Edit: Apologies, just saw how long the ramblings were after posting.
Hi Buffalo,
not sure how to answer it without it being a novel...
there has obviously been massive delays and issues to overcome the last 16 months (since we were supposed to be cashflow positive dec 16). this has naturally soured the sentiment, in addition to questionable communication or lack thereof also. but, they've learnt plenty about this plant and processes a hell of a lot in that time also. I think it has probably been far more of a pilot plant than perhaps we envisaged or were told.
I do believe the company is on the right track now... but, it may be just from march onwards... afterall, the operational update did suggest "The Phase 2 wet beneficiation plant has performed strongly following the completion of a number of key technical improvements in February and early March." Was this testing? Was the plant shutdown from production for this? We don't know, but, hope we learn more in the plant order or quarterly, whatever comes first.
We have had the first real mention of grades, yield and from what feed..... which i consider very important. from the update:
- producing 58%-60 Fe%: target range was 58%-62% Fe. So not perfect, but, we don't really know if they were originally targeting 62% by using a blend of better grade dirt etc... something we all didn't consider, yet, timtator found was written up in the very first applications with the indian officials (maybe it was enviro clearance or something, cant remember specifically).
- from a 30-33% fe feed: This is telling us we don't need the higher 50% fe feed etc that the company acquired to try and make the 63% Fe (from mem) for the initial BMM order. They are going to be providing dirt for this phase two and phase three from Mangal and AP26 sites.... Mangal had 213 bulk samples taken when they acquired it, ranging from 20-60% Fe, with an average of 38% Fe. AP26 is stated as being the same conditions/make-up as Mangal. Therefore, we are about to feed an average grade into the plant that is higher than the current 30-33% Fe feed.... This could have two outcomes... we either deliberately produce a product of greater than the current 58-60% Fe, or we can reduce the throughput. I.e. The better dirt you put in, the less you have to use for that desired grade, therefore, reducing the throughput and increasing the yield.
- 30-38% yields: i can't remember where i read it, but, the yield targeted was to be 30%. I.e. They put 100kt of dirt through the plant and get finished product of 30kt out. This is where in earlier news flow they wanted to test the yields when putting the better dirt in. I think with the issues they've had they haven't been able to determine this yet. But, the idea is it would stay as is yield wise, unless the margins were better to use blend of a better grade (i.e. yield increase vs cost of blend etc). So we can't rely on better yields yet, but, meeting the target is good enough. I don’t image they will do any more testing until phase three is up.
sales, well, i have never been worried about the sales occurring. if we produce it, it will sell. i think we are in the right spot at the right time and the demand is absolutely there.... remember this is a refined, consistent product that the steel mills buy. they don't get that when buying iron ore in 4000t stockpiles straight out of the ground... it could have varying grades and complete different in size etc. by using NSL product they can skip stages in the steel production, saving time and money.... therefore, demand for our product should be there, meaning so should the right sales price. i don't think the right sales price was there initially, i think after the infinity ores stuff around we were probably desperate and took what we could.... at that stage i think we had dirt and just needed to cash some of it in... i think we were probably pretty desperate for some cashflow until First Samuel came onboard. Also, probably no better way to market your product quickly than to offer incentivised sale prices to customers..
xinhai... well, they appear to be very impressive and offer guarantees on their EPC offerings. It is unknown if horses for courses and perhaps they don't offer it all the time... but, it could also be reflected in the price you pay for the plant i guess.... the more you pay, the more they're willing to guarantee i guess....i would love a guarantee... but, it might be wishful thinking.
i definitely think we will get an order very soon. this will be for phase three, in addition to what they've always referred to as 'enhancements for phase two'. We've added on the thickening circuit on already, but, this was basically something they appear to know they needed at the very beginning of the relationship with xinhai... therefore, i dont think is anything to do with the further enhancements they’ve continued talking about...they're still to come. as to how it is funded, who knows... my belief is probably export trade finance as they've mentioned previously, along with deferred instalments, like we had with Huate on phase two plant. But, who knows.
so phase three plant should be better, and and the same time the same extras will likely be added on to phase two...
what i think/hope we will see is:
- phase three plant ordered in addition to phase two upgrades
- paid for with some finance. does this give the market some confidence that further parties have done due diligence to approve the finance? I am unsure of the requirements to obtain it, does there need to be guarantees given etc by the epc to the purchaser, to ensure the buyer is capable of debt repayment?
