The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
This is simply for our share of the 2 phased development.
If you multiply the profit potential $127.5/ton over the reserves you get the below.
770 MT (proven) $98.2 billion
2.1 BT (probable) $267.8 billion
6.9 BT (resource) $879.8 billion
Based on 65% FE pellets. ZIOC can produce 67%
$161.50 / tonne for 65% pellets
Stage 1 opex $24/ton
Cold palletisation $10/ton
= $127.5/ton profit
12Mtpa = $1,530,000,000
9 years = $13,770,000,000
Stage 2 Opex costs reduced to $22/ton + $10/ton cold pellets
= $129.5/ton profit potential
30Mtpa = $3,885,000,000
21 years = $81,585,000,000
Total profit over 30 year life = $95,355,000,000 ($95 billion)
Less $4.2billion capex
= $91,155,000,000
ZIOC share = $41,019,750,000
0.78 exchange rate = £31,995,405,000 (£31.9 billion)
283,201,033 shares = £112.98 per share
Depends how quickly they can turn it around. I'd expect to see news appearing in Chinese media almost instantly.
Due on power and EPP export routes by H2 so only 5 weeks to go.
They should be able to give us indications of cost, further confirming profitability of the project.
Good to hear them reiterating the signifcant amount of work that CRBC has conducted on this project, and mentions the feasibilty study, along with the LOI signed by all 5 mining companies back in June.
For those following progress on this front, they will already be aware of a recent meeting between RoC and China where they provisionally agreed to commence port development, with "formal" agreement due at FOCAC.
Also remember that a certain Chinese company (Evergreen) already commenced clearing their allocated plot at the new port ready for development.
CRBC has conducted a significant amount of work on this major project, including a feasibility study on the port development.
Extrader, $150m was spent on the Feasibility Study.
But they also spent $106m on the Pre Feasibility Study.
At $131/ton profit for our high grade, cold pellets we have 50% of a near-enough trillion dollar deposit.
770 MT (proven) $100.9 BILLION
2.1 BT (probable) $275.1 BILLION
6.9 BT (resource) $903.9 BILLION
I'm very much looking forward to joining the 1% club.
Sorry - yes that's long term once all considerations are paid for the assets. It scales each year, so will be a gradual rise as SQZ take a bigger slice of the profit each year.
Something similar to this:
57p therm selling price x 55 per boe = £31.35/bbl
Production costs $14/bbl (£10.5) = £20.85/bbl profit (I believe production costs will now be higher than this)
Combined assets will produce 9,115,500 bbls per year
= £190,058,175 profit per year
Divided across shares in issue = £0.72
P/E 10 = £7.20 per share.
So factor is increased production costs, you probably get something similar to what you've posted.
Based on cold pellets on the 770 MT reserve, we get £120.00 per share profit over the lift of the mine.
That's based on our 45% share of revenues but excluding capex.
So the trust notified ZIOC but ZIOC didn't notify the markets, or someone within ZIOC is the beneficiary of those trusts.
Remember that Garbet held 41% of the company which was distributed to various shareholders and trusts. 29.1% of the shares were held individually but below the 3% threshold.
Free float here is tiny!
They agreed a $20bn investment into the project, so demonstrates that ZIOC's much cheaper capex costs should achieve a much more significant offer price for the asset.
I also note that Chinalco Iron Ore then resold the asset to their parent for $2.07 bn.
As always there are lots of factors at play so nothing will ever be as straight forward.
Big demand from China for higher grade iron to reduce pollution, yet still seeing year on year growth in steel production.
Recent increases in call-off agreements with majors for iron ore to satisfy this demand.
China has shown interest in buying directly into the resource so that they can control the entire supply chain, rather then being held over a barrel by the likes of Rio, Vale and BHP.
Zanaga is one of the only iron ore deposits not held by the existing major producers, so is prime target for the Chinese.
Chine pushing for higher grades and lower impurities through pricing penalties similar to Japan.
Benchmark Iron Ore Product contains 62% iron, 2% alumina and 4.5% silica, among other gangue elements.
Zioc offering 67% iron, 0.8% aluminia and 3% silica – higher grade, fewer impurities gaining further price premiums to the benchmark.
Remember that 85% of the port financing was already agreed, with15% being funded by CRBC (the construction partners) and 70% by Exim bank of China.
It was only the remaining 15% to be provided by the Republic of Congo.
Once the IMF restructure their debt, the RoC should then be in a position to agree to fund their share.
With pellets proving commercial and discussions ongoing with other interested parties and steel mills, ZIOC should be close to announcing offtake agreements. Once announced this will guarantee revenue and further strengthen the investment case in the project i.e. straight takeover or partnership with ZIOC retaining free carry.
The cheapest way to take this over is upfront, if they do go down the free carry, it will be very expensive to buy the remaining stake once producing.
The board were buying back shares at up to 40p each, so their view is that this is worth multiples of that. How many multiples is up for debate.
I did a calculation based on the Rio/Chinalco sale of Simandou
They agreed $1.3billion for 46%
= $28,260,000 per %
21% premium for ZIOC higher grade = $34,195,000 per %
2.6 times (6.9 BT vs 2.6 BT) larger resource = $88,908,000 per % ownership
50% ZIOC share = $4,445,400,000
0.75 exchange rate = £3,334,050,000
= £11.95 per share
Blaming the weather? Apparently it's been too hot to buy those poor summer borns birthday cards this year.
Rio Tinto send 76% of their iron ore to China and of the 30 largest steel mills in Asia, they supply 26.
This is where the major growth is for high grade iron ore.
Has anyone else noticed that Leganes Limited (original shareholder in Garbet) who originally acquired 12,513,469 (4.49%) as part of the transfer in April 2017 now holds 16,971,041 (5.99%) according to ZIOC website.
Only problem is I cant see the notification of their increase (1.5%), yet the company has obviously been informed?