Hi Mozart, I'm not sure, but I think they wrote it up after WR's presentation to them last Tuesday. When I spoke to the broker on Wednesday he mentioned that it would be increased annual production and that with the screening it would in effect be a lower cost magnetite type operation for the non DSO CID. They mentioned more risk but greater returns.
Definitely more return, but great capex required - which will affect returns per share.
I'm not sure if the cost of processing the overburden makes it worthwhile investing the additional $300Million- particularly if the returns in a few years from now may not cover the cost of the production.
This ore game seems to be one of conflicting information that it makes it hard to figure what makes economic sense. FMG has wasted millions in legal fees trying to get BHP rail access to haul Mindy Mindy ore (adjoins Marillana) which is 44MT at 55%. I know that FMG's legal action doesn't just relate to Mindy Mindy, but nonetheless, it sees value in 55% ore. I've seen plenty of posts over the days that carry on about how 60%+ is the only saleable product - yet in the Pilbara I believe only Rio and BHP have that quality DSO (and UMC in the future we're led to believe). FMG need to beneficate all of their ore to get it over 60%, so it's not going to be a low cost producer, which isn't affecting its SP.
I was a bit unclear about the rail issue. Previously they mentioned the 35Km link to Cloud break. Not mentioned this time, but the broker did say that it appears a deal with FMG comes with strings attached ie FMG taking a holding in BRM. Not sure what prompted this assertion. Personally, I think producing 20MT per annum needs rail haulage, so maybe the 35km to Cloud break is a given.
I don't know how credible Patersons are, but they previously asserted that Marillana would at best have 100MT. We now have 56MT DSO from 1 gravity zone and 7 others are yet to be drilled!
BRM Price at posting:
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