Well folks, is 2023 going to be the year where we finally have the final piece of the puzzle fall into place? We have a mining, rail and port agreement with Min Resources but we're now waiting for Min Resources and Hancock to make the Final Investment Decision to develop Stanley Pt berth 3 at Port Hedland. Min Resources and Hancock joined forces to overcome the opposition from BHP and FMG for additional port space, so I'd be surprised if they don't proceed to develop the berth along with the associated rail and ore holding infrastructure.
I don't know if Hancock's FID for the port development is contingent on it sorting out development approvals for its new mines and rail spur lines but if it is, we may still be a couple of months off from a decision.
I'm feeling pretty confident that the deal we have with Min Resources and the deal Min Resources has with Hancock, that we will see a mine up and running. Years after being given short shrift from BHP and the middle finger from FMG, it seems we have an arrangement where there are winners all round.
Of course, we have had to give up 50% of the 404MT Marillana resource (61% beneficiated end product) and 50% of the 340MT (circa 60% ore) Opthalmia to get Min Resources to provide the rail and port logistics as well as funding the mine. In turn, it appears that Min Resources has offered Hancock a significant share of tonnage allocated to the new berth space and funding for port development in exchange for Hancock to provide rail and port services for the Marillana and Opthalmia mines.
The 20MT annual haulage agreement that Min Resources and BCK have on the Hancock infrastructure means that there's a 37 year arrangement for all parties. While BCK will only get half of the takings from the 20MT annual production, it's worth noting that Marillana was found in previous feasibility studies to be a low cost mining operation (lowest 25%) due to it being free dig without a need for blasting. One of the studies conducted by Qube in 2016 had estimated the cost of mining and hauling ore to Utah point at Pt Hedland via truck (600 km round trip) as $35 USD FOB (2 MT per annum mine). I guess mining costs have gone up since then but this would be offset by rail haulage being significantly cheaper than by truck, and perhaps economy of scale of a 20MT v 2MT per annum operation may offer other reduced unit costs. It's also possible that Min Resources could run a more efficient mine operation compared to Qube.
If today's iron ore prices are in place by the time BCK ships ore, it'll be quite a little money earner. Even if ore prices are down 30% from today's levels, it's still quite profitable (at today's exchange rate).
So for us long suffering holders it's been quite a convoluted journey to get to where we are now. The bonus is that under the current arrangement we don't need to have a capital raising as the mine, rail and port infrastructure and costs are funded by Min Resources (50% of the mine cost to be repaid by BCK from mining profits).
Here's to hoping it all works out.
BCK Price at posting:
2.6¢ Sentiment: None Disclosure: Held
