BDR (ASX) Ann: Maiden Dividend and 2014 Financial Year Results

Originally posted by JID ↑

Hi Guys,

Hopefully I can help.

Sarge, I too was concerned about the USD / BRL trend as it affected their fx losses in relation to the USD $60m debt. I contacted BDR some time ago and asked whether their cash holding was held in BRL / USD / AUD. I was told that all surplus cash is held in USD.

BDR only recently moved to a position of significant cash on hand (largely due to MACA deal) and thus for the majority of the FY under review there was no offsetting gain in USD cash holdings against the USD debt fx losses. This should now be a largely neutral situation as BDR's cash horde grows and then exceeds the gross debt position.

In a previous conversation with BDR I asked whether they intended to hedge their USD exposure and was told no, that the benefit, over time, from BDR's BRL denominated costs would offset an increase in the USD denominated debt by c. 6x. In context, the conversation went something like, for a $20m loss on USD debt BDR would benefit by $120m in BRL denominated cost savings. There isn't enough information in those comments to really get to the nub of the matter and, unfortunately I did not follow up (e.g. over what time frame? under what inputs does this hold?).

Goldbear - in regards to the iron ore all of the FY15 guidance excludes any potential benefit arising from iron ore credits. Thus the USD $810 - $890 AISC per oz excludes any iron ore credits.

This is wise given the state of the iron ore market; the status of the export port facility (still unusable) and the status of Zamin currently (in trouble). BDR has an asset of 3.8mt of iron ore (that needs to be beneficated) as per the recent announcement (under the heading 'iron ore moved') that has not been sold nor has any cash been received. I believe that the original deal may have valued this at c. $2.50t to BDR (note: this is not the concentrated iron ore from the plant tails) but given the situation it may be floggable for say $1t. My thoughts are that this iron ore will continue to be stockpiled as BDR / MACA mine the open pits this year and, under a worst case scearnio, could be sold to a third party (if Zamin goes belly up) once there is sufficient quantity to justify a third party re-opening the port facilities / iron ore benefication plant. I don't know ... maybe a 10-20mt stockpile would be needed?

Tim - as regards to the issues around Zamin / BDR / Brazilian Government I do not believe that there are issues between Zamin and BDR re the tenements that Duckhead / Goosbumps / Foldnose is located on. I also believe that BDR's rights / access to gold on the Zamin tenements are under control and will be protected regardless of the fate of Zamin.

This is as I understand it.

Cheers
John

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Thanks for your reply John. Forex aspects are not my forte.