From SDL last preso, Mining Indaba 2014, it said:"Robust margins...

From SDL last preso, Mining Indaba 2014, it said:

"Robust margins = rapid payback in approx. 3 years, based on US$100/t CFR China"

Now, pay attention to SDL CF modeling (see also diagram below):

1) FOB based on US$100/t CFR China

2) Opex = US$21/t

3) Revenue start from Y2019 (they mentioned Y2018, but let's take the whole year production from Y2019)

4) 5-year tax holiday, meaning they start paying tax from Y2024

5) Start paying Capex with payback approx 3 years, meaning they are cash flow positive from Y2019

6) Stage 2 funding (Itabirite) start from Y2027

7) 5 years "blue sky" will come for SDL between period Y2019 and Y2023, as they start production without paying corporate tax (inc Royalties), so a very strong cash flow

By using a very simple calculation, the cash flow is approx above $US2b per year

Between Y2019 and Y2023 : Revenue / CF = $35Mt x (US100/t - $21/t) = US$2.7 b (per year)

They still enjoy a very strong cash flow between Y2023 and Y2026, after paying corporate Tax (period set before stage 2 funding)

So what SDL will plan if having a strong revenue cash during these periods, I doubt we see the development of stage 2 Itabitirte project....

what are different projections that SDL could come up with a strong 8 years CF before Capex/stage 2 funding ?

If you combine ideas from Hotazel, Reddragon and 9Lives (re. below), SDL could run this project with only DSO for a while...and that would change dramatically the projection of SP:

They always said they want to "Capitalise on our first mover advantage to unlock the potential of a new world-class iron ore region"

World-class could be mean DSO projects and running on SDL rail/port infrastructure for a while, before expanding beyond the capacity of 100Mtpa

"Capitalising as first mover", would mean:

1) with strong cash flow, SDL can made acquisitions and/or be in JV/partners with company having potential DSO projects AND/OR

2) once funding in place, they could start the exploration of DSO on existing tenement, including Ibanga permit (maybe Westcott could shed any light on this...)

From SDL Prso Nov 2013 - Presentation - Overview of Operations:

"Adjoining Ibanga Exploration Permit was also renewed for a further two years in August 2013"

IMO there will be catalyst in SP, during pre-build (EPC and funding announcenet), and ALSO during the buil phase of stage1 as lot of things will be happening as I stated above..

I don't expect SDL will start their stage 2 Iatabirite soon after DSO phase 1... why not capitalising and taking advantage of potential DSO projets around, and even in their own backyard ....there are so much risk reduced in LT with DSO projects, considering a low cash cost ...

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Hotazel - re "Port and Rail options"

The earlier article re: "China no longer interested in investing in greenfield projects", makes me think that perhaps China got a sniff that the European contender for SDL is going to succeed and as a result China HAD to come out with an immediate/early public "excuse" why they won't be competing for the SDL project. If that's the case - the whole world will probably rejoice because it seems the West Africa region (also referring to the withdrawal of the Belinga convention)have had a gut full of Chinese "colonialization" by means of continuing infrastructure promises but with very little materializing within "promised" or reasonable timeframes.

All said, this leaves China with one option only - full blown takeover.

Anothor thought for speculation might be that SDL will go all out for Belinga. If it succeeds, China will have everything that it initially wished for - own and operate entire SDL project with all the bells and wistles (first mover advantage and enough synergies to draw in all surrounding mine projects in the region) as well as Belinga; or OR OR

As 9lives mentioned in earlier post that Jill commented that China doesn't want to go it alone (or something to that effect), it could be that China is behind a SDL drive to procure Belinga. Once achieved - China to step in as 50% JV partner.

But let's not forget Equitorial (with Badondo) and BHP- Anything is possible.

The "shock and awe" announcement for the century: - "BHP secures Beling and acquire 50% JV from SDL. - Bollore to build, own and operate rail and port." - Is it just a dream or is this likely?

Would the SP still only be 20c at most on such an announcement? Even 3 years out from production? I think not

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re: Gabon : sundance eyeing belinga iron

Reddragon:

If SDL and partners move first i think it is almost a lock that ore from Belinga goes out through the cameroon, just because the economics would be so compelling versus a standalone development going through gabon.

these projects have been at a standstill for years and im not sure that a government would turn down a solution that see's investment in country.....infrastructure through to the cameroon is better than none....

governments dont have a huge amount of leverage in these situations, if they want investment it will have to be on the terms of the financier.....especially given the greenfields environment at the moment

whoever makes the first move will have basically all the ore from the region channeled through it

Nine Lives:

but what if SDL came up with a plan to simple start by taking the ore through Cameroon and as the bucks started rolling in they also built a track through Gabon and got a bit of a circuit going. If I am not mistaken there is room for the current SDL leases to be expanded to 100 mill tpa by themselves without the other deposits you mentioned.

I suppose we do need to walk before we can run and this is nothing more than a possibility but if it did happen then there may be scope for SDL to pick up more deposits through Gabon on any proposed rail corridor. Pie in the sky at this time I know but it would give SDL scope for expansion beyond our wildest dreams plus reduce sovereign risk by having 2 possible countries through which ore could be transported.

I mean hell, forget about SDL being the new FMG...maybe one day it will be the new RIO

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