lets start afresh, page-23

My understanding:

Hammersley fines price is a benchmark price for 100% of Fe contain which is impossible.

Based on that price, then you apply Fe grade, and penalty for impurity to deal with vast different kind of iron ores.


From today's Criterion, The Australian Newspaper

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Aurox Resources (AXO) $1.31

GIVEN this week's iron ore action with Murchison Metals' tilt at Midwest Corp, it's worth considering other would-be producers with an advanced game plan, such as this ferro-vanadium play.

Aurox has produced an upgraded bankable feasibility study (BFS) for its fully owned Balla Balla deposit, 100km south of Port Hedland, based on annual production of 6 million tonnes of magnetite ore, rising to 10mt over five years.

"We can now put our hand on our heart with bankable-level numbers which will bring comfort to shareholders," says CEO Charles Schaus.

When we looked at Aurox in August, the company was looking at a mere 3mt, secured by Chinese buyers RockCheck, a private steel mill and the government-owned Chengde Iron & Steel.

Last Thursday, RockCheck upped the stakes by taking 7mt within five years - enough to send Aurox shares from 97c to a high of $1.34.

In its updated bankable study, Aurox assumes an average price of $118 a tonne, with operating costs of $30 a tonne.

The project will cost $603million, producing annual revenues of $418 million and EBITDA of $216 million. Based on an EBITDA multiple of seven times, the project is worth $523million in current-day terms.

The cost includes a slurry pipeline to transport the crushed ore to Port Hedland - and then on the boat to China for processing. On the downside, the estimated cost of this pipe has rocketed from $80 million to $157million because of the need for a second pipeline to return some of the slurry water to the mine. Schaus stresses the numbers are based on 6mt of output and don't take into account the ramp-up to 10mt.

Unlike most other projects, Aurox's offtake agreements don't involve the Chinese taking an equity stake.

"We are determined not to give away project equity," says Schaus, who expects to raise the $600 million through a 50-50 mix of debt and equity.

Schaus says banks including ANZ, Commonwealth and Barclays are keen to be part of a debt syndicate. As for the equity part: "We already have a number of big international investors with their hands up."

We rated Aurox a speculative buy at $1.11 on August 2. While the stock price captures the potential, we maintain this call on the back of truly bullish iron ore price forecasts.

The sky's the limit when Fortescue Metals is worth $14billion without yet delivering a teaspoon of ore.

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The Australian accepts no responsibility for stock recommendations. Readers should contact a licensed financial adviser. The author does not hold shares in the stocks mentioned.