I have written this over the past two and a half hours in order to share with newcomers the story that is NSL Consolidated. Although many of you are probably already familiar with the company, especially after today’s awesome announcement, I wanted to go over the recent history of the company and why I believe NSL Consolidated is different to all other ASX companies you could invest in today.
This is an opinion piece, I do not represent the company and have collated the information to the best of my ability. The maps are possibly inaccurate, as I have created them myself using rough information provided by the company over the years. Everything I write should be taken at face value and you should always do your own research and consult a financial professional before investing in anything.
With that out the way, join me on the wondrous journey that is NSL Consolidated.
Who is NSL Consolidated?
Well to who NSL Consolidated are in terms of people, I can pretty much just list three names off the top of my head. There are others, but these three are currently the most important in my mind for you to all get to know. Obviously picking up the telephone and chatting to them is a good method also.
Sean Freeman is the Chief Operating Officer who lives in Perth but spends the majority of his time over in India, driving down red dust roads to our site, where for a long time he single handedly managed operations of the company’s existing beneficiation site. I have had the pleasure of meeting Sean at the EGM last October and exchanging the odd text and email. He is undoubtedly an honest and hard worker and an all-round great guy. Sean has invested a lot of his own money, along with Cedric, in the company in belief it will one day be a success.
Cedric Goode, the Managing Director and Chief Executive Officer, also lives in Perth, and spends more time here I believe than abroad. However, in addition to trips to Andhra Pradesh, Cedric has made several trips to China in the past 18 months, working to put together company changing deals. Cedric has a wealth of experience, and is a great salesman. He has been with NSL for the past seven years which have been undisputedly rocky as the company worked to gain a position somewhere in the Indian market. Evidently from the progress the company have made and having met him at the last EGM, he is clearly a hard worker and truly believes NSL Consolidated will be a success.
Dan Little was hired in October 2015 as a dedicated Project Director to oversee the everyday Kurnool operations, in conjunction with the construction, commissioning and smooth transition to operations of the wet beneficiation plant. He has a wealth of experience having worked on some massive projects in the past and has been working hard in preparation for the commissioning of the Phase Two wet beneficiation plant in Q3 this year.
That’s just three people. There are others behind the scenes, but I figured I would cover the most relevant. In addition to these staff, in preparation for the commissioning of the Phase Two wet beneficiation plant, the company’s Indian operations have expanded to approximately 175 staff according to Cedric at the EGM last month.
What have they achieved in the past 18 months?
The company have achieved a hell of a lot over the past 18 months. The past 7 years have been a real challenge. From failed joint ventures with Indian companies to trying to purchase mines already in production, the company have struggled to find their place in the market. However, through persistence they have been successful.
In order of occurrence, here is what the company have managed to achieve in the past year and a half to set themselves on a path to success.
This is the announcement which I believe first signified a positive change for the company.
On the 10th of February 2015, the company announced their participation in the Australia Business Week in India. This was of great significance, because it put Sean Freeman, in the same room as JSW Steel and important Indian state government representatives.
Within six days of participation, the company announced a signed offtake agreement for NSL Consolidated’s first 200,000 tonnes of future Phase Two 58-62% Fe wet beneficiation plant fines product between the company and BMM Ispat.
Just under six weeks later, the company then announced the successful signing off another offtake, again with BMM Ispat, but this time for up to 200,000 tonnes of the company’s existing Phase One dry beneficiation plant lump product at 58% Fe.
The company made several announcements, highlighting the significance of their AP14 project. A 290-acre lot of land, predicted (roughly using chip samples) to potentially have several hundred million tonnes of iron bearing magnetite, ranging between 20% and 50% Fe. This kind of ore is perfect for wet beneficiation and would allow the company to produce millions of high grade iron ore each year.
This time last year, the company announced a third offtake agreement, this time with the multibillion dollar company, JSW Steel for 200,000 tonnes per annum of future Phase Two 58-62% Fe wet beneficiation plant fines product.
In June, everything changes for NSL Consolidated. The company announced that they had officially signed an MoU with the Andhra Pradesh Mineral Development Corporation (APMDC) which is a state owned enterprise. This MoU covered the collaboration for the beneficiation and value addition or iron ore within the state.
The only foreign company to mine iron ore in the whole of India, and they signed an MoU with the state government. This however, was only just the beginning of what has grown to be a solid relationship between the company the state government.
In August, the company arranged a A$5 million loan to provide them with much better terms than their existing funding arrangement. The loan however, was with the same company who had previously funded NSL since the start of the year, but had a premium built into share conversion instead of a discount. Regardless of the terms, the company have only thus far used 20% of this loan, and don’t look like they will need to use any more of it.
Throughout the year, the company’s Phase One operations began to falter. In fact, the moment they ramped up production, the client BMM Ispat decided to switch off its Sponge Iron ore kilns, killing demand for the dry product instantly. Thankfully for Phase Two however, our fines product is steel grade and will be soaked up like water in the desert.
The company have had small sporadic orders for their Phase One product, but their eye has always been set on Phase Two and the potential it will unlock for the company.
To summarise 2015 as a shareholder, it was full of potential but met with relative disappointment. Not because the company did anything wrong, but because they still didn’t have the funding or relationships to unlock the giant potential sitting right under their feet. Either way, it was a much better year than some of the previous.
That’s when we got to 2016 and things finally started to change in a big and noticeable way, more noticeably then they had throughout 2015.