- operational update with either the quarterly or the plant order, whichever comes first.... if the company is on track for greater than 10kt production, then they may well inform the market about it. it won't breach their own applied restrictions of talking about sales other than quarterly, but, it will go a long way towards the market believing that the production has turned the corner...
- hopefully the plant order elaborates more on the testing and/or the key technical improvements that were made in Feb and March. Not necessarily the specifics if IP, but, who undertook them, was it us, xinhai or someone else? Have we had further review of xinhai's proposals? it appears we probably didn't on phase two, so this would maybe help us believe in a way better result for phase three, both in performance and commissioning time if we've done further review on what xinhai show us.
- good june quarterly
- good sept quarterly
- plant commissioning? not sure on the dates here...
what i would love to see is more detailed reporting of why nsl can turn low grade iron ore into high grade iron ore.... i think this is one of the biggest scoff points for the skeptics. “why can nsl do it when nobody else can?” well, the truth is others probably can, they just haven't tried it with the low grade iron ore as a starting point from our specific region, and well, not with the current technology. Plus, they’ve had plenty of high grade dirt to select and dig from, so they’ve all seem to have taken the easier option..... the reason is the make-up of the ground we are on in the cudappah basin... i'll stop there before i explain it badly.... but, i would love to see some more info on this for everyone to clearly read (providing it doesn't give away IP).
so post successful commissioning there is then bigger fish to fry in the know, phase four and five (the two x 1mt plants) and hopefully a pellet plant.... i am not holding my breath for the steel mill... that is a seriously big ticket item... a pellet plant can offer an amazing return for the capital outlay.
where does that leave us with the current share price? haha, the question you actually asked... well, in what order do things above come? does the market already believe that the march quarter isn't going to be flash? or is it hopeful? the fact that the share price went down post operational update makes me think it believes it will be ordinary... therefore, maybe an ordinary one wont effect the share price much at all... but, if they can provide an update that confirms the plant is in fact going well for april, then this will help lift people's confidence i believe.... possibly the plant order will come before that also... will that help people become more confident? who knows... i think it could... but, we need the details...
one thing i think is that should they be able to confirm operation performance and a quarter or two of consistent sales performance, it will change direction pretty quick.... there is a lot of believers, or people that bought in higher... a lot of sellers may well dry up... although of course some lower entrants may take some profits... but, the big thing is, if they can prove themselves up... i think a lot of people realise this has a lot of potential long term... the company has mentioned 8mt and steel plants etc, but, my goal over a few years is 2.5mtpa and a pellet plant... if something more with minera jv or other left field happens then great.... but just these will be enough to see approx profits of:
2.5mt x $30/t = $75m
600kt pellet plant at approx $2o/t margin = $12m
so profits of potentially $87m on something that i think is very achievable.... before opportunities of consolidation on the 8mt pa MOU with GOAP etc...
with that potential in front of them people will strongly reconsider selling..... people realistically probably just want to ensure the plant is producing... as the sales demand should be there, we have enough mining leases already for many many years of production, let alone the potential for more leases to be acquired.
obviously none of the above might not happen, i might be wrong, and that is why some people wont buy until fully proven up, or maybe never... and fair enough to them, each to their own...
if we risk it, do we risk it now or after quarterly? or do we not risk it at all....
i'm a risk taker.... and confident.... but, then again i was confident at 5.2c high 18 months ago too and never cashed in very much at all…
to be fair, some of my opinions of past matters have probably changed from my attitudes at the time. I think there has been plenty of things I have been wrong about.
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