Maybe it's time for PDY to think outside the square, otherwise its a slow death for the company.
Why not look to Japan instead of China.
Last year Sumitomo wanted to strike a $115m deal with Mindax to develop the Mt Forrest Iron Ore Project in the Yilgarn area. The board couldn't agree and eventually a group of shareholders associated with one of the Directors scuttled the deal and got control of MDX. They have since found another potential J/V partner and are currently in the process of due dilligence.
MDX has about 1.6b tonnes of iron ore, some of which is hematite at around 45% grade.
A summary of the failed Sumitomo deal (as taken from the announcement)is as follows:
? 'Sumitomo is considering acquiring, by way of farm-in, up to a 70% interest in the Project by contributing or guaranteeing certain expenditure in relation to the Project feasibility and development (Transaction).
? During the pre-feasibility and feasibility stages (collectively, Feasibility Stages) (if Sumitomo decides to proceed with the Transaction), it is proposed Sumitomo will have the right to acquire, through incurring or guaranteeing certain expenditure to assess the feasibility of the Project of up to AU$15 million, a 45% interest in the Project.
? During the Development Stage (if applicable), it is proposed Sumitomo will have the right to acquire, through incurring or guaranteeing 90% of certain further expenditure of up to AU$100 million to develop the Project, a further 25% in the Project (ie, 70% in aggregate)'.
Now, PDY could look to Sumitomo to see if they are interested in doing something similar. If they were interested, there could be the possibility of them becoming a cornerstone investor in PDY and Padbury's IP holding company Midwest Infrastructure could also be part of the deal. PDY could include 90% ownership of the IP to entice Sumitomo to work with Mitsubishi on the Oakajee Port and Rail project. Mitsubishi have as good as shelved Oakajee for the nexr few years and Barnett is hoping to get China to come to the party, which is nigh on immpossible given Japanese/Chinese history. Maybe see if 2 Japanese companies can make it work instead.
Mitsubishi has the Jack Hills project which it acquired from MMX about 18 months ago, so with Mount Padbury ore, the J/V would almost take the entire port capacity between them, but they could also tailor the port to include the expansion plans of GBG. This would alleviate the situation Mitsubishi & MMX faced when Sinosteel withdrew plans to utilise the port and rail at the last minute, leading to the demise of the project.
I think it was a strategic move by Sinosteel to shelve their Weld Range project in a bid to force the WA Goverment's hand in their threat to revoke Mits/MMX's exclusive right to build Oakajee but in the end Barnett didn't carry through with his threat, instead giving Mitsubishi (who now own 100%) another 5 years to develop the project.
Barnett is soon heading back to China in an attempt to convince China to help develop Oakajee, but its hard to see them doing us any favours as firstly Labor (through Carpenter) gave Japan the rights over China and then Barnett renewed them. So China will not take kindly to being snubbed by both major political parties in WA.
Maybe PDY management need to approach Sumitomo or another large Japanese company directly and forget about the Chinese altogether.
PDY Price at posting:
0.3¢ Sentiment: None Disclosure: Held
