Ann: Perenjori Iron Proj Negotiations for Offtake and Infrastruct, page-160

Roughly half of the globally traded iron ore is magnetite, which is fine ground and magnetically upgraded. The operating cost base for magnetite producers is around US$70 per tonne (for 62% Fe product). This effectively puts a floor under the benchmark iron ore price. The premium for 68% Fe product is about US$25. This puts a price floor of around US$95 on the product SRN is proposing. The incentive price for new projects to come into the market is around US$100/t for 62% Fe. The world needs more premium magnetite products as the transition to green happens, so I think this will position the project well for development.

Xi Jinping won't make much difference with his jawboning. Supply and demand always determines price in the long run.

The important thing is not the iron ore price or Xi Jinping, it is access to capital. It will require a big lick of funds to get this thing going and the market doesn't yet have much conviction that a minnow can pull this off. The offtake agreement is an opportunity to turn this around.

Ideally, what I'd like to see is an offtake agreement with a steel mill to buy 5mtpa of 68% Fe product. What would really make the difference however is selling 20% of the project to the offtaker, for say $20 million, valuing the project at $100 million. Firstly this would revalue the company, but secondly, having an equity partner that wants the iron and has deep pockets would significantly re-rate SRN.