One view of this morning’s announcement:If rail/port upgrade...

One view of this morning’s announcement:

If rail/port upgrade allowing Extension Hill Haematite proceeds then 5mtpa production from end 07 possible.
Allowing for life of mine model out to 2017 return over next 11-12 yrs is huge.

MGX appear to be saying that due to low grade of ore in 2H 06 they will delay shipping some ore so as to blend with higher grade available from 1H 07. Therefore all ore will eventually ship (06/07) but be delayed temporarily so as to maximise price rather than sell lower grade now.

Extension with Shougang option pushed back. Shougang involvement undecided til final ore increase known. The longer the contract pricing negotiations take, the greater the chance Shougang will commit.

MGX reviewing level of participation in Magnetite project: price of ore shipped (off take agreement dependant) must justify capex. Common sense dictates this is the only position the co. can take.

Either way MGX appear to be pointing to the most likely outcome that the pellet plant will go ahead irrespective of the timing of the magnetite mine side of project.

The Nanjing pellet plant site is fully permitted and construction could start quickly. This is where the margin in the magnetite project lies ie: in the pellet plant side due to the low capex, operating cost and big tax advantage not in mining magnetite.
MGX looking at sourcing alternative magnetite therefore may start the plant in China a lot quicker than planned. If this is case MGX may gain margin side of magnetite project business without full Capex requirement.

The fact that the price has held up somewhat indicates people are aware the existing business is worth $1 without either of the extension Hill projects or any Iron Ore contract increase.


My opinion only. Do your own research. Etc.