The company announced another MoU with the state government of Andhra Pradesh. This time however, it was a bit more specific about what they wanted to achieve and was directly with the state government, as opposed to being with the state owned APMDC. The company attended the Andhra Pradesh Investment Summit, during which it executed an MoU overarching to the previous MoU signed, this time covering the mining, beneficiation and pelletisation of low grade iron ores in the state.
The MoU was to support the company’s 5-year growth strategy in Andhra Pradesh and the basis of which would position the NSL to be producing in excess of 8 million tonnes per annum of iron ore in the newly formed state. The MoU also includes the construction and operation of a centralized pellet plant. The MoU would also realise the generation of 1800 jobs directly associated, and an additional 1000 supporting jobs. It’s safe to say, they state government is a fan on NSL Consolidated.
After the signing of the MoU, the company began working closely with the government of Andhra Pradesh on the approvals of additional land grants and power grid connections. The additional land, would allow the company to expand its Phase Two wet beneficiation plant further in the near future.
Then the company did something most of us didn’t see coming. They performed an oversubscribed capital raising of A$3.2 million in order to fully fund purchasing, construction and commissioning of the Phase Two wet beneficiation plant and subsequently remove reliance on the existing A$5 million loan agreement which included a plant royalty. This royalty was only applicable if the loan was used to commission the phase two plant though, so will not likely be applicable to production. This means more money for the company to use while expanding operations.
There has literally been so much progress this year alone, it’s hard to write about it all. It just never ends and you can imagine my dismay as the share price has continued to take any of it into account for such a long period of time.
What other little perk did NSL Consolidated manage to achieve? Oh, just 21 day, single desk approvals through a new government web portal. How many days did it take them to get approval to connect to the super reliable industrial power grid? Oh, just 6 days. People still think everything takes ages in India, but not NSL and not the state government of Andhra Pradesh that’s for sure.
When asked at the EGM last month, Cedric explained that the industrial power grid in India is essentially the same as in Australia, it pretty much never goes out unless a storm takes down a pole. So you can rest easy. The company also have plenty of access to ground water, so have no fear!
In mid-March, the company appointed Design Tribe as the lead engineering services for the beneficiation plant. The two companies have worked closely over the past three years in India, and were selected for the provisioning of civil, structural, mechanical, electrical and instrumentation engineering services. Design Tribe previously constructed the Phase One dry beneficiation plant for the company and completed in on time and within budget, so they have a good track record working together.
As part of building up the new state of Andhra Pradesh since Bifurcation in 2014, the state government have set about to grow the state into one of the best in the country. Luckily for NSL, this has resulted in plans to build a 28,000-acre Industrial park only 30km away from their operations.
The state government confirmed in March the granting on land for NSL’s future pelletisation plant, in addition to creating a bypass road, with officials visiting the site to discuss future plants.
Up until this point in time, the company already had several local mines as shown below. Existing mine Kuja
Existing mine AP23
In late March, the state government assisted the company in executing a Binding Heads of Agreement (HOA) with the local Lessee of the mines entitled AP26 and AP27, which would see a A$1 royalty per tonne paid to the lessee.
Newly acquired AP26 (HOA)
Newly acquired AP27 (HOA)
To give you a sense of scale. The new 28,000-acre industrial plant is 30km away from NSL. So you’re probably thinking so far, wow, it can’t really get any better can it? Considering how dirt cheap the company’s shares are, it can’t really?
Well it does.
Through hard work and tenacity, Cedric flew over to China and signed a groundbreaking Phase Two wet plant agreement with Tier One Chinese supplier Huate Magnetism, one of China’s premier global suppliers of beneficiation plants. So what’s so great about that? The terms my friends… the terms.
NSL Consolidated walked away with a 25% cost reduction and longer payment terms, reducing upfront costs and the overall cost than previously anticipated for Phase Two.
Then the rest is history, the company have since shipped Stage One and likely Stage Two now of the Phase Two wet beneficiation plant, from China to India.
With predicted operating costs of A$22 per tonne of iron ore and a sale price of A$52 per tonne announced by the company, you can see how their modular 200,000 tonne wet plants are appealing.
It's important to remember that the domestic price of iron ore is different to seaborne prices. Here is an example of prices provided by the company to outline such differences.
Nothing I have written even begins to take into account the significance of what we have learned over these past few days. A potential joint venture, in which a giant Chinese manufacturer is going to ship a partially acquired steel plant to India, put us in charge of operations, allow us to sell our ore to it and also take a 50% free carry stake at zero financial obligation….
This share price totally makes sense…. If you removed the decimal point… in my opinion of course
If you would like further information, I highly recommend you take a look at this post from the EGM last month as it will answer plenty of questions I'm sure.
Good luck with your research and hopefully you can all see the potential of the company, especially now that the Chinese are looking to use NSL to get a foothold in the booming Indian economy.
Remember, go do your own research. There is plenty I haven't covered. I didn't want to spend more than two hours otherwise I might go insane when I keep looking at this low share price. Apologies if there are a lot of errors, I type fast and don't spend a lot of time editing haha. 2320 words in 2.5 hours, not bad haha
NSL Price at posting:
1.2¢ Sentiment: Buy Disclosure: Held
So you’re probably thinking so far, wow, it can’t really get any better can it? Considering how dirt cheap the company’s shares are, it can’t really?
(20min delay)