Ann: Company Secretary Appointment/Resignation, page-10

That post from him shows a MAJOR lack of understanding or deliberate ignorance of AVERAGE UNIT COST.

It all comes down to AVERAGE UNIT COST (cost per ton).

The AVERAGE UNIT COST takes everything into accounts, positive and negative, advantageous and disadvantageous factors of a project, all of them, into the final calculations to give you the AVERAGE UNIT COST at a particular production scale, 10mtpa.

Hawsons project resource has average grade of 13.5% DTR. Its resource cut-off grade is 6% but the majority of its resource sits in the range of 16%-18% grade bracket, giving it an average grade of 13.5% DTR.

What he was trying to point out is, say compare Hawsons project to another project of say average grade of 27%Fe DTR in-ground (before processing to final concentrate). And therefore Hawsons needs to dig up twice as much in-ground ore to extract the same amount of concentrate compared to the other deposit and therefore it would cost Hawsons twice as much money.

What he seriously miss is when you compare 2 projects of different in-ground grades, you need to add up and take into accounts ALL FACTORS, not just grades. For example water, energy, transports, port,...The biggest OPEX cost item is energy consumption. Hawsons ore is super-soft ore and it has been tested and proven to save around 75% energy consumption compared to typical Pilbara hard-rock iron ore. This is a major advantage point of processing cost for Hawsons project.

There is no point to pick and choose a particular factor of advantage or disadvantage of a project. All you need to consider is THE FINAL AVERAGE UNIT COST.

The PFS completed in 2017 pointed out the final unit cost of USD $48/ton (OPEX) based on 10mtpa production plan with assumed product selling price of USD $88/t for Fe70% with corresponding Fe62% of USD $63/ton.

Obviously, CAPEX has changed, OPEX has changed, but selling price of the product has also changed since the last PFS. Everything has increased, no doubt about it. But product selling price has increased much more than OPEX (average unit cost). The resulting effect is the profit margin is much higher than the profit margin in the previous PFS and thus NPV of Hawsons project is now much bigger than previous one.


It's all about the final cost per unit.

Mitsui & Co signed an agreement in 2019 to buy 2mil tons each year from Hawsons and was willing to contribute AUD $80mil towards construction, plus partial funding for the BFS. The Japanese corporation wouldn't be willing to pour serious money into this project if it didn't see Hawsons project viable at USD $63/ton Fe62% price at the time. Fe62% price is currently at USD $120-$125/ton with world's focus shifting to greensteel and higher grade iron ore.

Wood McKenzie would not have ranked Hawsons project as one of the best magnetite iron ore projects globally if had thought the same way like this block who seriously lack understanding of what AVERAGE UNIT COST means.

Australian government, NSW government and SA government would not have given Hawsons project "MAJOR PROJECT STATUS" if they looked at the project the way this block does.


Enough said.