PROJECT VALUATIONS

Previous 2017 PFS all-in-cost = USD $48/ton for an operation of 10mtpa.

Allowing for a generous 30% increase in cost will result in new all-in-cost = $48 × 1.3 = USD $62.40/t which is consistent with the new projected all-in-cost of USD $63/t from the KPS report and the USD $61/t from the IIR research report for a 10mtpa.

Now Hawsons is positioned for 20mtpa which should result in a 30%-50% savings in cost for that 2nd 10mtpa, with a direct slurry pipeline from mine to port which I expect to save about $5-$7 from the previous RAIL+PORT of USD $11.23 × 1.3 = USD $14.60.

The new all-in-cost for a 20mtpa is expected to be ={ [$62.40 (1st 10mtpa) + $62.40×70% (2nd 10mtpa)] ÷ 2} - $5 (rail+port savings) = $48/t.

Note: if applying a 50% savings to the 2nd 10mtpa and a $7 savings from RAIL+PORT item, the new all-in-cost for a 20mtpa would be equal to USD $39.80/t. This figure correlates well with the all-in-cost figures from MGT's project for 3mtpa and for 5mtpa. So, don't be surprised if the all-in-cost figure from BFS is actually even lower than my figure of USD $48/t.


Product selling price: at AVERAGE Fe62% = USD $100/t, Fe69%-70% product is expected to be USD $128/t (for reference, in the recent update from the company, when Fe62% = USD $109/t, Fe70% is expected to be USD $137/t).


Based on the PFS, for every USD $10 increase in the selling price of the product, annual EBITDA increases by USD $96mil (USD $497mil - USD $401mil) on top of USD $401mil and NPV10% increases by $565mil for every $96mil increases in EBITDA (USD $1432mil - USD $867mil) on top of USD $867mil.


So, total annual earnings for 20mtpa is:

[$128 (selling price) - $48 (all-in-cost per ton)] × 20mt = USD $1.6bil EBITDA per year.



And project valuation at 8% discount is:

NPV 8% = NPV10% × 1.2 = 1.2 × {[$1.6bil - $401m] ÷ $96mil} × $565mil + $867mil = USD $9.508bil = AUD $13.58bil using FX of 0.70 rate.


This Hawsons project is no doubt going to well above 800mil tons final concentrate resource. No doubt about it. With a JV partner moves in, HIO is going to drill more around the current resource area of 481mil tons to increase it further and the other areas of historical drilling hits including the T, Wonga, South Limb, and Dam area. The ultimate resource will most likely to be above 1bil tons. Remember the Total Exporation Resource is now more 2.5bil tons concentrate. It is simply waiting to be drilled out to be converted to resource figures.


At 600mil tons: project valuation is roughly AUD $13.58bil × (600mil tons ÷ 400mil tons) = AUD $20.37bil.


At 800mil tons resource: project valuation is roughly AUD $27bil.


That is project valuation based on the figures from the PFS.


If you rely on the figures from the IIR report, you will end up with higher valuation.


And if you rely on the KPS report, you are likely to be blown away because the valuation will be highest figures out of the 3 different calculations based on 3 different sets of figures.


Based on standard MC/NPV = 20% at PFS-BFS stage and MC/NPV = 40% at construction ready stage (after BFS, Financing, off-takes,...) I see a brilliant 10bags-20 bags potential here from now to mid-2023.


Many will REGRET FOR LIFE when this giant project catches the attention of serious investors and the institutionals plus JV partners, off-takers, stragetic partners....


With all the big boys of the iron ore industry like BHP, FMG, VALE SA, RIO,...and many major steelmakers including AccelorMittal, POSCO, Nippon Steel, Tata Steel, Baowu Steel, South32...all busy pouring billions of dollars into opening new iron projects (surprisingly MinRes with its JV partners of Baowu Steel, POSCO, AMCI opening a $3bil CAPEX low grade Fe58% project) and new steelmills using DRI technologies, the future for HIO is just brilliant. It is just BRILLIANT.


Numbers don't lie.