"Inside Briefing: The Karara Project shipped a total of 1.2mt of DSO hematite in the December Quarter, implying an annualized run rate of over 5mtpa. What sort of pricing have you been able to achieve in the market for these early sales? Are the DSO operations currently generating positive cash flow? Tim Netscher: The early DSO mining has always been an important part of our strategy. First and foremost, it enabled Karara to establish, commission, fully test and operate all elements of the integrated logistics chain – helping to de-risk the Mine, Rail and Port operations prior to the start-up of magnetite operations and also taking up our take-or-pay rail obligations. We’ve also been able to find a market for very low grade material of around 55% Fe, which made up about half of those sales. This material had to be mined anyway because it formed part of the pre-strip activities, and would otherwise have been classified as waste. The pricing for that material is in line with what other producers are achieving for similar quality products. However, as I’ve said, cash margin was not the primary driver for making these DSO shipments: the main benefit was derived from testing and proving up our logistics chain ahead of commissioning the magnetite plant and from using our rail take-or-pay obligations, thereby achieving an overall very positive outcome for Karara."
It is a very simple question Tim. Are the DSO operations currently making a positive cash flow. If they were you could bet the answer would be a very simple yes.
cheers Surly
GBG Price at posting:
27.5¢ Sentiment: Hold Disclosure: Held
