DJ Carmichael's Paul Adams says LJ is "value accretive" for POS.
However the market and brokers have not realised this fact, POS has overnight since 2 July become the 2nd largest NI producer and processer in Australia, I have said this several times and here is why, lets compare the other large producers and processers-
BHP Nickel West - several processing plants like MT Keith, Kambalda, smelter in Kalgoorlie and refinery in Kwinana, processes 30-40% of its higher grade ore from PAN MCR and WSA, they are the largest processer and the only NI refiner and smelter operator in Australia So No 1 processer but no 1 or 2 producer as it has become more reliant on other producers higher grade ore for their mills.
WSA - No 2 producer but no processer plant of its own, 100% of its high grade ore 4.9% goes to BHP, producing 600KTpa ore and 30KTpa NI concentrate according to their last financial reports, totally dependent on ore processing on BHP and any purchaser of Nickel West, they mine the ore and BHP mills it into concentrate, so 0 processing themselves and BHP takes cut, very workable for both due to high grade.
MCR- No 3 producer 3.2% high grade ore producing 240KTpa ore and 10KT pa concentrate, no debt, totally dependent on BHP processing plant, with 2 yr mine life for last 14 years.
MBN in brazil, massive ore low grade 0.46%, US bondholders took it over shafting OZ shareholders of 98% of their shares, low debt CN only now but produces 38,000KTpa ore and 6.3KTpa concentrate which Norilsk processes 50% in an offtake
SIR - in 2017 with a large debt of $470M (according to their conservative costing DFS 2014), they will build their own processing plant stranded in norseman/nova in the nullabor desert capacity of only 1.5MTpa ore and 26Ktpa concentrate (DFS 2014),massive resources but its still only medium grade ore of 2.1-2.6% but easier to mine so very low cash costs of $2.09USppd (they estimate now)
POS- 2 processing plants of 2.2MTpa (BSwan) & 1.5MTpa (LJohnston) = 3.7MTpa fully operational and new barely used turnkey, Ore medium grade at windarra of 1.6%, low grade at BSwan of 0.6%-1.4% and high grade at SSwan of 11% with lower cash costs of $4.0USppd than MCR 4.96 and MBN 8.4 but higher than WSA 2.70 and SIR 2.09.
So WSA and SIR are rightly valued by the market at $1B+ MCap due to lower costs and higher grades. But POS is way undervalued as many have said many times on HC (Diesel saying today 98c at a 1/4 value of SIR). Upon funding and production start (green lights are on), POS will become the second largest processer of NI ore in Australia behind BHPs Nickel West with 3.7MTpa ore milling capacity with its own 2 processing plants. MCR WSA do NOT have their own processing plant. POS has 2, even when SIR builds its own Processing plant in the nullabor in 2017 it will only have 1.5MTpa ore processing capacity, thats the size of POS's LJ plant already built and working right now! and less than half the size of POS 2 plant capacity of 3.7MTpa ore processing capacity;
In terms of production, BHP ~80KTpa and WSA 30KTpa will exceed POS in concentrate produced pa however the BHP figure already includes ALL of WSA concentrate already as they process it for them. POS will have at start annual production of 12KTpa announced before lJ purchase but with LJ this is increased to 30KTpa, remember SIR can produce 26KTpa conc at 2.4%grade from a 1.5MTpa processer.
So the combined POS plant group can produce at these grades 12KTpa windarra, 12-20KTpa BSwan & 12KTpa-22KTpa conc from LJ ie = 36KTpa -54KTpa concentrate. This thrashes WSA's concentrate today of 30KTpa and its MC value of $1.1B.
Whilst SIR and WSA has been the markets NI darlings last 1-2 years, the new NI market darling will be POS this year once the brokers and analysts realise the above, They saw the 2 Aces come out on the table with BSwan and LJ but they cannot believe it and some are starting to believe it and when see that 4th Ace of funding and 5th Ace of production restart with low debt then the hand is unbeatable. POS has produced the winning hand and the others still cannot believe it.
POS at Min concentrate capacity of 36KTpa exceeds WSA's concentrate right now but unlike WSA it owns its own processing plants and is not beholden to BHP and unlike SIR it doesnt have to spend $470M in large debt over the next 3 years with no income to produce it at a third of the plant capacity that POS has right now. POS will exceed WSA concentrate production and exceed SIR processing capacity by more than double putting it clearly behind BHP NIckel West as its main competitor something the ruskies has planned on doing when they bought and developed Lionore for $7B
POS IS the Second Force in Nickel Ore, the Iron ore investors will start switching to a winning trade, the writing is on the wall and Pual Adams of DJ CArmichael called it last Sunday in the Sunday Time and this Saturday int he West newspaper, its Value Accretive time!
(20min delay)