Member Info for 99icecream

No it does not work like that.

1/ When the metal price is very low some mines (with the highest costs) are mothballed, so there will be spare capacity that will keep prices low for a long period.

2/ Part of development costs are usually funded by selling product forward. When prices are low there will be no interest in lending secured on the mine or the product.

3/ Major miners will sit on projects until the market improves, they will only want too sell the most unattractive ones.

4/ If you invest in a mine when prices are low, you will find that shareholders etc. will not be very patient for a return.

Deloitte have produced a review of the Steel and Iron Ore markets in 2020, which is available to read here (or to download):

https://www2.deloitte.com/ru/en/pages/research-center/articles/overview-of-steel-and-iron-market-2020.html

If there is a China deal there is a good chance that the first we will know is when Zanaga shares are suspended (following an approach that may lead to an offer for the company).

But there may also be rumours and ramps in the interim.

More on Iron Ore Prices next year

https://www.afr.com/markets/commodities/iron-ore-seen-supported-near-us180-a-tonne-into-january-20201224-p56pxa

China's trade war with Australia is failing because their demand for iron ore - our biggest export - will keep its value high for years

https://www.dailymail.co.uk/news/article-9080509/Chinas-trade-war-Australia-backfiring-iron-ore-prices-stay-high-TWO-years.html

Predictions for Simandou capacity vary between 100 MTPA and 150 MTPA (see extracts from FT below). Zanaga has the capacity to produce similar numbers.

China consortium wins rights to develop Guinea iron ore deposit

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https://www.ft.com/content/6729b63c-12d3-11ea-a225-db2f231cfeae

Mr Wazni said the first phase of the project would cost $8bn — $5bn for the rail and $1.5bn each for port and mine development — and produce 60m tonnes of iron ore a year from blocks 1 and 2 of Simandou in 2026.

The second phase would see $5bn invested to double the capacity of the railway to 200m tonnes and $2bn to open new ore bodies and expand a deepwater port at Matakong. At this stage Simandou would be producing 110m tonnes of iron ore annually.

https://www.ft.com/content/6729b63c-12d3-11ea-a225-db2f231cfeae

Iron ore’s January contract on the Singapore Exchange slumped 2.9% to $169.89 a tonne, after touching a record high of $176.20 a tonne in the previous session.

https://uk.reuters.com/article/asia-ironore/iron-ore-retreats-as-dalian-bourse-sets-further-trade-limit-idINL4N2J20Q5

Zanaga posting on twitter again.

Iron ore leaps 7.3pc to more than $US176 a tonne

https://www.afr.com/markets/commodities/iron-leaps-7-3pc-to-more-than-us176-a-tonne-20201222-p56pf1

"Glencore is the big unknown"

I see it like this. Glencore have the choice to develop or to sell. If they look at developing then they would calculate the NPV assuming that over a 30 year period (after say 5 years of building) output goes from zero to 30 million TPA according to their plan. However, China will value the project assuming that over a 30 year period (after 5 years of building) the project goes from zero to say 125 MTA - in rough terms the value is 4 times what Glencore would put on it and before you add in the extra benefits of the impact on the price of other Iron Ore imports.

Now factor in the fact that Glencore is a trader in most key metal ores (both sport and forward) and will have very sophisticated forecasting models of the supply and demand and price of Iron Ore. They will be in a good / best place to negotiate a very good price for Zanaga.

All IMHO

Sundace

All of the Iron Ore in JORC Indicated or Inferred category none in the Measured category - so I guees they need to do a proper survey prior to funding ??

Also they need a 510 KM railway in Cameroon, plus a 70Km of rail into Congo, plus new port facilities. (c.f. Zanagas 300Km slurry pipe).

The suggestion that China has the 40 Mtpa from Sundance seems a bit of a stretch. If Sundance survives its current financial problems it will seek compensation (of US$ 8.76 billion) from Congo which will liklely leave the mine in limbo for several years. Chances are that Sundance will be taken over by its bondholders who will then take on the claim.

https://www.argusmedia.com/ja/news/2170793-congo-strips-australias-sundance-of-iron-ore-project?backToResults=true

Would China want the Sundance mine in addition to Simandou and Zanaga? A normal miner might not want Sundance in addition as more supply will push down the iron ore price - but for China this would be an added benefit. It has been suggested that a mine the size of Simandou or Zanaga might cut the Iron Ore price by as much as US$ 10 per Tonne. If they buy 1.2 billion Tonnes a year that adds US$ 12 Billion a year to the value of a large mine to China over and above its NPV.

The offer for Sundance was in 2011 and was $ 1.5 Billion for the 81.4% of shares that Hanlong did not already own - a 25% premium to the Sundance stock price at the time.

https://www.reuters.com/article/us-sundance-idUSTRE76G37920110718

In the agreement governing the rights of the shareholders of Jumelles:

Xstrata (now Glencore) has the right of first refusal if Zanaga wishes to sell (i.e. it can match any offer that Zanaga might want to accept.

Zanaga has the tag along rights (i.e. the third party must pay Zanaga the same price as Glencore gets for its shares.

This is why Zanaga will let Glencore do all the running of any sale process rather than try to sell its own share seperately.

So what would a non-controlling interest, 50%-1 share of ZIOP be worth ?

The same as the controlling interest, 50%+1 share of ZIOP be worth as per the agreement between Zanaga and Xstrata. Zanaga has whats called tag alog rights set out in the Admission Document.


Tag Along
The Company enjoys tag along rights if Xstrata transfers or sell 50 per cent. or more of its beneficial
holding to a third party. The tag-along rights are proportionate to the percentage of ordinary shares
that Xstrata is proposing to sell or transfer. The tag-along rights do not extend to any other
shareholders of Jumelles BVI, except for the Company. Where the tag-along rights are triggered, the
right of first refusal will not apply.

Iron ore price leaps to highest since 2011

https://www.mining.com/iron-ore-price-leaps-to-highest-since-2011/

Iron ore price: have the bears got it wrong?

https://www.hellenicshippingnews.com/iron-ore-price-have-the-bears-got-it-wrong/

Copper tops $8000 as Goldman points to commodities super-cycle.

https://finance.yahoo.com/news/copper-tops-8-000-goldman-102805634.html

Sundance Resources (ASX:SDL) set to delist amid African disputes

A good expanation of the situation at Sundance. With the assets (in Congo and Cameroon) in dispute the proposed debt for equity swap will be in doubt.

https://themarketherald.com.au/sundance-resources-asxsdl-set-to-delist-amid-african-disputes-2020-12-16/

Sundance is in financial difficulties and I suspect that Congo is trying to protect its interests in the event that Sundance fails (i.e. it wants to make sure that any owner has (or can get) the financial resources necessary to develop the mine.)