Australian (ASX) Stock Market Forum

ICU - Investor Centre

Jump to new
YOUNG_TRADER

YOUNG_TRADER

Joined
18 February 2006
Posts
4,200
Reactions
2
I have found anohter Iron Ore gem and unfortunately its started running alot sooner than I had hoped, so before it runs to far I'm starting an FWL thread.

This company is looking at producing Pig Iron which should generate $75m a yr in EBIT for 30yrs vs a current mkt cap of $21m

It has a largish low scal magnetite deposit,

We can expect a JORC in 1-2weeks

With a PFS By start of JULY,

I am seeking to get a discussion going to assess whether my assements of the company are reasonable

At 25c Current Mkt Cap = $21m
An EBIT of $75m a yr for 30yrs = NPV $1Billion+ (EBIT of $2.25Billion)
So I'd say once PFS is out I'd expect a mkt cap of $50m minimum = 60c


Advantages
- Management = Ex MIS MD in charge of their Magnetite Project, Excel Coal
- TOP 20 = Hold 80% so very tight
- Capital raisings will be done sparingly = When they issued rights options instead of being free or 1c they were at a 4c cost so company could raise $1m from the rights, sounds very very prudent to me
- Infrastructure amazing, on the main highway to Port Geralton = truck ore no rail! 14kms away from main town of Yalgoo, can use all exisiting port facilities, gas and water run through or near deposit
- Mkt cap tiny vs NPV
- Backed by Martin Place
- Pig Iron in high demand, much higher than magnetite ore as its a value added product
- Japanese Steel firm Kobe already taking Iron Ore samples, they could easily underwrite the development of Yogi project


Disadvantages
- Cap Ex = $350m+


It all looks good but I want to hear some others thoughts and feedback,

I found most of my info on the companies web
Project- http://www.ferrowest.com.au/yalgoo.html
Top 20 (old) - http://www.ferrowest.com.au/shareholders.html
Management - http://www.ferrowest.com.au/directors.html

And also recent announcements



p.s. DYOR!
 
Re: FWL - Ferrowest Ltd

YOUNG_TRADER said:
I have found anohter Iron Ore gem and unfortunately its started running alot sooner than I had hoped, so before it runs to far I'm starting an FWL thread.

This company is looking at producing Pig Iron which should generate $75m a yr in EBIT for 30yrs vs a current mkt cap of $21m

It has a largish low scal magnetite deposit,

We can expect a JORC in 1-2weeks

With a PFS By start of JULY,

I am seeking to get a discussion going to assess whether my assements of the company are reasonable

At 25c Current Mkt Cap = $21m
An EBIT of $75m a yr for 30yrs = NPV $1Billion+ (EBIT of $2.25Billion)
So I'd say once PFS is out I'd expect a mkt cap of $50m minimum = 60c


Advantages
- Management = Ex MIS MD in charge of their Magnetite Project, Excel Coal
- TOP 20 = Hold 80% so very tight
- Capital raisings will be done sparingly = When they issued rights options instead of being free or 1c they were at a 4c cost so company could raise $1m from the rights, sounds very very prudent to me
- Infrastructure amazing, on the main highway to Port Geralton = truck ore no rail! 14kms away from main town of Yalgoo, can use all exisiting port facilities, gas and water run through or near deposit
- Mkt cap tiny vs NPV
- Backed by Martin Place
- Pig Iron in high demand, much higher than magnetite ore as its a value added product
- Japanese Steel firm Kobe already taking Iron Ore samples, they could easily underwrite the development of Yogi project


Disadvantages
- Cap Ex = $350m+


It all looks good but I want to hear some others thoughts and feedback,


p.s. DYOR!
Click to expand...
Hi YT,

I recently looked at this overlooked stock which is at the top of my watch list. Its arguably the cheapest iron ore spec listed on the ASX. It has experienced management and is tightly held. If all goes well, this stock has strong potential to be a multi-bagger. The iron ore sector is certainly hot at present. Thanks for the info.
DYOR
 
Re: FWL - Ferrowest Ltd

I have a number of questions, some of which you might not be able to answer straight away but I'll pose them anyway:


Where did the EBIT of $75mm come from? (What is the implict metal price, and how realistic are the companies cost assumptions vis-a-vis current producers)
Why is this a constant EBIT and not ranging with inflation?
How is the capex getting financed?
How realistic is this mine cost vis-a-vis current mine developments?
 
