Gordon Stein, CFO of CleanTech Lithium, explains why CTL acquired the 23 Laguna Verde licenses. Watch the video here.
A timely and pithy piece from Seeking Alpha today. Analysts are fast coming round to the realisation that high grade iron ores are the crucial input to the DRI-EAF Green Steel process.
Sooner or later, and I now think sooner, we will be substituting out 'Simandou' for 'Zanaga' and then the brakes will be off the SP.
Some edited highlights:
THE SIMANDOU PROJECT: RIO TINTO'S BET ON GREEN STEEL
The Simandou Project
Simandou is located in Guinea, West Africa, and is home to the world's richest undeveloped deposits of high-grade iron ore. The iron content of 66-68% (compared to the conventional 62% benchmark grade) is considered an increasingly important advantage as it reduces carbon dioxide emissions during steel production.
Economics
Simandou's commercial reserves are estimated to be in the range of 2.4 to 4 billion tons of high-grade iron ore, the total planned capacity stands at 120Mtpa which is roughly 5% of the current global seaborne supply.
For Rio Tinto, Simandou's appeal is the high quality of the ore, a quality that cannot be found in Australia.
IT IS EXPECTED THAT THE SUPERIOR GRADES WILL ULTIMATELY FETCH A SUBSTANTIALLY HIGHER PRICE THAN THE STANDARD WHEN THE DECARBONIZATION OF STEELMAKING BECOMES REALITY.
Premium grades with higher iron content are already more expensive than the ones containing less iron. Blast furnaces need more coking coal to process lower-grade iron ore, a fact that became particularly important when prices for coal skyrocketed triggered by supply issues during the COVID-19 pandemic. Additionally, the usage of higher-grade ore reduces emissions, an increasingly important factor when considering stricter environmental regulations in China which regularly lead to production curbs to reduce pollution or the rising costs for carbon emission rights worldwide.
From the FMF in January. ZIOC surely opened all those doors...
Andrew Trahar, partner at Vision Blue Resources, a Guernsey-based private equity firm, lauded Saudi Arabia for a clear vision and strategy to seek investments after banks and equity capital providers reduced mining funding over the past decade.
“This is a very refreshing feeling,” said Trahar, who founded Vision Blue with former Xstrata CEO Sir Mick Davis. “We’ve had a huge number of meetings here, fantastic engagement, lots of support from the Ministry of Industry and Resources, so we’re going away with the next steps identified and we’re back in a month already.”
https://www.mining.com/at-saudi-arabia-forum-buzz-word-is-partnership/
What ZIOC reported in Nov 2022 on the Glencore deal:
Clifford Elphick, Non-Executive Chairman of ZIOC, commented:
"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."
Mattradio - You left off the important part:
'Iron ore Mineral Resources and Ore Reserves have not been re-estimated since 2015 (refer earlier Glencore reports). Glencore is no longer an active participant in the previously-disclosed Zanaga project. The remaining iron ore projects are not financially material to the Group and are, therefore, not reproduced in this report.'
> In other word, Zanaga *IS* financially important. Glencore might now be just shareholders, but they are shareholders with 2 BoD members and a LoM off take pencilled in.
Let's hear it for the Institute for Energy Economics and Financial Analysis. In a report published earlier this morning, the IEEFA have laid out up the upcoming demand for high grade iron ore to feed the DRI-EAF process - and thereby produce green steel. Some highlights:
KEY FINDINGS
Green hydrogen-based DRI has emerged globally as a key technology to reduce primary steelmaking emissions, which also constitute the great majority of iron ore miners’ Scope 3 emissions. However, DRI production requires a higher grade of iron ore with a greater iron (Fe) content than that used in coal-consuming blast furnaces. Direct reduction (DR)-grade ore has an Fe content of 67% or more. A global steel industry shift from blast furnaces towards DRI will drive a significant shift in the quality profile of traded iron ore.
(and)
Meanwhile, Asian steelmakers including Japan’s Kobe Steel and JFE Steel are targeting DRI production in the Middle East, which is already an established user of mature DRI technology.
