Thoughts?, page-8

Why would Kogi want to try and ship to China when it has a domestic market currently importing 18 odd million tonnes of steel each year and Europe just 4 days away by ship? Nigerias economy has been growing at around 7% for a number of years now which means their economy is doubling every seven years. With the collapse in oil prices comes a more pressing need for Nigeria to diversify away from oil and every emerging economy has based their growth around a healthy domestic steel industry. Nigeria now has around 20 operating steel mills but relies on scrap metal for its blast furnaces which is hardly a solution. Sponge iron as pointed out is ideally suited for blending with scrap and is very economically produced and it's an ideal fit for Kogis iron ore. Keep in mind also that Kogis cost per tonne to mine, process, pipe and administer its ore is $24.19 as per its pfs. The cost to barge its ore to local mills would be minimal. However as per its pfs, to load Or unload Cape size ships requires an expensive facility to be located offshore at a depth so as to handle the size of these ships. I make this point because a) potential importers of iron ore will encounter this problem which adds to the end users cost of the ore and b) smaller ships suited to servicing the European market are able to dock at the shallow Nigerian ports. Sending smaller ships from Brazil or Australia to either Nigeria or Europe adds significantly to the cost of the ore and so hands Kogi a significant cost advantage. Today's spot price of iron ore for May delivery into China is $50 per tonne. I would suggest it would cost significantly more Delivered to Nigeria. On the mine side of the Kogi equation, we have the only defined resource in Nigeria, a potential resource of up around 8 billion tonnes and a modest cost to get the mine into production with the ore easily processed and at shallow depth of around $380 million ( excluding the deep sea loading facility's). Based on a modest mine output of 5 million tonnes per year at around $25 per tonne gross profit (based on near record low prices or iron ore)would see the cost of the mine paid off in just over three years. Assuming someone wanted to takeover Kogi at say 50 cents per share or around $250 million would give an all up investment for an operating mine paid off in just 5 years! The mine would still be operating when our Grandchildrens Grandchildrens are old and grey!