Re: FWL - Ferrowest Ltd

I have exams so I don't have alot of time to answer questions,

Go see the companies web page and you'll see the scoping study which has the imput costs etc etc

I found most of my info on the companies web
Project- http://www.ferrowest.com.au/yalgoo.html

Also read the ann's

and finally speak to the company management, they are really top notch if your unsure,

But put it this way I see FWL as having potential to have a mkt cap of at least $50m = 60c if the PFS confirms what I estimate it will,

They aim to produce 500kt's Pig Iron for 20yrs generating an EBIT of $165/t (500 x $165 = $82.5m I rounded down to $75m)

Note management believe deposit could be 2-3x the intial expected 75Mt@25%Fe,

Also note the 25% Fe is not an issue for Pig Iron (very different to YML type play which is looking to DSO the Heamatite Ore because that requires grades of 60% Fe+) also the Ore is apparantly ideal for benefication etc

Re financing, look at how many Chinese and Japanese steel firms are fudning projects AXO, MIS, MGX, TFE, AGO, CFE, ARH, GRR, IDO, then also realise the fact that Japans huge Kobe steel has already asked for sample ore from FWL, if the PFS stacks up it'll only be a matter of time

I think the JORC will cause a semi re-rating and the PFS should cause the full re-rating,

For a copmarable Magentite plays see
- IDO Mkt Cap $100m 70% of a large 600Mt@10%Fe Iron Sands project CAP Ex $750m NPV $500m Pig Iron project, Iron Sands so techinacally more challenging, also in PNG

- GRR Mkt Cap $200m, 458Mt@37%Fe, excellent grade but **** Infrastrucutre, deposit is in the middle of nowhere, Cap Ex will be $1Billion and will need Power Station, Slurry pipe to transport Ore, New Port constructed etc etc

- AXO Mkt Cap $100m, FerroVandium operation 100Mt@45%Fe + 0.63% Vanadium, Cap Ex $500m NPV $300m


Clearly FWL's biggest adnvantage is its location location location, combined with its mkt cap, you have an undiscovered Iron Ore/Pig Iron play

At 20c its mkt cap was $10m
At 25c its $14m or $21m if the opies are exercised still cheap I would have thought.

Compare this to others and then let me know your thoughts,

I'll do follow up posts on Wednesday thursday,

Also make sure you thoroughly read their web page to get all the info you need!
 
Re: FWL - Ferrowest Ltd

magnetite and good location
I couldn't find where they said they expect having 2-3 times more than their (expected)75mt ore body- was that your own research?

A 75mt deposit divide by 2.4 mt a year gives a 30 year mine life

Curious as to why in the samples they included silica and phosphorous but not sulphur....any ideas why that would be? wouldn't this be a major cost inclusion for benefication?? surely a pfs should include that or does that wait down the line to bfs?
 
Re: FWL - Ferrowest Ltd

Does anyone have access to the top 20 shareholders?

It would be interesting to see who is holding them, because there is currently very little amount of shares/options on offer:

FYLO Sell side:
0.120 50,000 1
0.130 35,000 1
0.140 75,000 1
0.150 220,000 3
0.180 15,100 1

$56,000 would see FYLO with no sell orders leftover.

FYL has a few more:
0.290 11,700 1
0.340 37,885 1
0.350 20,000 2
0.400 40,000 1
0.460 50,000 1

but even this only equates to $62,000.
 
Re: FWL - Ferrowest Ltd

"Does anyone have access to the top 20 shareholders?

It would be interesting to see who is holding them, because there is currently very little amount of shares/options on offer:

FYLO Sell side:
0.120 50,000 1
0.130 35,000 1
0.140 75,000 1
0.150 220,000 3
0.180 15,100 1

$56,000 would see FYLO with no sell orders leftover.

FYL has a few more:
0.290 11,700 1
0.340 37,885 1
0.350 20,000 2
0.400 40,000 1
0.460 50,000 1

but even this only equates to $62,000"


Go to this link. Wasn't really that hard to find. :rolleyes:

http://www.ferrowest.com.au/shareholders.html
 
Re: FWL - Ferrowest Limited

as this is a magnetite project, i understand that they have to be developed to a significant scale to warrant investment? or is the pig iron production different?
you seem to imply,YT, that this will not be a problem.
2.4Mt pa is this on the low side? i mean should production not be higher to match the investment required?
 
Re: FWL - Ferrowest Ltd

Hello friends :),

The most important factor as to whether FWL will realise their goals is in the technology they end up using.

FWL have just sent samples to Japan to see if they are suitable for FASTMET ®, Corex, Circofer and a new emerging technology, ITmk3 ®.

Is there anyone out there who knows about these processes first hand?(especially ITmk3)?

I found these links, but as I'm not in the industry, its over my head.:(

I found this and this relating to Kobe steel's ITmk3 technolgoy, which you may find useful.
 
