Interview, page-94

Hi Watchdog

This is obviously one of the main issues right now and one of the big problems HIO has. How can they give costs estimates if prices can change 10, 20 or even 50% within weeks? Its simply impossible!
As they mentioned, some of the cost items they checked just one year ago have gone up 2 to 3 fold. In one year! I mean we are already complaining about 10% inflation, but we are talking 100 to 200% price increases here.

And you are right, under normal conditions building costs don't tend to go down. But these aren't normal conditions! Some of inputs into materials (like energy in say Europe) have gone 10x! They won't stay 10x.

A piece of pipeline that cost $10K 1 year ago might now cost $25K...But could be back to $11K next year...who knows?

But even if those costs don't come down, that is exactly the same for all other similar projects. On a per ton basis the CAPEX for HIO wasn't outrageous at all. With other words, the only options for steel makers will be to either go without or pull their wallets and get a few of these projects going even if it is at much higher cost.

The reason HIO is now in this position is due to timing, finalizing their BFS in the midst of great uncertainty including around pricing. A BFS delivered in December is likely hopelessly outdated or at least widely off when it comes to pricing in March...What is the point in completing it now?

And I don't think they should panic into a smaller production project. It is likely the 20Mtpa has significant scaling benefits and I am absolutely convinced the demand will be there. So unless they can get the CAPEX much lower on a per ton basis with a smaller production (which might be possible if say the pipeline is one of the major cost blowouts, and remains so) I would rather they wait for conditions to be good enough to progress the project in its current form.