Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
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Hi 99 icecream,
Changing product mix to reflect new requirements, then ?
Thanks for the link, I sent it off to AT a while back as interesting twitter material, which he acknowledged he hadn't seen.
Esp given …"""There is one source remaining of natural high-grade direct shipping ore, which is the rich deposits of West Africa, especially Guinea,” Eames noted."...", I'm mildly interested that he's not posted it.
ATB
Hi Jiving,
Fair enough - makes sense !
ATB
Extrader - I don't think there is a worry about accounting implications (if you take a write down it would cut your taxes) and we are not talking about abandoning working mines - only replacing old worked out mines with better new ones.
https://stockhead.com.au/resources/why-iron-ore-grade-is-now-more-important-than-ever/#:~:text=Higher%20grade%20%3D%20less%20impurities&text=The%20main%20impurities%20in%20iron,made%20from%20expensive%20coking%20coal.&text=Impurities%20reduce%20the%20productivity%20of,energy%20consumption%2C%20especially%20coking%20coal.
Extrader, miners usually develop multiple mines that could be deemed to be in 'competition' with their existing mines, but in truth they are seeking to supply a growing, changing market. Even if you added a generous annual production figure for Zanaga to FMG's production it would still be smaller than its main competitors.
I realise interpretations of course can differ on what their motivation was re-Simandou bid but potentially they were gaining insight into how the Chinese & others intended to operate in the African iron ore business.
Hi 99 icecream,
Hmm, that figures !
That would kind of put them (Oz miners in general, FMGL in particular) in a position akin to the oilco's / internal combustion engine car-makers : using cashflow from the 'legacy' business to finance growth elsewhere...?
Wouldn't that lead to big writedowns on the value of their existing businesses ?
Tricky call for the CEO, a real career maker-or-breaker !
ATB
Agree caml...all we get is the odd tweet with #China...while long term investors live in hope they have our interests at heart. I have written 3x to Andrew Trahar recently and not even had the courtesy of a response. Really makes me wonder whether we are just being strung along. I love to believe that something good will come along but we are 6 mos now since the Coidic FA and not one update!
FMG did not include the railway in their bid, but it is not clear what other infrastructure/development costs were included in the $9b bid.
Extrader - I think its the other way round. The Aussie miners are well aware that their product is lower grade than Vale and the Chinese will pay higher premiums for better grades. All are trying to replace their old mines withe newer better grade iron-ore. Fortescue has the worst problem in this regard.
Fortescue had offered $9 billion for the blocks but did not formally promise to build the railway dubbed the “Transguinéen”, two government sources told Reuters on Wednesday.
https://www.reuters.com/article/us-guinea-simandou/china-backed-consortium-wins-14-billion-guinea-iron-ore-deal-pipping-australias-fortescue-idUSKBN1XO09B
Hi Jiving,
With FMGL alone involved, we come back to the problem that 'their' Zanaga high-quality ore down the road would be in direct competition with their existing Oz-based production.
Can't think that the Oz shareholders/Govt/employees/public would be overly pleased at that...The Aussies don't have much experience of 'being off-shored', unlike many Western economies.
I think they'd want a GLEN figleaf, at least.
ATB
The market doesn't understand because the market hasn't been told anything. There is no business plan to get ore to market and there hasn't been one since the feasibility study. There's nothing more than rumours about discussions with FMG, nothing official about Glencore's interest and nothing official about financing. For all we know loads could be happening in the background or absolutely nothing. In July we will either be looking at 3.5p or 35p IMO.
I wouldn't be here if I didnt think it was undervalued. By how much is the question.
Do you think the market understands the value here - I don't ! The price is driven not by short term speculation. The longer term investors bought at much cheaper prices.
99icecream - Why does the market currently value half of Zanaga in the form of ZIOC at around £24 million? If someone was prepared to pay between £750-1200 million for our 50% that would represent an amazing return from the current market valuation, of course I hope for more. The FMG bid for Simandou I believe included a substantial quantity towards development costs, the figure for the actual mine itself is not clear.
Still the Fortescue offer for 50% of Simandou sets a minimum price for 50% of Zanaga. Zanaga is cheaper to develop and similar size.
Think that reference was for ZIOC's share only, not the whole mine.
Jiving - Why would Glencore or Zanaga sell the whole mine for as little as $2-$4 billion when Fortescue would pay $9 Billion for half of Simandou ?
Trader, I agree on your point 1.
Unsure about point 2 though.
Something has to give soon though because the macro-economic environment will not remain this favorable forever and the iron-ore bubble will inevitably deflate like all commodity cycles. Surely, surely the Glen, and Zioc boards are acutely aware of this. Hell, I'm a layman and even I'm aware of it!!
The neatest FMG solution would surely be to make an offer for 100%. GLEN want out, ZIOC shareholders would presumably be OK with a price £2.50-4.00 (equating to a price of $2-3 billion for the whole mine). FMG know how to build & run vast iron ore operations a big plus from everyone's perspective. With the current iron ore price their equity is at an all time high & their cashflow must be incredible. With one successful iron ore miner in charge there would be nothing to stop them parcelling out % of the project to Chinese infrastructure companies, Chinese miners, whoever.
Frankly I would rather have a smaller % in a project run by a financially strong, industry specialist as majority owner than a bigger % of a project run by a JV committee of 3,4, 5 partners.
Hi ShrewdDude67,
(1) I like the structure, but maybe there's a minority interest place for ZIOC supporting FMGL with their local knowledge/contacts/"institutional memory" ?
FMGL have AFAIAA none of the above...and little international experience to draw on.
(2) Not sure FMGL would want to cede to GLEN ALL trading rights to product, aren't they to some extent competing suppliers to China ?
ATB
ATB
What could happen is FMG buys Zioc half on the understanding that Glencore relinquish overall control to FMG (FMG 50+1, GLEN 50-1). Perhaps Glencore would do this because they know that FMG, unlike little Zioc, are more than capable of getting the project into production. Throw in an agreement for Glen to have trading rights over the ore and everyone is happy.
No?
There’s been a lot of talk about a buyout process involving Fortescue recently - can someone please explain why Fortescue would want to buy our stake in a mine controlled by Glencore who won’t develop it? Doesn’t that mean they will just be parting with £xbn with no guarantee of ever getting a return from it, if Glencore chooses not to sell their portion and not to develop? Not sure I’m following the logic or structure correctly. Thanks