Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
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Boral's flash ash deal is not done yet, but clearly getting close. Their AGM was earlier today (Australia):
https://boral.com/shareholder-information/annual-general-meetings
From the Chief Executive's Address:
"In addition, we have announced plans to divest our North American Fly ash business, and we
are at advanced stages of that process."
Just speculation, but it's not hard to imagine scenarios in which our deal might be waiting for this much larger deal to be resolved first.
We may find out before long what's happening with Boral's NA fly ash business, which could have some sort of knock-on effect for us, depending on who picks it up.
"Fly Ash in North America is the final business in the portfolio that we intend to divest and we continue to
progress divestment opportunities. We expect to provide an update on progress at the Annual General
Meeting, or sooner."
(Their AGM is on 28 Oct.)
https://boral.com/sites/corporate/files/media/field_document/20211004-Completion-of-North-America-Building-Products-and-Timber-divestments.pdf
Boral have now sold their North American Building Products business. They plan to return cash to shareholders, but perhaps they'll still have some spending money left over?
The situation regarding their NA fly ash business strategy appears to be unchanged:
"As part of the review of Boral’s North American Fly Ash business (announced on 15 April 2021), Boral is continuing to explore value creation opportunities through a potential joint venture, strategic alliance, divestment to a third party or continued ownership of the Fly Ash business. We expect to be in a position to update the market at our full year results announcement in August, or earlier if appropriate."
https://www.boral.com/sites/corporate/files/media/field_document/20210621-Boral-Supplementary-Targets-Statement.pdf
There's a new document from Boral today:
https://www.boral.com/sites/corporate/files/media/field_document/20210610-Boral-Targets-Statement_0.pdf
It's been provoked by a take-over bid, but contains a mass of info on fly ash.
Some of it is what we already knew regarding their recent fly ash strategy review, but there's new stuff including detailed DCF calculations. What struck me most (and assuming I've understood it correctly) is that they've used a DCF discount rate of 8-8.5% (equating to PE ~12) which is much better than I'd have expected. (Previously I've seen suggestions of 20% i.e. PE ~5).
A few other random notes, after a first speed-read:
1. There are hints that they might actually be selling off the North America fly ash business.
2. Kirkland is due to be completed in late 2021. Target is 500ktpa.
3. Fly ash price estimated to rise by 5%pa (base case) up to 8%pa ("upside scenario", though this is actually the current rate).
4. Historically, fly ash was cheaper than cement, but the gap has narrowed and "in California (which has virtually no local supply), the fly ash price now exceeds the cement price".
Loads more info in the document, if you're happy to wade through 184 pages. The most relevant part starts at page 121.
... bumping as per previous post.
Thanks for link, just skim read through it.
Agree $3 to $4 per ton royalty seems low but as you say they may be happy with $2M per year for doing nothing plus the upfront money.
Well for sure a deal like that won’t work for a listed Company like us.
Got to wonder what permit / permissions Kirkland will be need for this uplift in production and processing.
I have requested my AGM ticket / entry via HL. Hoping for news before then.
There's also this bit further down, where they hint at the royalty value :
"Yes. So a brokered ash, you might have a revenue share, and I'll just pick a number of 35%. And so for every dollar we make, we give 35% away. For a Montour style or a Kirkland style, we pay a fixed cost per ton. And that fixed cost per ton is single digits, so $3, $4 a ton, and then we add value through whatever the processing and the manufacturing. And then for Kirkland and specifically, if we're paying a few dollars for the material and we're selling in the western markets where the pricing is $80, $90, you can quickly see how -- even if you add in the cost of grinding or drying or the other things that we do to improve the value, there's a big dollar amount in there that allows us to maintain and get the margins that we're talking about, and that was mid-20%."
$3-4 seems quite cheap to me, but perhaps the Kirkland owners (private company I think) are happy not to have to lift a finger, and just wait for the cheques to start arriving!
I've found a bit more info on the Boral-Kirkland deal, in this transcript of the recent Boral half year results investor conference call :
https://finance.yahoo.com/news/edited-transcript-bld-ax-earnings-084524587.html
"In December 2019, we acquired long-term exclusive marketing rights for 24 million tons of high-quality natural pozzolan in Arizona. The beauty of this product is that it can be used as a fly ash replacement with no blending required. We will mine and process the pozzolan in a facility being constructed at the Kirkland Mine site with production expected to ramp up to 500,000 tons over a 2-year period. This is a significant source of supplementary cementitious materials for supplying Arizona, Nevada and other western markets. We have acquired the mining rights for USD 4 million, which we will pay over 4 years. We will invest some capital into the construction of the facility, and we've negotiated an attractive per-ton royalty once we start mining in late financial year 2021. We expect EBITDA margins to be in the range of 20% to 25% on this project."
Thanks , Dubliner. Just as well the NGS did close, as it more or less cancels out the Kirkland mine. No chance of it coming back now I don't think.
Hope your hangover isn't too bad...
Sorry for typos. Watched Rugby in pub and got into single malt rounds a Scottish chap.
Further to that I recall (I think, if not you someone did) being asked me a while ago what I thought about possibility that Navajo would get rescued and not close.
There is always something to contemplate it seems it we if we are patient hopefully it will come right.
SGD would love to know the answer to that. Perhaps Boral have expressed an interest but could be wishful thinking. Time will tell I guess...
@Dubliner : I'd be interested in your assessment of the Boral situation - will Kirkland be enough for them, or will they be looking at us too?!
THIS IS THE POST FROM PEPS THE OTHER DAY....
This IS one of the rns we are waiting for a long long time now we can see sres transform company and SP Will be 0.70 or more soon. Now yes good job
That 0.41 target was done in Jan 2019...since then a lot of progress has been made...on the verge of getting permit....alot more than 0.41 peps....
Target? 0.40p long term?
Thanks SGD...appreciated
Hey SGD appreciate you pointing out the updated presentation yesterday and the Boral research too.
Hi Bplan, yes that's a lot of pozzolan, so it's probably just as well they're not any closer to us - their mine is about 450m SE of ours. They may be better positioned for Southern California, including LA, but we're probably better for the north: San Fran, Sacramento etc. And AFAIK they don't have perlite.
(BTW To be accurate I should have said "how they're planning to continue to do it", not "how they've done it".)
Nice find SGD27.
Exclusive marketing rights for approx 24 million tons!!
Like the way Boral will mine and process the pozzolan at the Kirkland Mine site.
The potential is there for SRES.
The Boral Half Year Results came out a couple of days ago, and are worth a look :
https://www.boral.com/shareholder-information/results-announcements
A couple of notable points from the "Management Discussion & Analysis" document :
Pages 7-8 : Fly ash price is up 10% compared with a year ago.
Page 12 : They've managed to increase their volume despite the coal power station closures, but take a look at how they've done it :
"In December 2019, we acquired long-term, exclusive marketing rights for ~24 million tons of high quality natural pozzolan in Arizona – securing a significant source of supplementary cementitious materials for supplying Arizona, Nevada and other western markets. The natural pozzolan site, 90 miles northwest of Phoenix, was developed and permitted by Kirkland Mining Company. Extensive testing of the pozzolan confirms it can be used as a replacement of fly ash for the production of durable concrete, with no blending required. Boral will mine and process the pozzolan in a facility being constructed at the Kirkland Mine site, with production expected to ramp up to ~500k tons over a two-year period."
Maybe they'll be looking at us next :-)