Overall the quote-driven study validates the PFS, and should...

Overall the quote-driven study validates the PFS, and should increase investors’ confidence in the project.

Furthermore the drop in RxSi increases confidence in the ability to find buyers for the product, the markets for which have recovered from 3Q15 troughs. With its proximity to China and incredibly low capital intensity, we think this project stands out not just above peers, but in the junior mining space.


Land rights issues should be completed ahead of this with the Section 31D native title formalities targeting completion this year.


Focus turns to 4-5 Mtpa scenario

With a full EIS underway, there is no longer a 2Mtpa cap. Metro will submit terms of reference for a 5Mpta scenario and is preparing a scoping study for a 4-5 Mpta operation. Either way we expect operations to start up a 2Mtpa, with upsizing at modest incremental capex. For example, if we lift production from 2Mtpa to 4Mtpa in FY20 for A$15m capex, our NPV10% would lift from US$132m to US$187m, with plateau EBITDA of A$81m. With the bottleneck being barge-loading infrastructure, the company has sensibly scoped the port area for 5.5Mtpa giving optionality to expand even further in due course.

The DFS is quote driven and increases the level of confidence from the previously desktop PFS.

This drives a FOB price to Bauxite Hills of US$39.5/t, which aligns well with the ~US$41/t that Malaysian producers are now receiving for washed product

Catalysts
- 4Q15: Section 31D settlement (GMPe)
- 1H16: EIS submissions (GMPe)
- 3Q16: EIS granted (GMPe)