VMS: Riley Iron Ore Mine - Profitable or Not?, page-244

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Ironman2020

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31/01/23

10:53

Post #: 65970192
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Originally posted by ShareBeers: ↑

** Had to make some changes to Original Post **

Hi all,

With the fantastic news that VMS has announced that it has booked its first shipment, I have noticed people question whether Riley Iron Ore Mine is profitable. Well let's go through the calculations.

My information is based on the official Pre-Feasibility study (PFS) which is linked here: VMS PFS 22 Aug 2019

VMSPFS Assumptions

The PFS Financial Model is based on the following:
Iron Ore 62% Fe price of US$90.35
Fx of AUD$1 to USD$0.68
CFR Costs of AUD$85.12 (comprising of FOB of AUD$56.09 and Shipping AUD$29.03)
Iron Ore sold is 1.6M
At Iron Ore 62% Fe price of US$90.36 and Fx of AUD$0.68, VMS make a profit of AUD$30M

VMSRevenuePer the PFS, Revenue is based on Iron Ore 62% Fe price and then a discount is applied for grade and content because VMS' Iron Ore is actually 57% Fe. Anyone who quotes the Iron Ore 58% Fe price have not done their research properly.

VMS Discount for Grade and Content (convert 62% Fe to 57% Fe)My calculations show the discount is actually 18.71% under the off-take agreement but I've used the discount of 20% as I prefer to be conservative with my calculations and it's unclear what the wording below means but I've used 20% as the discount rate.

VMS CFR CostsUnder the PFS the official CFR Costs are

The shipping costs on the PFS is AUD$29.03 but @nevillebbelieves the shipping costs will be AUD$65.00 (which is double).

I have done my calculations based on the official PFS as while I don't dispute Neville, I believe the reason why the shipping costs was so high was due to the high iron ore price when Iron Ore price was closer to US$200 whereas it is currently sitting on US$140.

I believe that the shipping costs will move closer to the PFS shipping costs if the Iron Ore price is between US$120-US$140.

Is VMS Profitable?Well please look at my VMS Profit Table below but you will note that I've been conservative with my calculations:

VMS is currently US$140

However, logically if Iron Ore price drops lower to US$130 and US$120 that the AUD.

Remember, my calculations are very conservative. You will all know that in when Iron Ore 62% Fe Price was US$200, Andrew has always stated that he was happy for Iron Ore Price to be above US$100 as the PFS is based on US$90 for 62% Fe.

If anyone on Twitter or HotCopper questions the profitability of VMS on Riley Iron Ore Mine, please provide this post to them and ask them to challenge my calculations not with one word answers but actually challenge it properly.

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back to the future with discussions about Riley restarting
VMS Price at posting: 2.7¢ Sentiment: Hold Disclosure: Held
1 Upvote

0 Great analysis

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