 million tonnes from year one.
We all know there is a lot more high grade in the ground,it is a matter of drilling to prove it up.
It is plain to see there is going to be more then twice the amount of high grade they have proved up at present.

It all boils down to there being more then one customer interested just in high grade.
They are already giving out percentages of the different types of iron ore and where it is destined to go to.
That surely tells us there are a number of customers from different continents that are interested in buying our different types of iron ore.

As with the rail system.Don said SDL are in the box seat and will only do what is best for SDL in terms of agreements.Does that sound as if they are struggling to get interested parties?
I think it is a matter of it taking longer because there are more people fighting over getting involved and SDL have to pick the right partners on the best terms for SDL over the next 50 to 100 years.These agreements will not be just for 5 year terms.
SDL have to cover them selves for iron ore prices going up and down as to the pricing over the agreement time frames,also cover the cost of transporting the iron ore in ships,with shipping prices likely to change as time goes by.
They do not want to be caught out and have legal battles like FMG have had by signing up freight cost contracts at a price,then find the iron ore price comes down and they are stuck paying the same price for shipping the iron ore as they did when the iron ore prices were twice as high.

That will be where the likes of the German Bank come in to make up the terms of all agreements and contracts.

SDL may already have picked partners,but until the German Bank write up terms for the contracts and the interested parties agree to them,nothing can be said.

Don's trips to different continents could be a case of seeing who is interested at the right terms for SDL.
It does not mean they have not had offers of full funding.They then need to see if they can get better terms then they have been offered.
One dollar per tonne difference over the term of shipping 50 million tonnes per year over 50 years = $2.5 billion.

That could be in shipping cost per tonne or selling iron ore cost per tonne or both,then it doubles to $5 billion.

That is the way I see it as a layman.

Regards
Westcott.