Shree Minerals clinches offtake and funding for Nelson Bay River iron ore
Shree Minerals (ASX: SHH) has entered into an offtake agreement for its Nelson Bay River Iron Ore DSO Project in Tasmania with Singapore based trader Frost Global.
Besides
securing offtake for iron ore produced at Nelson Bay River Iron Ore DSO
Project, the agreement with Singapore’s Frost Global also provides Shree
Minerals with a US$4 million advance to progress development of the project,
which has low forecast OPEX of $58 per tonne for DSO product FOB Port Burnie.
Importantly, Frost will provide US$4 million in funding to progress development
of the project by way of an advance towards the supply of iron ore.
This will be paid back over the first eight shipments of iron ore, or
US$500,000 per shipment.
Gven that Nelson Bay River has low capital expenditure requirements and operating expenditure of about $58 per tonne for DSO product, which is not bettered by many iron ore producers, the funding advance will help progress the project towards production while allowing Shree to maintain a sizeable margin during payback.
The production schedule for the first stage of the project is to develop
two relatively shallow open-cut mines to produce direct shipping grade hematite
ore, which will require just crushing and sizing.
The second stage involves the continuation of mining of the second
open-cut situated above the main magnetite orebody.
The hematite oxide cap consists of the central DSO ore section mined in stage
one which is surrounded by lower grade ore considered to have potential to
produce a commercial beneficiated oxide product.
Analysis
The offtake and funding agreement with Frost Global provides both certainty of
buyer for the DSO iron ore to be produced at the Nelson Bay River project, it
also deftly provides funding through a US$4 million advance against production
to progress development.
Shree is steadily but surely ensuring each box is ticked on the road to iron production. That the current market cap. of $17 million does not factor in revenues and profits from near term DSO production is to understate the facts.
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