Iron ore price shines for Jambreiro
12th July 2019
Resources Rising Stars
Centaurus Metals isn’t the only company dusting off an old iron ore project in light of the surging price for the steel-making commodity (reports The West Australian).
But it probably has a better chance than most, in bringing its Jambreiro project in south-eastern Brazil into production.
Jambreiro’s scale is small, but its fundamentals look appealing.
Centaurus had come close to pushing the button on the project in 2014 when a tanking iron ore price put its plans on hold and had the company looking at base metals in Brazil instead.
The company yesterday released an updated pre-feasibility study for Jambreiro with revised financials adjusted for the resurgent iron ore price.
The study showed it would cost just $60 million to get the one million tonne per annum project off the ground.
Jambriero has a $115 million post-tax net present value and 32 per cent internal rate of return based on a conservative benchmark iron ore price of $US75/t.
At prevailing iron ore prices of about $US125/t, its NPV jumps to about $300 million.
Chief executive Darren Gordon said he believed the project economics would be better than what the report showed but the company had taken a conservative approach on pricing so Jambreiro would stand the test of time under various market cycles.
“When you look at these numbers relative to our market cap, it’s a big tick,” he said.
The project will deliver a beneficiated 65 per cent-plus, low-impurity sinter product into the domestic Brazilian market over an 18-year minelife.
Jambriero is expected to operate at C1 plus royalties costs of $29/t delivering annual average cashflows of $29.6 million and life-of-mine revenues of more than $1 billion.
While permitting for an iron ore mine in Brazil at the moment would be tricky given the sensitivities around the recent deadly Brumadinho tailings dam disaster, Centaurus has three big advantages.
Jambreiro has a granted mining licence with key environmental approvals in place.
Centaurus has also opted to dry-stack its waste, averting the need for a controversial upstream-type tailings dam.
The revised plan means the mine’s footprint will be smaller than before and be easier to expand without the capacity constraints of a tailings dam.
Mr Gordon said he didn’t believe the recent disaster would be an impediment for Centaurus, it might even create some opportunities.
“The government still wants to stimulate industry and create jobs but they want to do it in a safe and environmentally friendly manner,” he said. “Projects like Jambreiro will actually be seen as a good thing for the State.”
Centaurus will now turn its attention to locking in offtake agreements with local steel mills and trading groups, explore financing options and complete a bankable feasibility study ahead of an expected final investment decision early in the new year.
Shares in Centaurus closed unchanged at 0.9¢. The stock has 2.7 billion shares on issue for a market cap of about $25 million.
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