This is handy info thanks.I’ve modelled some NPV/sensitivity...

This is handy info thanks.
I’ve modelled some NPV/sensitivity analysis scenarios below, using a pig iron production only operation. These are estimates based on my own interpretation of the data available currently to us. It’s not intended as advice of any kind, more to prompt discussion/questions and again, for pig iron production only, which sounds like their current Phase 1 plan.

The only variable that changes in each scenario is the pig iron price (US$350-$650 per tonne).

Note that Fastmarkets priced pig iron at US$595 per tonne at beginning Dec-21 with the company anticipating continued high demand and high prices in coming years due to EAF expansion.

The biggest unknowns are the CAPEX and OPEX which we’ve really not got a view on from the company so far, so I’ve used the RKEquity analysis to base my assumptions on.

In my model, anything above a $450 pig iron price nets a $1B plus NPV.
At the latest known pig iron price of approx $600, the NPV is nearly $2B.

To me it’s a pretty compelling business case for a project, even if all it produced was a fairly modest 600K tonnes of green pig iron a year. But we also know they’re looking to expand their resource size and no doubt expand their product offerings and production volumes along with that, in later phases of operations too.

Assumptions used:
-OPEX cost of USD $200/tonne (RKEquity suggested ~$180 for HBI).
-600,000 tonne per annum pig iron (between 500-700K tonnes likely)
- Exchange rate 0.75 (0.71 currently)
- 30 year project life (JORC resource would appear to support longer. Here I assume close to the 1 million tonnes capacity concentrate post beneficiation is output each year, requiring say 4 million tonnes mined, over 30 years this is 120mt mined of a 232mt JORC resource)
- 9% discount rate.
- EBITDA shaded down by 26% for the post tax NPV calc. (US company tax rate currently at only 21% but Biden admin would like to see this at 28% so I have modelled at a higher rate, less a couple points for depreciation/interest deductions)
-CapEx AUD $350M, RKEquity suggested $425M but recent comms from the company suggest lower capital intensive plant (i.e rotary kiln/electric furnace/“plug and play” beneficiation) is being sought now to produce the pig iron, so I’ve assumed they’ve simplified the current design to a less costly one, compared to the potentially more expensive HISMELT approach they may pursue later down the track.