I've skimmed the PFS a few times during the week and only...

I've skimmed the PFS a few times during the week and only recently sat down and given it a good period of time to digest. Here's my summary on my own interpretation, however reasonably happy with what I've read -

Like:

1. PFS resulting in an as stated “high return, long life, initial development of the large-scale Razorback Resource”. Understand that this is based on probable reserves only – 31% of the indicated resources and there is a lot more to be explored / upgraded.

2. The team have clearly defined the go-forward case as the Head Grade Improvement Case, which has a NPV of A$669m and A$1,544m, using Iron Ore price (62% FE) of 110 and 150 US$/t respectively. 15.5 Mtpa ore producing 2.7Mtpa of final product. Going straight into a fully funded DFS with this is positive.

3. Capital cost estimate of this option is 675 A$m to an AACE Class of 5 standard (AACE Class 5 standard specifies cost estimates being between -30% and +50% based on some brief research). Management clearly taking the conservative approach and wanting to minimise project financing hurdles, which would be one of the lessons learnt from the previous 2013 PFS.

I also note that the bigger the capital cost and size of the plant, the higher the risk for potential blow outs (time and cost). You only have to look at some other projects which have had these types of issues during construction and also other ones which are still trying to get off the ground. Happy to be going smaller and mitigate the risk.

4. MGT clearly stated in the recent * article, that the capital costs estimate above includes a factor of + 15% for engineering and construction costs and an additional 23% contingency. Which leads to further understanding that these costs may be on the conservative side.

5. Ore sorting and selective mining will be further reviewed during DFS and understand that this should result in additional financial benefits (hopefully brings down the breakeven target even more).

6. Infrastructure appears to be generally available and only makes up a minor portion of the capital costs (haul road and rail/port). Electrical supply has significant capacity for future expansion, with costs to be recoupled by the provider via annual tariff fees.

Energy consumption appears to be an issue with some other magnetite projects, so good to have a lower cost feed, coupled with the softer ore product (compared to WA ore) and also advanced ore sorting prior to processing.

7. Many options (15+) available for water requirements (5.8GL/a), however targeting options over 10GL/a. Given that the processing water is listed as raw, and low capital costs, assume nil or minimum treatment required.

8. The team reviewed the plant size options, including doubling the capacity from 12.9Mtpa (base case) to 25.6Mtpa, which would double the output for 91% capital cost. Which to me ties into the team targeting water options over 10GL/a and above and the larger electrical supply, indicates to me this could be an option for future expansion plans?

9. Given that initial production target of 2.7Mtpa, likely only one or two offtakes required to fill capacity? Shipping calculated to China, so assume this would be a good bet.

Queries:

10. Macro-economic assumptions under table 11 of the PFS reference product premium along with base FE price values. Am I correct in assuming that the PFS is calculated on premium pricing for the key metrics (table 1) such as NPV, IRR and breakeven price? Or is this excluded and modelled simply on 62% FE? Appears a few readers are confused on this one. Someone may have posted previously, will have to filter back and check.

11. Project forecast Cashflows indicate only minor post tax profit at years 2027 and 2029, with negative during 2036. Can anyone with a financial background provide some insight into why this would be? Are they feeding in forecast FE price or are these capital sustaining / maintenance costs?

12. Will SP and any material announcements between now and October be enough for additional conversion of MGTOD, resulting in additional funds?