newmont could drop a$100m on amc , page-7

re: project economics? I did a spreadsheet calculation for SAMAG using the following assumptions:

The technology will function as predicted.

Amount to be repaid: 800 million AUD

Rate of interest: 5%pa, calculated monthly

Cost of production(excluding interest): 0.60 USD/lb

Magnesium Price: 1 USD/lb

Annual Production: 155 million lb per annum

Life of Project: 20 years

1AUD = 0.66 USD


From this you can estimate a return of about 800 million AUD over the life of the project before other expenses and tax. The project becomes uneconomic if:

the initial debt is >= 1.05 billionAUD

magnesium price <= 0.87 USD/lb

interest rate >= 10.5% pa

From the USGS website you can get the following price info for magnesium:

http://minerals.usgs.gov/minerals/pubs/commodity/magnesium/mgmisq402.pdf

Units Beginning of quarter End of quarter
Metals Week U.S. spot Western Dollars per pound $1.14-$1.23 $1.10-$1.22
Metals Week U.S. spot dealer import do. 1.00-1.07 1.02-1.07
Metals Week European free market Dollars per metric ton 1,830-1,900 1,800-1,900
Metal Bulletin European free market do. 1,880-1,980 1,880-1,980
Metal Bulletin China free market do. 1,370-1,390 1,360-1,380


From the above you can work out that the European spot price ranges from 0.85-0.90 USD/lb and the Chinese are flogging it for < 0.65 USD/lb!

Beattie and co may do better by basing a light metals industry on Chinese magnesium rather than a home grown product. I cant understand why the two should necessarily be together. Surely magnesium at 65 cents US per lb would give the proposed light metals industry an edge over locally supplied magnesium at around 1 USD/lb.

If the price of magnesium rises in the future then the production of magnesium metal may well become a viable industry in this country and elsewhere. Until this happens magnesium metal projects are just money dunnies imho.

Billy

My opinion only.