Member Info for 99icecream

They claim to be able to produce a pellet of 68% Iron content and >50% of current pellet production is stated as DRI grade. At the moment only about 10% of Vales production goes into pellet, but this will rise as the margins are better (and will get better still). It will (I guess) take a while to prove that the new plant can produce consistently high quality briquettes (as Vale calls them). With Vale involved in Saudi, the prospects are good for Vale selling their product.

Obviously, if Brazilian production is taken by the Saudis, this enhances the case for China buying into Zanaga ??

"... from where will come the high grade necessary for this whole green steel value chain...? "

Well in the case of Vale - Brazil obviously.

https://vale.com/w/revolution-in-the-global-steel-industry-vale-inaugurates-the-worlds-first-briquette-plant-in-vitoria-brazil/-/categories/1968809

It seems a rather naive comment from Mr Martins. Vale is putting its efforts into expanding pellet production and therefore being able to sell its iron ore at a bigger premium. Value already produces more DRI pellet than BF pellet. Its latest plant is aimed at a better / greener DRI pellet (what it terms "briquette").

"Last year, we signed agreements with Saudi Arabia, the United Arab Emirates and Oman to create Mega Hubs, industrial complexes for the production of HBI, initially using natural gas as an energy source. In the future, with the use of green hydrogen instead of gas, HBI could enable the production of green steel, with zero GHG emissions."

https://vale.com/w/revolution-in-the-global-steel-industry-vale-inaugurates-the-worlds-first-briquette-plant-in-vitoria-brazil/-/categories/1968809

Sorry, x-posting - I see you make the same point.

In addition the figures you quote are from 2014 (or earlier) no doubt benefaction will have improved a bit since then !

And note in each case the impurities are similar (at about 3.8%).

MM - I think you may be a bit confused about the question of Iron Ore Grade vs. suitability for DRI steel.

Most of the articles written on DRI discuss grades of Haematite (Fe2 O3) as that is easily the largest part of the market. So any statement that DRI requires X% Grade Iron Ore applies to Haematite only.

Zanaga has both Haematite (Fe2 O3) and Magnetite (Fe3 O4). 100% percent pure Haematite (Fe2 O3) is 69.9% Iron, 100% pure Magnetite (Fe3 O4) is 72.4% Iron the rest is Oxygen.

The Suitability of Iron Ore for DRI depends upon the impurities, so if say 66% Haematite (=3.9% Impurities) is suitable for DRI, then you would need 68.5% Magnetite (also = 3.9% impurities.

The difference between suitable concentre and Pellets that can be used in DRI depends upon further benefaction during the pellet process. Vale, for example, claims to be able to produce a 68% Pellet using their "dry concentration technology".

Obviously, 68.5% Magnetite Ore is always worth a premium over 66% Haematite Ore as it contains more Iron.

Also, the benefaction of Magnetite is "easier" as it is magnetic and therefore magnetic separation can form part of the process.

https://ieefa.org/resources/iron-ore-quality-potential-headwind-green-steelmaking-technology-and-mining-options-are

IMHO - Glencore would sell the entire Off-Take for the "correct" price (provided that Zanaga is funded). Suddenly they have 40% of a quoted valuable mine worth $ X Billion and $ Y Billion in cash for the Off-Take.

I suspect that a Chinese consortium is in the background here. Chinese estimates, Chinese builders, Chinese Hydro,... Chinese Pellet Plant, Chinese Port builders, Chinese Finance etc.

However, foreign investment it is also political for the Chinese (e.g. Chinese Road and Bridge), so if Saudis, UAE want in to the project they will be accommodated. After all they are new BRICS members and China was very keen to recruit them.

Why not - Stage One 24 M/T, Stage 2 +36 M/T = 60 M/T ??

Indeed Jiving. But in the new "Green" future high quality iron ore will trade at an increasingly high margin, as demand will increasingly exceed supply. The current model does not take account of a widening quality premium.

The new investor will get in at a discount to value no doubt about it.

The Valuation of $4 billion (for stages 1 and 2) assumes at 110 price for 65% Fe Concentrate. With 62% Ore at $145, 65% concentrate would be $15 to $20 higher in price say $160 to $165. At say $160 the Valuation is nearer $9 Billion.

5 May 2021

ZANAGA PROJECT DEVELOPMENT COST UPDATE AND ORE RESERVE RE-STATEMENT

https://www.lse.co.uk/rns/ZIOC/project-update-moki9qzpn8wpo92.html

Although the original numbers were done in 2014, they were re-estimated in 2021 (I think) and found to be still correct. The new estimates are "Chinese Pricing" rather than western firms so expected to be far cheaper.

Jiving - If I follow your maths correctly, you raise about 160 million new shares at about 5$ (£ 4) each raising $800 . £ £640 million. A couple of comments.

Firstly, there is no need to raise more than necessary, and then buy back shares, if shares are sold at £ 4 to the new partner, then the market price will rise sufficiently to keep any PI's happy.

Secondly, I suspect we will get savings of 20%, but the project will expand with cold pellet facilities (also increasing the valuation).

In any case the valuation of $ 4Billion is generously low, but then these projects tend to have low valuations until ore is exported.

In the model there are no dividends for many years as Stage one cash flows are used to pay for Stage 2 capex.

FWIW - The RNS for 3rd Tranche is necessary to announce the listing, so they could be already sold.

IMHO - Selling anything cheaply isn't something Glencore would ever do ! - Neither is it necessary as those in the business know that the potential value here will be massive. Climate change policy will mean that importers of Steel will impose large tariffs (and eventually outright bans on steel that is not "Green"). Using hydro electricity and cold pellet technology will ensure that Zanaga product can be sold at the highest prices.

A possibility is that the royalty is due on the value of the Iron Ore out of the ground (if sold before benefaction).

In the Edison valuations they had a Royalty of 3% on a Price of $90 estimated at $ 2.7 / Tonne . On $70 this would be $ 2.1 - so I don't know what deductions they allow to get to $1.3 (Stage 1) or $1.7 (Stage 2).

The Glencore "Marketing Agreement" is as I understand it an Off-Take not a Royalty.

China props up iron ore

https://www.proactiveinvestors.co.uk/companies/news/1037446/china-props-up-iron-ore-defies-global-economic-slowdown-1037446.html

Iron Ore Futures were up 5.5% today as well. January Iron Ore 62% Fe now 144.16 (+7.79).