The global steel technology shift away from blast furnaces is accelerating and **DEMAND FOR SUITABLE IRON ORE IS SET FOR SIGNIFICANT GROWTH.** DR-grade ore makes up only a small fraction of overall iron ore trade, and Australian iron ore miners have long focused on lower-iron content, blast furnace-grade ore in response to the huge growth in blast furnace-based steel production in China over the previous two decades.
The benchmark 62% Fe iron ore produced in the Pilbara is not suitable for existing DRI processes and the quality being produced in the last decade has been falling, making it even less suitable.
https://ieefa.org/resources/big-iron-ores-long-term-strategies-diverging-face-steel-decarbonisation
ZIOC, 28th Dec 2023:
A major Project update is underway to freshen historical studies in light of changes in the world's economy and growing demand for low-carbon steel production, for which the Zanaga resource is highly suited, with the potential to become one of the largest producers of high grade premium pellet feed iron ore.
https://www.lse.co.uk/rns/ZIOC/mou-signed-with-cmec-and-fs-process-update-g59wn18fndidx6z.html
Congrats to Veteran10 for eeking out a reply from the company as to future messaging from Marty Knauth. So...'the company are working on some things..' before messaging. What might they be?
Leaving aside the practicals (beneficiation, pipes, ports etc), all of which are technically doable, the crucial hurdle is convincing the financiers that the project is sound, and for that the company have revealed that 'market enquiry and financial modelling' is underway.
I'm sure that ZIOC now know the current NPV for Zanaga (assuredly markedly higher than the 2014 version) and this will have been conveyed to equity investors, those looking to secure a percentage of the off take.
In this context a look at Marty's LinkedIn 'likes' is most informative. He has 'liked' a post by Ahmed Althubaiti (AA) alongside Bandar AlKhorayef at last month's FMF in Riyadh. AA is the Director of Mining Investment at the Saudi Mining Ministry, having previously worked at Ma'aden. Hmmmm.
More recently Marty has 'liked' a comment on AMC Consultants (1). AMC 'exist to help miners find smarter ways to mine and unearth hidden business value', and 'AMC has been providing world class technical advice to the mining industry for more than 40 years. From feasibility studies to expert geotechnical audits (etc).' and 'AMC Advisory is a specialized team of AMC Consultants focused on providing exemplary whole-of-mine optimization advice. '
So far so very good.
Marty has also 'liked' posts by Erik van Doezum, Head of Global Metals, Mining and Global Steel Lead at ING Bank- (2). ING are leading the move to decarbonise the steel production chain, and they took part in the recent debt funding of H2 Green Steel in Sweden - (3). Marty then 'liked' a post by Matthias Woitok, Head of Structured Finance for N, C and SE Europe at the EIB - who also participated in the funding round for H2GS.
> So Marty has liked posts by employees of the Saudi Mining Ministry, AMC Consultants, ING Global Steel and the EIB. The last 2 on specific work for H2GS in which they raised €6.5bn for the new Swedish high grade and Hydrogen mega project. The Debt:Equity split was 66:33
>> I reckon these 'likes' are representative of those things the company are working on, giving further support of Saudi involvement on the equity/offtake side, and also some potential sources of debt funding.
We shall see, of course.
(1) https://www.amcconsultants.com/
(2) https://www.thebanker.com/Dutch-bank-ING-sets-the-pace-in-decarbonising-steel-1705566687
(3) https://www.h2greensteel.com/latestnews/h2-green-steel-raises-more-than-4-billion-in-debt-financing-for-the-worlds-first-large-scale-green-steel-plant
More money:
SAUDI ARABIA EYES REVIVING MULTIBILLION DOLLAR ARAMCO SHARE SALE
Saudi Arabia is considering plans to revive a follow-on offering in Aramco as soon as February, in a multibillion-dollar deal that’s likely to rank among the biggest share sales in recent years, according to people familiar with the matter.
The Kingdom is working with a group of advisers and is seeking to potentially raise at least 40 billion riyals ($10 billion) from the share sale on the Saudi stock exchange, the people said, asking not to be identified because the information is private.
