Shree Minerals's Australia's newest iron ore producer, ships this month
Shree Minerals (ASX: SHH) is poised to load its first shipment of about 42,000 tonnes of iron ore from its Nelson Bay River Iron Project in Tasmania on 25 or 26 January 2014 from Burnie Port.
It has been an odyssey for Shree's Sanjay Loyalka with the trials and tribulations of all mineral project developers as well as dealing with appeals to its permitting.
However, that was then - now Shree is Australia's newest iron ore producer with profit margins of A$50 a tonne at current 60% Fe iron ore prices.
Now Shree will not be producing at tonnages a la Rio Tinto (ASX:RIO) or Fortescue Metals (ASX:FMG), but for a mining junior it is all about getting to positive cash flows and profitability.
As well as the relativities between market cap. and earnings and
ultimately price earnings ratios, that's where Shree has it in spades.
This
follows the installation of infrastructure and all necessary
contractual arrangements to produce DSO iron ore as well as
transportation of product for storage and loading at Burnie port.
There is currently 41,000 tonnes of product at the port and another 15,000 tonnes at mine site.
The first cargo is expected to consist of about 60% iron ore lumps and 40% iron ore fines.
The
company said it is proud to have achieved the development of NBR from
discovery to production at benchmark capital costs & time.
Nelson Bay River
Nelson
Bay River is located about 70 kilometres south-west of Smithton in
north-west Tasmania and 7 kilometres north-east of the coastal town of
Temma.
Shree started mining in November 2013 the DSO South Pit, which has total Resources of 650,000 tonnes at 56.7% iron.
Overall Resources are 870,000 tonnes at 57.7% iron
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.
After
that it is onto production of BFO material, and then the magnetite
resource in this way the mine lift at NBR is a very solid 9-10 years,
exploration could increase this time frame.
Low operating costs
NBR
has C1 Costs FOB of $59 a tonne, comprised of site costs of $27 a tonne
and off-site transport & port of $32 a tonne. Add in about $21 a
tonne for shipping and total cost is $80 a tonne.
This provides a very handy buffer and a healthy profit margin at current and forecast iron ore prices.
Analysis
Shree
is just weeks from shipping its first cargo of Nelson Bay River iron
ore, which will in turn start cash flow for the company. Production
from Nelson Bay is set to earn the company A$36,000,000 in two years
from mining of DSO.
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.
Shree
will then move to the third stage of the project, which involves
open-cut mining of the deep magnetite orebody beneath the oxide cap.
Its
current market capitalisation of $16.79 million leaves the company
significantly under valued relative to underlying profits.
This will change.
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