Hi all, does anyone know the sales strategy for Shine, assuming it goes ahead? I know at Extension Hill they had a fixed price to ensure it was mildly profitable, whereas Koolan is exposed to the prevailing iron ore price. My hazy recollection from a few months back was that management were planning for Shine to be fixed price. Does anyone know if that is the case, and more importantly, if they had already locked such a price in place? With the recent rise in iron ore price, such a decision would be looking pretty foolish. Conversely, if they have not locked in a price, maybe now is a good time to consider doing so, if they can get near the prevailing price. Even if they only locked in the price for half the supply, and left the other half to float? I know I could ask the company, but it's Saturday, and I thought maybe someone within the Hotcopper collective might know the answer to these.
Offhand, a few quick calcs on the potential value here: ASSUMPTIONS: Production: 1.45 wmt p.a. for 2 years Grade: 58% AUS/US exchange rate 0.7425 Conversion wmt to dmt, apply 8% factor as per FMG Assumed cost: $70/wmt + 10% for royalties + sundry = AUD$77/wmt Futures price (July 2021) for 58% fines on Singapore exchange is USD$105/dmt CFR Shipping cost of US$13.5 as per FEX estimate
CALCULATIONS: Production of 1.45*0.92 = 1.33M dmt p.a. at Cost of AUD$77/0.92 = AUD$84/dmt Received price = US$(105-13.5) = US$91.5/dmt = AUD$123/dmt Margin: AUD$123-84 = $39/dmt Nett revenue (pre-tax) =$39*1.33M dmt p.a. = AUD$52M p.a.
Initial capex of $20M. Figures look compelling, even for only the initial 2 year mine life. If I get cheeky and use the current CFR price for 58% fines of US$124, the nett margin becomes AUD$72/dmt, giving nett revenue (pre-tax) of AUD$96M p.a.
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