A successful deal would bring in funds for Crown Prince Mohammed bin Salman’s ambitious push to diversify the economy.
https://english.alarabiya.net/business/energy/2024/01/31/Saudi-Arabia-eyes-reviving-multibillion-dollar-Aramco-share-sale
Zanaga strategics in a nutshell?
China and the state-backed funds from the Middle East with a mandate to diversify from oil and gas do not face. Oil powers Saudi Arabia and United Arab Emirates are among those most able to take risk.
Edited highlights:
WESTERN MINERS LAG AS OIL POWERS ENTER RACE FOR AFRICA’S CRITICAL METALS
Risk aversion is likely to leave major Western miners lagging in a race to tap Africa’s reserves of critical raw materials that has gathered pace now Middle Eastern oil powers have begun to emulate China’s years of investment on the continent.
Attracting the capital needed to advance copper, cobalt, nickel and lithium projects in Africa will be high on the agenda when executives, bankers and government officials gather in Cape Town, South Africa, for the annual African Mining Indaba beginning on Monday.
For the big listed miners, the problem is convincing board members anxious to keep shareholders onside, an issue China and the state-backed funds from the Middle East with a mandate to diversify from oil and gas do not face.
Oil powers Saudi Arabia and United Arab Emirates are among those most able to take risk.
Saudi Arabia’s mining company Ma’aden last year formed a joint venture with Ivanhoe Electric for mining projects in Saudi. It also created a fund set to source iron ore, lithium, copper and nickel abroad.
“It behoves us to take advantage of our natural competitive advantages to try and knit together a mineral strategy that stretches from Asia to the tip of Southern Africa,” Robert Wilt, chief executive officer of Ma’aden, told Reuters.
https://www.mining.com/web/western-miners-lag-as-oil-powers-enter-race-for-africas-critical-metals/
Hi alwayshoping.
As you say China's CMRG are specifically tasked with securing alternative iron ore supplies to wean themselves off over-reliance on Australia.
Of note is that Baowu Steel are involved at Simandou and also Baniaka, just over the border from Zanaga in Gabon.
It's a racing cert for me that one or the other, or even both!, will want a chunky piece of Zanaga.
In addition to the financial modelling there's also this, from Sept 23 my capitals::
o Phase 1 - Feasibility Study update (the "FS Update")
§ 2014 Feasibility Study cost estimates to be updated to current market pricing using Chinese contractor pricing for both phases of 12Mtpa Stage One ("Stage One"), plus 18Mtpa Stage Two expansion ("Stage Two") projects.
§ Chinese EPC Partner possesses specific, specialised, design and construction expertise in slurry pipeline projects as well as iron ore pellet feed concentrate projects similar to that proposed at the Zanaga Project.
§ Initial guidance provided by the Chinese EPC Partner is that potential capital and operating cost savings of more than 20% could be achieved.
§ The results of this exercise are expected to be received in Q4 2023.
O PHASE 2 - PROCESSING TECHNOLOGY APPLICATION STUDY
§ CHINESE EPC PARTNER POSSESSES A PROPRIETARY NEW PROCESSING TECHNOLOGY FOR IRON ORE PROCESSING, WITH THE POTENTIAL TO PROVIDE FURTHER CAPITAL AND OPERATING COST SAVINGS BEYOND THE RESULTS OF THE FS UPDATE.
§ THE APPLICATION OF THIS PROCESSING TECHNOLOGY TO THE IRON ORE FROM THE ZANAGA PROJECT IS PLANNED TO UNDERGO TECHNICAL ASSESSMENT AS INITIAL RESULTS FROM THE FS UPDATE ARE RECEIVED IN THE COMING MONTHS.
> We have been told that the initial results have been received and hence ZIOC and our Chinese EPC must now be applying and testing the processing technology on Zanaga ore.
>> Potentially this will produce lower processing costs and, whisper it quietly, improved beneficiation rates and grade improvements.
