I must admit, I have been surprised and disappointed at the share price following completion of the capital raising. Prior to the capital raise, it was the expectation of a capital raise itself that seemed to be the lead balloon that had attached itself to the share price.
Whilst I had expected the price to fall to the low 3’s during the capital raise process, I thought that once the capital raise process was complete we might see some upside given the potential positives in the short to medium term and nothing by way of significant negatives given the capital raise is now complete.
So I thought I'd share what I see as some short term positives that we have to look forward to:
- Drill results - The last of the drilling for shallow magnetite was completed by ASX announcement on 29 February 2024. Whilst down hole magnetic tests provide a reliable indication of results, it would be good to have the lab results back and after three months they should not be far away.
- CEO investor presentation – I would like to think that our new CEO would be keen to have an opportunity for shareholders to get to know him and I am therefore hoping for a new (and overdue) shareholder briefing, presentation or similar. If this doesn't happen before, the EGM would be a great opportunity to do so.
- JV partner due diligence update - per the project update announcement on 16 April 2024, the due diligence review process for the seven selected strategic investors was expected to be completed in the June quarter - therefore expecting some news on that front soon.
- BFS funding by end of September - per project update announcement on 16 April 2024, "The number of Strategic Investors will then be reduced prior to entering the final stage whenconfirmatory due diligence will be completed, and definitive investment terms agreed upon. This final stage is expected to conclude in the September Quarter of this year and Hawsons intends tothen proceed immediately into the BFS".
I have previously posted my reasons for believing that there is a high probability of a JV partner/s coming on board, which I have summarised below.
1. There is a global need for high grade iron ore in order to produce green steel. The only current technology that can produce green steel (other than recycled steel) is high grade ore in an electric arc furnace that uses by green power. Hydrogen based production is being developed, but requires commercialisation and production of large quantities of green hydrogen, methods to transport hydrogen to steel mills, and commercialisation of steel production with hydrogen. Therefore, high grade magnetite is the lowest risk option to be able to produce green steel in the near term.
2. Hawsons represents a low risk option for production of high grade magnetite in that:
a. The project is located in a politically stable country;
b. The project has access to labour, power, water, rail and port.
c. Whilst some drilling is still required to get a JORC resource for the near surface ore and revised mine plan, the drilling to date is confirming management expectations.
d. The ore can be processed using simple and known processes.
e. The ore can be transported using existing rail and port options.
3. I believe that the potential JV partners know that if they want a reliable source of high grade iron ore from around 2030 (when EU carbon tax ramps up) they need to start taking action now given the time it takes to complete BFS and build a mine.
Below are some quotes from Rod Sims, former ACCC chair and now Chair of Ross Garnaut back Superpower Institute in a recent AFR article. When reading these comments, note that green steel can be made with high grade magnetite from Hawsons in an electric arc furnace and it is already a proven method to do so at scale.
“All overseas studies that I am aware of suggest that Australia is likely the cheapest place in the world to make green iron.”
But Mr Sims, a former competition regulator who now chairs the Ross Garnaut-backed Superpower Institute, said it would require government intervention and funding.
“There is a clear role for government – contrary to the view of the market fundamentalists – because there are two large problems facing those who would make green energy-intensive products,” Mr Sims said.
The first problem was that steel made with fossil fuels was cheaper because it did not account for the environmental costs of carbon emissions.
The European Carbon Border Adjustment Mechanism was one such example of necessary government intervention to address this problem, he argued, because it placed a cost on the carbon imported to the EU.
This presented Australia with a chance to export competitive “green” iron into the trading bloc, he said.
He proposed the energy-intensive hydrogen production facilities would not be linked to the National Electricity Market, and instead be located close to the iron ore mines in Western Australia.
Australia’s biggest miners, Rio and BHP, have long known the iron ore they produce in the Pilbara is not well-suited to low-carbon steel, and solutions cost tens of billions of dollars. [emphasis added - and will add to their cost of production]
Which leads to Mr Sims’ second problem: financing. While green iron-making technology is proven, it has not been done at scale and will require federal government support.(source: AFR, 24 April 2024, "Sims says 'high cost' Australia-made fixation threatens green steel").
