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Compared to Simandou, Zanaga will be cheaper to build, have higher grades and be more profitable.
Zanaga's Stage 1 CapEx is now below $2bn. Simandou's is somewhere north of $14bn.
Rio Tinto report Simandou's grade as 66.1%. Zanaga's staged average will be 67.5%.
The final and most compelling metric is the relative Internal Rates of Return between the 2 projects. Simandou's IRR is 11-13%. In ZIOC's FS reworking at the end of last month Zanaga's IRR was stated as 26.2 - 28.2% (increases of over 60% on 2014 figured). The IRR is the ultimate litmus test for any mining project.
Thus Zanaga scores a convincing 3-0 over Simandou in the Champions League final of high grade mega mines.
Now, if the likes of Rio Tinto and Baowu Steel think Simandou is worth investing in, then Zanaga is absolutely compelling. Zanaga's IRR went under the radar on April 30th, but it won't have gone unnoticed by the Strategics who received the FS under NDAs. Of note, Manara Minerals state that: Our Investment Mandate - (is to) provide long-term capital to investment opportunities that offer both access to offtake as well as attractive returns on investment.
Hold that thought.
RioTinto 2023:
An IRR in the low double digits (12) is anticipated for the combined Simfer mine and the co-developed infrastructure through ownership of CTG. (12) 11 to 13% (post-tax, real basis). Based on Wood Mackenzie and CRU average pricing for iron ore (65% grade), with a premium applied for DR product.
Rio Tinto is also reporting Mineral Resources exclusive of Ore Reserves for the Ouéléba and Mineral Resources for Pic de Fon deposits at Simandou of 1,360 Mt at 66.1% Fe, 1.5% SiO2, 1.5% Al2O3 and 0.06% P consisting of Measured Mineral Resources of 153 Mt at 67.0% Fe, Indicated Mineral Resources of 460 Mt at 66.2% Fe and Inferred Mineral Resources of 746 Mt at 65.8% Fe.
https://www.riotinto.com/en/news/releases/2023/simandou-iron-ore-project-update
I assume Simandou IRR includes deep water port costs and Zanaga does not. I don't know enough about Simandou specifics.
Guessers, the FS report:
'In 2023 the Company partnered with a Chinese iron ore technical expert engineering firm ("Chinese EPC Partner") as part of a process to update the economic evaluation of the Zanaga 30 Mtpa staged development project.
Using the 2014 Feasibility Study's ("2014 FS") infrastructure designs, flowsheets and material take off lists, direct and indirect cost estimates were updated to current market pricing using Chinese major equipment and contractor pricing for both phases of 12 Mtpa Stage One haematite ("Stage One"), plus 18 Mtpa Stage Two magnetite expansion ("Stage Two") projects, inclusive of buried concentrate pipeline and port infrastructure.'
I will disregard the unkindness. Does port infrastructure equate to a "deep water" port or is it the jetty variation or is it simply ZIOCs warehouse and processing plant at port established by someone else. The detail is important, long time since I read the original.
Sorry - just noticed the predictive text. Apologies.
From previous company release, as I remember them, ZIOC build the portside infrastructure, mainly a dewatering yard, storage and reclamation plus associated conveyors etc.. A 3rd Party is responsible for the port itself - think AD PORTS as the most obvious.
The borrow line is that Zanaga's IRR (26.2 - 28.2%) is more than twice Simandou's upper IRR figure of 13% - and that's annual and cumulative.
What I originally thought then, thanks, MM.
An excellent comparison MM.
Unfortunately it brings me back to the question I have been asking for many years - why is Simandou progressing and we are not?
The only answer I have is just one word. It beings with G and ends in an E.
Hi Mitch - Zanaga IR/PR has always been meagre, and so it often feels that us humble (irritating?) PIs are left scrabbling around in the dark trying to piece together a double-sided jigsaw. As I see it Zanaga development has had 3 aborted take-offs, only one of which can be part-attributed to Glencore.
Efforts first stalled in December 2014 as the iron ore price dived. Elphick said this, 'During the Funding Round initiative conducted jointly by ZIOC and Glencore, a number of entities expressed an interest in discussing an investment in the Project alongside the joint venture partners. Engagement with interested entities is expected to continue, however, we believe that current iron ore market conditions need to stabilise before formal discussions can resume.'
Then we had the COIDIC era which ran up to 2018-19. As far as I can see this stalled for a number of reasons; China-Congo relations, primarily debt issues, US concerns over China having a deep water port in the Atlantic, and 'Glencore'. Trahar was reported into here as saying that, 'Glencore had been presented with development options that, in hindsight, they probably wished that they had taken'.
