Here you go beavau..From Highgrade.netRepairing strained Pluton...

Here you go beavau..

From Highgrade.net

Repairing strained Pluton friendships

Michael Quinn, 18 August 2011

FOR the second time this year Pluton Resources managing director Tony Schoer has had to deal with some very unhappy campers among the company?s shareholder ranks. But he steadfastly maintains the future trajectory of the would-be iron ore miner remains in a good orbit.
Earlier this month the company announced it would be selling 30% of itself to a China-related party Timeone at A35.5c per share, as a pre-cursor to the two companies negotiating the funding and development of Pluton?s Irvine Island project.
Timeone is said to have beneficiation and logistics expertise and connections to the Rizhao Port Group, operator of the world?s largest iron ore import port in Shandong Province, China.
Pluton?s Irvine Island iron ore project off the north western coast of Western Australia requires beneficiation for its viability.
Schoer indicated to HighGrade that institutional shareholders of Pluton could see the rationale for the deal, whereas some retail shareholders were unhappy. The basis for the unhappiness is the 35.5c per share pricing of the equity deal with Timeone, given a shareholder share purchase plan (SPP) announced in April (and completed in May) was done at 78c per share. Unfortunately for participants, less than one month after that had been completed, Pluton reported the capital cost of the Irvine project was estimated by its pre-feasibility consultants at about $A700 million, double what the general expectation had been.
Pluton shares collapsed in reaction and have since been in the 25-40c range.
Schoer was maintaining this week that all indications prior to the formal pre-feasibilty results in June had been for a project costing in the order of $A350 million. He pointed out that the plant ? comprising $A470 million of the total $A700 million ? costed in the pre-feasibility was to be built in Australia, whereas ?in reality? that would be done in Asia/China.
Asked why this ?reality? wasn?t factored into the pre-feasibility Schoer responded: ?Well I guess we are only a small team, we?re not engineers, we had Calibre do the work and they are the numbers they came back with ... and presumably in a prefeasibility study that?s what they do.?
As well as reducing the cost of the plant ? which could also be a function of the company being able to reduce the crushing required on Irvine to produce a pre-con (and which, incidentally, begs the question to some extent as to why it was not examined more closely prior to the pre-feasibility study) ? Schoer also points to a significant increase in mine life as reflecting the upside for Pluton shareholders.
?The pre-feasibility study was also based on a very small portion of our resource,? Schoer said. ?We needed to drill another 2-3 holes to convert a big piece of Hardstaff into resource. Now we?ve drilled those holes and they are visually as expected (and) they are currently being assayed ... that will open the entire Hardstaff resource to the north. So the pit size will effectively double, so that will double the mine life.
?So we get the capital down, we get the operating costs down somewhat, so, yeah we think there is significant upside.?
Over and above all this Schoer is keen to reinforce to unhappy shareholders the critical need for Pluton to find a beneficiating partner.
?I think [critics] are missing the point, it is not really the $30 million Timeone is putting in [that is key], it is the fact that they will be a joint venture partner and they are the ones capable of beneficiating our product in China,? he said.
?That is where the value is.
?That is the reality of it. Without a beneficiation partner Irvine is not worth an awful lot. Because we can?t beneficiate on the island. We can?t use a wet process ... we don?t think we?d get environmental approvals to do that ... and under a wet process you use an awful lot of water and awful lot of power which we?d have to generate ourselves which would be very costly.
?Rizhao is the place where you want to do it because it is the largest iron ore port in the world, they?ve got land at the port, so beneficiation can take place at port, using very cheap electricity and water ... so they were really the standout. At the end of the day you?ve got to have someone who can beneficiate your product.?
Retail shareholders will be hoping it all ends up beneficiating their bank balance too.