Some interesting action today,
AXO threatened to break through 1.00 on a very strong morning session, before finally closing 3.8% up at 95c.
I would say the recent rise from approx 65c in AXO was partly due to the glowing AGO report released by ML. Probably the sentiment has filtered through the sector to a degree. No such in-depth coverage available for AXO however, they probably need a broker to raise their market awareness.
So what do these guys actually have?? The items in bold, I consider to be either key milestones to be achieved, or positive factors:
- Ordinary shares on issue: 149M
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Project construction costs $850M
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Production start-up Sept 2010
- Approx 45% Fe grade, magnetite ore body
- Very favourable project economics
- Targeting 650Mt resource/350Mt reserve Spet 08
- 6mtpa concentrate production, target 14mtpa 2014
- $72M cash on hand.
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15 year contract with Chinese customers
- Slurry pipe transport to Port Headland
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Strip ratio during operations Y1 through to Y5 of 1:1
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Long-lead items on order; SAG mill, crusher.
- Secured stockpile areas at Port Headland
Probably the main thorn in their side is the not-so-small amount of capital required to fund construction at Balla balla, in the order of $850M. They're hoping to debt fund potentially up to 65% of the costs, and then use an equity rasing to obtain the remaining cash. Probably they will withhold the equity raising until they obtain some traction in the price, too dilutory otherwise. New Holland Capital, the AXO debt advisors, have held introductory talks with several Australian and overseas's groups interested in financing the project.
This whole phosphate issue raising its head has me a little bemused tbh. Sure, lab tests may be able to show that economic amounts of phosphate can be extracted under highly-controlled lab conditions, but to apply this technology at a plant-scale is an entirely different scenario. The 5% initital phospahte grade from the waste needs to be concentrated to 30% for a realistically saleable product, requiring crushing, grinding and flotation, so basically a separate flow sheet altogether!
Perhaps they're just looking for a bit of attention. They seem to be saying "yeah well we have to mine waste to gain access to the magnetite ore body anyway, so we can kill two birds with one stone!" Hmmmm....I'm not
entirely convinced of this argument just yet, if they can demosnstrate this process at pilot-plant scale, then well....I might pay a bit more attention.
Anyways, looks like a pretty robust project, and one that has flown under most people's radar I'm sure. If they can keep their
focus, and not become distracted with the phosphate issue too much, this
could get very interesting very quickly. I am watching this extremely closely. Look out for any positive news re financing to drive this north.
jman
Disclaimer: DNH