IDM idm international ltd

Just adding onto some of the posts attached.The points mentioned...

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    Just adding onto some of the posts attached.

    The points mentioned by some regarding project valuation methodology are correct. But we need to remember that this a greenfield (new) project and we are using details from a report 15 months ago.

    Since then the company has indicated that with additional leases (currently in negotiations with the landowners), it could well have a 25+ year mine life. The additional leasing should be concluded in the next 3-6 months.

    Just with the pricing of each product and why using the figures from last year's report should only be used as guide.

    The pricing of Zircon "FOB" from Iluka in Feb 2010 (when the IDM report was made) was $650. In the latest Iluka quarterly report they have pricing structures as of Jan 1 2011 of $1,250 and are currently being negotiated on a monthly basis. Here is a comment from David Robb the MD of Iluka from that report: "In terms of zircon, we are unable, as the largest supplier in the industry, to meet customer requirements in full....and we know they are unable to have these requirements met from other sources".

    To my knowledge there isn't a new Zircon/Chromite mine anywhere in the world close to start-up. Locally we have IMA, DRX, GUN and BSE, but they all need BFS's and are years from production and will need hundred of millions.

    TZMI which is the industry's independent body has forecast pricing in excess of $1,500 for next year. I think we may see this by June 30 this year and a price up near $1,800-$2,000 by the end of the year. Big call you might say? Iluka finished at $12.23 up 7.5% today and 30% since the japan tsunami. One year ago it was $4. So I'm guessing that this market has worked our the forecast pricing needs to be upgraded.

    Just in relation to IDM and Zircon.
    They will be producing around 3,700 tonnes a year. In the Feb 2010 report $775 a tonne was used as the price IDM would receive for their product from Jan 1st 2011 (TZMI forecast). Iluka are "supposedly" receiving $1,250 a tonne, so today's market rate would be a better number to use. If that's the case, the EBITDA has increased by around 10-15% or $2.5m+, just on 3,700 tonnes. Work it on $1,800 a tonne and its an approximate increase of 25% on the report. (Talk is the spot price is already $1,800 - but I have no facts).

    Spherichrome (Chromite).
    This is the real money spinner that needs to be highlighted.
    Metallugical grade chromite is used for (chrome production) and that's low grade compared to this product. IDM will not be selling into this market.

    A good idea from management was to re-brand their product as Spherichrome. The focus has always been to sell to the foundry industry, but now they have a clear product name differential, which will be head to head with Zircon.

    HA is one of the biggest suppliers of industrial mineral products in the world. They realised some time ago the issues relating to Zircon supply and have been working with management through bench testing and independent foundries to come up with the parameters for Spherichrome to be used. In many cases the testing came out better than Zircon (you can see some examples on IDM's and HA's website). Both Zircon and Spherichrome can be mixed to get better results than Zircon alone.

    Why hasnt Chromite been introduced earlier? Well, there hasn't been a Zircon supply problem and there are quality and supply issues with metallugical grade chromite (mainly sourced from S.Africa). The product that IDM will bring to the market has never been seen before. The name itself "spheri" (round) should be noted. For any mould to work well, it needs the grains to be tightly packed, the rounder the grain structure - the tighter the mould, the better it is. The area between the grains will use binder.

    The issue that IDM will face will be the foundry's accepting an alternative to Zircon, but with the price and supply issues of Zircon, this can only help their cause. Also, they will only be producing 70,000 tonnes, so I think they could have their own supply issues, but that will work in their favour with pricing. (Just a side note: TZMI have forecast a deficit of 400,00 tonnes of Zircon within 3 years, with no new supply coming on-line).

    Just with the pricing of Spherichrome.
    I have seen videos where IDM management have been quoted as saying "in time, our product will track closer to the zircon price, than metallurgical grade chromite". Think about that carefully... Management have re-branded it away from chromite and are looking at a totally different market to metallurgical grade, why? Because they know they will get a premium for their product. In the Feb 2010 report they quoted a price of $500 a tonne. Part of the deal with Macquarie and Sentient related to management obtaining supply agreements for some of the initial production. I would just be guessing, but HA International would have been deeply involved with this and are the sole distributor in the U.S. If the Zircon price continues to rise, Spherichrome will move with it. It may just take a little time after initial acceptance. (In the Iluka quarterly report under "Zircon threats" the MD said: "some evidence of substitution from chromite sand"). Well, everyone looks for a cheaper alternative, especially when your input costs three fold.

    There is another section that management have only touched on lightly but its worthy of a quick line.
    There are four other minerals that will be extracted when they have the plant up and running well. They are: Kyanite, Staurolite, Silminite and Epidote. Production of all these minerals is scarce and supply is incredibly hard to obtain and in reality, production is 12 months away. But this could be a fantastic side earner.

    Another point to mention is the old pilot plant they have owned for 3 years that did all the initial testing and flow-design work. It runs a 10tph and could easily be re-located to the tenement for a first stage initial processing. You can see it with the latest plant pictures (near the water's edge).

    The big one to finish off is the Low Ferrochrome project that will have capex costs of around $35-$45m. This alone could transform IDM into a very serious player and a valuation to match. "LowFerro" is used as a super alloy in specialised manufacturing and I think once the plant is at full production, management will work quickly into making this a reality.

    Lastly, the company has listed through the OTCX market. I'm just guessing that they've had a fair bit of U.S. interest in the project and want to give them the chance to buy-in.

    Anyway, must go, I hope this has helped.

    Regards
    Pep

    If I've missed something or you have something else to add that I may not be aware of, email me, I would love to hear it.
 
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