It seems we are pushing forward at a faster rate than most of us thought. If we can ramp up to 5mtpa in 2014 as per the article I posted previously suggested that is huge news.
A company producing that much Iron Ore is worth $1 billion any day of the week.
I also find it interesting that Exxaro want to get to 10mtpa by 2017 - it would make sense for them to consolidate the area and take EQX out.
My understanding is the rail line can handle 10mtpa. This is split between EQX and Exxaro. In order for Exarro to get to 10mtpa on the existing line you would think it would cost some serious $$ to upgrade and refurbish. Makes more sense to spend that money on taking out EQX. This way they control the Mayoko area, own all the DSO in the region and will have 10mtpa of production well before 2017.
I would be surprised if Exxaro aren't thinking the same way.
Personally if John Welborn is serious about ramping up to 5mtpa by 2014 I would prefer to hold on until production unless a VERY good offer comes in from Exxaro or another major.
At the current Iron Ore price our profit margin is $100 a tonne. AT 5mtpa that is $500 million in operating profit before royalty and taxes assuming a $50 opex. Even if this works out to be $300m after the aforementioned taxes and royalties(very conservative) we are a company making roughly double our current market cap in profit!
Either the market has this one very wrong or John Welborn and co are well off the mark. Given John is on the inside and the market is in the outer I know who I will put my faith in.
Enjoy the ride.
EQX Price at posting:
$1.45 Sentiment: Buy Disclosure: Held
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