RE: buy and hold....8 Mar 2018 22:22
Hi 1750mk1,
I guess this RNS is a bit like the Bible (or maybe the Koran), everybody can find something to support their case....
The RNS acknowledges that the key issue is whether the EPP can achieve ' economies of scale' without scale :
"The Zanaga Project Team believe the EPP has the potential (if the EPP operating costs can be kept low) to demonstrate attractive economics purely by producing a pellet feed concentrate for export into the seaborne iron ore market, similar to other existing large producers. "
They don't know if operating costs can be kept low :
"The proposed solution for the small scale EPP operation is different from that envisaged for the larger 30Mtpa operation in that the scale of the operation and focus on the ore from the upper layers requires different processing with different associated costs. "
So the small scale 'basic' EPP studies that began 'early 2017' haven't yet demonstrated financial or technical viability.
'Simultaneously' ie early 2017, ZIOP Project management began to explore ways to 'add value' by using base case product as feedstock for pelletisation. They acknowledge from the outset that this was unlikely to work because the 'conventional' process is uneconomic :
.."the Project Team have simultaneously been investigating whether Zanaga's high quality pellet feed concentrate product could be converted into pellets at a low operating cost.
Conventional pellets are typically manufactured in plants that require high capital cost which is not normally viable for smaller scale operations..."
Because economics are the key, they're exploring an untested alternative approach, cold pelletisation.
The RNS is selling the sizzle , not the sausage. I don't blame ZIOP for doing this, it's a selling document after all, as I think we all agree. And - going back to the Bible - it's trying to be 'all things to all men' , offering something to everybody, so each school of thought will have its own interpretation.
FWLIW , I'm a firm holder of ZIOC, one of the smaller ones of about 20 equity holdings.....and I usually only trade around the edges, maybe 8-10 trades a year. I occasionally spread-bet, but long only. Perhaps we should all declare our investment styles, to help sort the wheat from the chaff and the sheep from the goats ?
Oh and at the risk of being accused of further 'deramping', I thought the Gabon export option sounded like a great idea (lower country risk etc) until I looked further and looked at the 2 countries' export destinations :
Gabon : US 45.7%, China 14.6%, South Korea 6.6%, Ireland 5.5%, Italy 5.1% (2016)
Congo (B) : China 39.8%, Italy 10.2%, Australia 7%, Gabon 6.6%, Angola 6%, Singapore 4.2% (2016)
I can't see China Inc financing the infrastructure ZIOP needs in a second country, one where it (currently) lacks the economic clout that it clearly has in Congo (B). It only buys 3x what the Irish do, ffs !
Let's see what the next
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