ZIOC have slated 2 milestones for this quarter, a Port moU and one for a 'selected strategic partner'. To add to those 2 we can add the re-costing of the Feasibility Study, from as far back as 2014, plus - and this is where it where it becomes most intriguing - is the 'market enquiry' and 'financial modelling' leading up to a 'comprehensive () update'.
> An updated and accurate financial model, as part of any 'comprehensive update', must include a current Net Present Value for Zanaga.
>> From point of view this means that the NPV will become the basis to value Zanaga, and hence the price being paid by our 'selected strategic investor'.
FINANCIAL MODELING IS CRITICAL TO THE EVALUATION OF A MINING PROJECT.
A high-quality financial model of a mining and processing plant is an important condition for attracting long-term project financing on favorable terms.
The purpose of the financial model of a mining and processing plant is to answer the question whether the proposed project can provide a sufficient return on capital and create additional value for business owners.
Attracting hundreds of millions of euros in the form of investments and long-term loans requires a comprehensive financial analysis and forecast from the project initiators, which is why the financial modeling of mining and processing plants is considered one of the most complex and demanding services in this area
Professional discounted cash flow (DCF) modeling is an important part of a feasibility study and allows stakeholders to test the economic viability of a capital-intensive project with long-term loans or investments.
...etc
https://esfccompany.com/en/services/mining-and-processing-plants/financial-model-of-a-mining-and-processing-plant/
Good afternoon, Guffers. Always a pleasure.
Perhaps of some relevance:
#PIF successfully completed the pricing of a $5 billion Reg S international bond offering, under its Euro Medium-Term Note Program. This is in line with its strategy to continually diversify its funding sources.
https://twitter.com/PIF_en/status/1750844761974477197
The offer was more than 5x oversubscribed at $27bn. It's the maturity schedule that interests me:
$ 1.75bn 5-year to 2029
$ 1.75bn 10-year to 2034
$ 1.5bn 30-year to 2054
That aligns nicely with Zanaga timelines.
...and the FT are FINALLY getting on message.
We've discussed this in here for some months now. The future of 'steel', what with carbon taxes (i.e. the CBAM in the EU) and all the rest of it, is for iron ore to be reduced (the oxygen stripped off) in regions where they have copious supplies of natural gas and then renewably-produced hydrogen. Then the hot briquetted iron (HBI) can be re-exported into the likes of the EU, evading the carbon taxes, and then EAF-processed into steel.
This points squarely at the Middle East, where their existing natural gas supplies are soon to be complimented with large-scale, industrially produced hydrogen from solar and wind farms.
This DRI - (HBI) - EAF route demands Zanaga-grade iron ore.
Zanaga has to be sitting squarely in the cross hairs of forward looking strategic investors in the ME and elsewhere.
EUROPE CAN STILL AVOID THE COMING ‘GREEN STEEL’ CRUNCH
Moving clean energy around is an oft-touted solution but steelmakers might also wish to rethink their inputs
This may make sense in some locations, but not everywhere. Building DRI facilities is not sufficient. Running these requires green hydrogen, made using renewable power. In much of Europe, that will be expensive.
Moving clean energy around is an oft-touted solution. But steelmakers might also wish to rethink their inputs. REDUCE IRON ORE WHERE GREEN POWER IS CHEAP, AND THEN SHIP THIS TO STEEL MILLS.
https://www.ft.com/content/ffaae533-b555-4a40-8b77-d0dda278b874
Wood Mac are starting to get into the nitty gritty of green steel making, and the demand for DRI-grade iron ore. At some point all the dots will be joined up and, I'm certain, Zanaga will start being mentioned in the same breath as Simandou.
30 January 2024: WHAT’S NEXT FOR GREEN STEEL TECHNOLOGIES?
Exploring alternatives to scrap, high-grade iron ores and current steel production routes
Potential hubs for DRI-based steel
'...We foresee seven potential hubs for DRI-based steel production by 2050. Each will have a distinct technological mix and development timeline. The Middle East, China, Australia and Europe are likely to lead DRI capacity additions. The US and Brazil will see some traction, but high scrap use may dampen DRI demand. We expect India to shift from coal to gas-based DRI only gradually, limiting its potential contribution to green steel production.