Now in we are on the third attempt. My understanding that, post 2018-19, ZIOC then took the initiative and pursued engagement with our Chinese EPC (still not identified but likely to be PSEI). This stalled during the Covid idiocy when the Chinese were locked into China, and others locked out. Matters resumed in 2022 and, as part of the process (and driven by the previously engaged Strategics) Glencore agreed to take a back seat, selling their executive and controlling interest to ZIOC in return for the off-take agreement. This I think is key. Elphick said as much. His statement near enough confirms that the Strategics asked for and then got a single point of contact that was much more ZIOC than Glencore:
Nov 22: "The acquisition of Glencore Projects' shareholding in the Project is a key milestone for ZIOC's shareholders, *** DEMONSTRATING TO THIRD PARTY INVESTORS THAT THE PROJECT IS NOW REPRESENTED BY A SINGLE ENTITY AND MANAGEMENT STRATEGY***. THE Acquisition is value accretive to Shareholders and increases effective equity ownership of the Project by existing Shareholders, enhancing their look-through ownership of the Project and securing control of the Project without paying any premium for such interest. Furthermore, entering into the Marketing Agreement with Glencore International now provides comfort to investors and financiers that the Project's future production is underpinned by one of the largest iron ore traders globally."
On the other hand, Simandou has always been driven by established iron ore miners (whereas Glencore are iron ore traders) such as Rio Tinto and Baowu Steel (hint).
WORLD’S BIGGEST MINING PROJECT TO START AFTER 27 YEARS OF SETBACKS AND SCANDALS
January 2024
https://www.ft.com/content/80f37963-c718-4f8b-8d77-0f0d5b1c99f
Hi MM,
Thanks for this potted history, which seems a good reflection of how things have developed (though I hadn't picked up AT's comment that ''Glencore had been presented with development options that, in hindsight, they probably wished that they had taken'.)
20/20 hindsight, eh ?
On the 'strategic' side of things, Elphick volunteered the importance of P-N as a deepwater resource at the AGM I attended, that US (?) concern MAY have lessened subsequently with AD Ports' arrival on scene , but - topically - may be re-awakened by the Little Den just-announced (re)launch of Equatorial Congo Air, in J/V with China's AVIC (see depeches).
AVIC is no run-of-the-mill aircraft leasing co :
"The Aviation Industry Corporation of China (AVIC) is a Chinese state-owned aerospace and defense conglomerate headquartered in Beijing. AVIC is overseen by the State-owned Assets Supervision and Administration Commission of the State Council. It is ranked 140th in the Fortune Global 500 list as of 2021, and has over 100 subsidiaries, 27 listed companies and 500,000 employees across the globe. AVIC is also the sixth largest defense contractor globally as of 2022 and second largest Chinese defense contractor with total revenue of $79 billion (from both defense and non-defense services."
https://en.wikipedia.org/wiki/Aviation_Industry_Corporation_of_China
Hmm...
This all looks like a re-run of Pan Am's 'Trojan horse' re-militarisation role in Latin America and the Pacific pre WW2, see
https://academic.oup.com/jah/article-abstract/107/2/525/5907750
.." Farsighted military strategists immediately grasped the potential value of air bases strategically placed around the world, but the military did not determine their selection, placement, or development. Pan Am was a private, commercial enterprise, whose unprecedented, and some said quixotic, venture to use marine planes to fly to uncharted territories—from the impenetrable jungle canopies of Latin America to the tiny specks of islands in the Pacific Ocean—prepared the way for the bases and air supply lines used in World War II. Pan Am developed air bases at Midway, Wake, and Guam. Their bases in Brazil and Africa* allowed Pan Am to shuttle aircraft to the British forces fighting Erwin Rommel as part of the Lend-Lease program...., etc. In addition, through shrewd maneuvers, Pan Am essentially dismantled the German plans to use Lufthansa as a cover for developing a military capability in Latin America and Central America..."
* the Brazil - West Africa air link was expanded [post Egypt] to include a route through Central Africa, primarily to tap a supply of uranium from what was then the Belgian Congo (now DRC)....
And, re BaoWu Steel, it doesn't seem to be bringing much mining expertise to its projects in Australia and Simandou, but is of course a major consumer of product in its own right...AND the lynchpin of China's intended industry-wide 'single-desk' ore procurement policy.
All good st