Firstly just a note about the recent webinar. Having listened to it a few more times I note that CE said Flinders wanted to “reengage with shareholders”. That is great news and a tacit admission that shareholder engagement hasn’t been up to expectations. I also think it was great that most questions appeared to be answered in an open way without too much avoidance. Shareholders appreciate openness and straightforward communication. So, well done CE and AW.
The acquisition of the potential port of Balla Balla and the FRS tenements would appear to offer Flinders great flexibility for future growth.
Flinders stated in the webcast that a road haulage operation to Port Hedland (PH) is their priority for near term cashflow. Port Hedland is about 400+ km from PIOP and that will likely be phase 1. That initial strategy is great although it is unfortunate that there is not an available operating port much nearer than PH.
So the route from PIOP to PH is likely to be north west along the Red Dog Hwy to near Karratha then easterly to PH passing Whim Creek (and the potential port of BB). The long distance from PIOP to PH will require more road trains to get same tonnage moved than from a shorter distance port to PIOP. Therefore it cost more than transporting to a nearer port (which reduces margins/profits).
So, it appears that Flinders will get Phase 1 (PIOP to PH) off and going and hopefully within the next six to twelve months. What happens next? Now that’s the 6 billion dollar question. Flinders are now (I believe) talking to two or three parties for Phase 1 who are probably pretty dam smart and may well spot an opportunity (Flinders may even encourage it) for further phases to increase volume and reduce cost. I would hazard a guess that one of the parties currently engaged wth Flinders would be Mineral Resources (MIN). MIN is an experienced ‘can do’ company as maybe are the others. Any of the parties may see that there maybe an opportunity for a JV with Flinders to make make serious big money by basically doing what BBI couldn’t or didn’t do, Road Haulage (later maybe rail) and port construction and operation. This could be a JV where Flinders just get an attractive royalty for everything going through the port (not just PIOP) in exchange for the JV partner fully or partially) funding the entire operation or other arrangement. But there are all sorts of other options I think will be considered. These include but are not limited to :
A) Building a private road haulage road from PIOP along the rail corridor to Whim Creek would greatly reduce the mileage to PH (and could serve as a rail service road for the later rail construction and servicing if ever required). As a private road road trains can carry a much higher tonnage, like double the capacity! Also this could be used whilst a port is incrementally built. Flinders shareholders should look at the Onslow Iron Ore Project to see just what is possible.
B). Incrementally build the port of Balla Balla. This would greatly reduce the travel distance from PIOP (via Red a dog Hwy). Road haulage via the rail corridor road (and/or Rail to PIOP could follow.
Whether A or B (or variants) are done first would require some detailed analysis.
C). Add rail after Flinders BB Port development but this expensive option may well not be required at all.
I would think a company like MIN (or Hancock) would see the potential for a JV that provides a gateway to the port at BB that could service not just PIOP, with other IO deposits. There may in the future be a better case for rail with appropriate spurs and extensions from the PIOP rail line to those deposits.
IMO, the acquisition of the Forge Balla Balla Port could finally be the catalyst that brings shareholder value.
Having said all this I wonder what is TIO’s strategy. They’ve squandered millions for no apparent return when others like Roy Hill have developed their projects, repaid dept and made handsome rewards. Does TIO want out or are they in it for the long haul? I’m guessing they might love someone taking it off their hands and coming exiting without loosing too much face. Just my thoughts.
BTW, did anyone notice the other FRS tenements in blue on the map? Also BBIP in yellow?
Interesting times ahead if IO stays north of US $80/t and particularly if above US $100/t! Right now the IO price is around Us $120/t.
How much would a private road of about 160km along the rail corridor cost? I don’t know but the budget for the sealing of the Red Dog Hwy including the new road in Phase 4 (110km) is A$360m. I wonder of the rail corridor has been already surveyed?
Maybe our day will finally come! GLTAH
(20min delay)