High prices, low discounts set stage for development of CZR’s Robe Mesa deposit in the PilbaraRio Tinto ramps up low grade iron ore sales to lift outputWith CZR on Rio’s doorstep could the DFS finally be the trigger for a takeover?
Mark Creasy, already a billionaire through his holdings largely in nickel and lithium miner, IGO (ASX:IGO) could be inching toward a new calling as an iron ore producer.The famous Perth prospector owns more than 50% of CZR Resources (ASX:CZR), owner of the Robe Mesa deposit adjacent to Rio Tinto’s (ASX:RIO) Robe Valley mines, which include the Robe River JV from where over 1.7 BILLION TONNES have been shipped over the past 51 years.CZR’s Robe Mesa is a far more modest prospect, containing 33.4Mt in reserves at an average grade of 55% Fe or 61.6% Fe in calcined iron content.A DFS yesterday demonstrated the project would generate $824 million in life of mine EBITDA at a long-term 62% Fe iron ore price of US$90/t with an NPV8 of $256m and IRR of 62%. On spot prices of US$117/t, that would rise to over $2 billion, $820m and 159%, with capex payback falling from 2.5 to 1.5 years.Product discounts are also better now than CZR has forecast. The study assumes its product runs at a 22.5% discount to the 62% benchmark price — that’s currently around 18-19% as Chinese steel mill owners look to save on input costs.
The iron ore junior surged almost 30% in early trade, adding around $5 million to Creasy’s stake in the Pilbara hopeful.An FID is due in the second quarter of 2024, with exports to begin in the first half of 2025, something which looks achievable on today’s numbers barring a major collapse in iron ore prices and assuming its long-touted port solution clears approval hurdles.UBS this week lifted its long term forecast for iron ore from US$65 to US$85/t. JPMorgan previously upped iron ore forecasts for end 2023 to US$117/t, lifting its expectations for 2024 13% to US$110/t, well above most Big Four bank forecasts.It thinks 62% Fe iron ore will still fetch US$105/t in 2025, 17% up on previous forecasts. While China’s property sector has wobbled all year, steel output has remained strong amid growth in infrastructure, car making and manufacturing industries as the country tries to return to a GDP growth rate of around 5% this year.
CZR Price at posting:
17.5¢ Sentiment: Buy Disclosure: Held
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