Making the green steel revolution happen
Decarbonising the global steel industry is complex and will require technological innovation, policy support – including robust carbon taxation and alluring green incentives – and significant investment. The rollout of green steel will be dependent on multiple factors, including iron ore quality, hydrogen and natural gas availability, renewable energy sources, the intricacies of carbon pricing, and the legacy of existing steel frameworks....'
https://www.woodmac.com/news/opinion/whats-next-for-green-steel-technologies/
...they really are!
Overnight we have had confirmation from Brasil of the swingeing fines levied out to BHP and Vale over the collapse of their Samarco tailings dam in 2015:
https://www.mining.com/brazils-justice-orders-vale-bhp-and-samarco-to-pay-9-7-billion-in-damages/
Now the ramifications of this and the other tragic dam bursts are seriously impacting Vale's operations and expansions in Brazil. Not only do their prospects extend deeper into the Amazon and are subject to increasingly restrictive permittings, but also new tailings dams are being banned. This is thought to be driving Vale's hunt for overseas opportunities for iron ore expansion (think Zanaga, and after their Simandou escapes).
Meanwhile ZIOC's likely iron ore beneficiator and pipeline specialist, PSEI, are claimed specialists in just this area. Their YouTube video, courtesy of 99icecream, details their proprietary Dry Fines Magnetic Separation techniques. These produce no liquid waste and hence completely bypass the wet tailings dam issues, and all the regulatory and ESG complications.
Check out IRON ORE DRY PROCESSING, @ 1:11 to @1:38, slides 11 to 15:
https://www.youtube.com/watch?app=desktop&v=NulWSEReWeY
Better again is that PSEI claim 40-50% OpEX savings on these processes (on top of those ESG and regulatory benefits)- slide 15.
For me the whole Zanaga project just becomes more and more compelling.
Quite so, alwayshoping. Without delving back I think I recall the phrase, 'game changing...in due course' being used by Bandar al-Khorayef's deputy.
If we are right in surmising that Bob Wilt was referencing Zanaga wrt to off take trading, and given the projections of Saudi and Gulf green steel production, then it would imply that they (MM) are after a larger slice of a larger pie. We shall see, of course, however only larger slice of a larger pie would likely cause issues for Glencore if they were seeking to maintain a controlling influence on Zanaga pricing. Once into the magnetite (Stage 2) and with the global push on green steel, then 30-60mtpa of 68.5%Fe would command a super premium. Glencore wouldn't want Manara Minerals side deals upsetting that very lucrative applecart.
All conjecture for now. However if so, and it doesn't seem overly speculative, then it would indicate that we are into the nitty gritty of a blockbuster deal.
Fingers crossed.
Of course Glencore could see themselves over-written on the LoM marketing agreement...
(m) If there is a direct or indirect change in ownership of MPD amounting to 50% + 1 share or more of the issued share capital of the relevant target entity, and, following such change in ownership, MPD notifies Glencore International in accordance with the terms of the Marketing Agreement that it wishes to cancel the Marketing Agreement and enter into a new life-of-mine marketing agreement (a "New Marketing Agreement") in respect of 100% of the production of the Mine with the relevant investor or its Affiliate (a "New Buyer"), then Glencore International may notify MPD, subject to the terms and requirements of the Marketing Agreement, that either:
(i) it shall match the terms of the New Marketing Agreement, in which event the parties shall discuss and agree in good faith such minimum amendments required to the Marketing Agreement to align with the key commercial terms agreed between MPD and the New Buyer under the New Marketing Agreement; or
(ii) it agrees to the termination of the Marketing Agreement, in which event the Marketing Agreement shall be terminated upon execution by MPD of the New Marketing Agreement and thereafter Glencore International shall be entitled, for the term of the New Marketing Agreement and / or any replacement or supplement to such agreement, to receive a fee in each calendar month by way of consideration for the initial marketing role played by Glencore International under the Marketing Agreement ("Royalty"), and
the Marketing Agreement shall be terminated only upon execution of the Royalty by Glencore International and MPD in a form acceptable to Glencore International acting reasonably.