ukidding wrote: 'A better question is where are they going to find the $50m to develop the mine?'
A fair question and one the market is toying with, as evidenced by the ridiculous SP, despite all the positive announcements over the past 6 months. The market isn't convinced on this one. Certainly, there are no expectations of success factored into the current SP. Therefore, any announcement re: MDA, off-take agreement, finance, etc will see this seriously re rate.
As for debt financing, the general rule of thumb for such projects is that they must generate an IRR of at least 20% to get up. <20% and most projects will struggle to attract finance. If you have crunched the numbers, you should be able to work out a back-of-the-envelope IRR for the project. You will need to make various assumptions and also plug in differing IOPs.
As for the amount, $50m is at the low end of the spectrum for initial cap ex requirements. I note that RIO is another step closer to solving the $US20 billion Simandou funding conundrum. What I find instructive from this case is the willingness of parties from diverse backgrounds to work together to successfully develop the project. If the financials stack up, the money will be found. See the following for more info:
The real question one should be asking is: can WR pull this one off? I understand WR was brought on board because the board felt he had the required business acumen/ experience/ network to ink a financing deal. From my discussions with him, he seems confident and committed and I have no reason at this stage to doubt his ability in this regard.
My personal view is that WR will successfully negotiate an off-take agreement (my personal guess is that it will come from the UAE). This will more than likely be linked in with any debt funding deal. I also believe there will be a BOO component involved (reducing initial cap ex) and potentially some kind of infrastructure sharing deal with other developers/producers. So, in other words, the initial $50m will be broken down into smaller amounts and funded in a creative way. All IMO & DYOR.
It is pertinent to note that one of the beauties of this project is its low initial cap ex. I'm sure this was one of the most attractive points for current investors in the project.
TAW Price at posting:
0.7¢ Sentiment: Buy Disclosure: Held