Re: FWL - Ferrowest Ltd

Pommiegranite said:
Hello friends :),

The most important factor as to whether FWL will realise their goals is in the technology they end up using.

FWL have just sent samples to Japan to see if they are suitable for FASTMET ®, Corex, Circofer and a new emerging technology, ITmk3 ®.

Is there anyone out there who knows about these processes first hand?(especially ITmk3)?

I found these links, but as I'm not in the industry, its over my head.:(

I found this and this relating to Kobe steel's ITmk3 technolgoy, which you may find useful.
Click to expand...

Hey not sure if you have seen the info on their site

http://www.ferrowest.com.au/yalgoo.html#magnetite

hope it helps.
 
Re: FWL - Ferrowest Limited

Thanks Fool...I read through the info on their website....very informative....and not surprinsingly bullish as it is their own website.;)

However, I was also looking for another perspective on this technology as its maketed as new wave/cutting edge.

Might have to google to see if there are any AMFs (Aussie Mining Forums):D
 
Re: FWL - Ferrowest Limited

Good work yet again YT.
Been busy with work so haven't had much time to do much research yet but it all looks pretty promising so far.
The location of the project is a real plus, close to infrastructure - towns, ports, roads, gas.
Management seem to be on the ball, look to have good solid plans and contingency plans in place and seem to be very thorough.
Pig Iron in high demand, easy to store and transport.

Info from scoping study below, some good points/info:
Key findings of the Scoping Study into the Yalgoo Iron Project are:

• That currently there are no fatal flaws in the planned Project. It further notes that there are no unusual project issues identified at this time that would delay or prevent the normal process of securing government approvals.
• Despite increases in both capital and operating cost estimates (detailed below), the overall project economics remain robust due to an increase in the expected long term average merchant pig iron prices.
• Four possible technology options for the production of merchant pig iron have been identified as suitable for further evaluation during the Pre-feasibility Study phase.
• Total capital costs for the Project have been increased from A$330M to A$388.5M (which includes a 15% contingency) as a result of capital cost increases brought on by the resources boom in Western Australia.
• The delivered price of natural gas to the Project is expected to be nearly twice that originally anticipated as a result of the boom in the liquefied natural gas market.
• The additional capital and operating cost has been offset by the higher anticipated average sales revenue for merchant pig iron. The long term average price assumption used in the Scoping Study remains conservative at approximately A$70.00/t below current merchant pig iron prices in Asia.
• The project has potential for a strong operating surplus (EBITDA) of approximately A$155.40 per tonne of merchant pig iron.
• The market for scrap iron alternates, such as merchant pig iron, and the resultant demand is continuing to grow and the shortfall in quality feed stock for the electric arc furnace market worldwide is expected to continue to influence merchant pig iron prices over the next 5 to 10 years.

Looks to be very tightly held atm, any sort of volume will push the price up rapidly as the chart shows. Steady increase of volume over the last 2 weeks or so with today very high for this stock.
 

Attachments

  • FWL.PNG
    FWL.PNG
    51.1 KB · Views: 1,700
Re: FWL - Ferrowest Limited

As per my post above.

Cap Ex $390m-$400m(with allowances)

(EBITDA) of approximately A$155.40 per tonne of merchant pig iron, x 500,000tpa target as per website = $150 x 500,000 = $75mil per year as per YTs post.

Not sure about where the money will come from for cap ex at this stage but the first hurdle would be the 15.5mil for the BFS as per below:
"Ferrowest intends, subject to finance, to invest approximately $15.5 million in the preparation of a Bankable Feasibility Study for the Yalgoo Iron Project."
 
Re: FWL - Ferrowest Ltd

Pommiegranite said:
Hello friends :),

The most important factor as to whether FWL will realise their goals is in the technology they end up using.

FWL have just sent samples to Japan to see if they are suitable for FASTMET ®, Corex, Circofer and a new emerging technology, ITmk3 ®.

Is there anyone out there who knows about these processes first hand?(especially ITmk3)?

I found these links, but as I'm not in the industry, its over my head.:(

I found this and this relating to Kobe steel's ITmk3 technolgoy, which you may find useful.
Click to expand...

Pommie not sure what technology they use will be the most important thing about whether they achieve thier goals. They currently have a number of options open to them and management appear to have taken steps to make sure they have a back up plan if the new process is not ready or unable to be used by FWL.
While the new ITmk3 ® Process does look to have a number of advantages I don't think that management is betting all of its chips on it, as they have stated that it may not be available to the Company in the project's development time frame.
 
Re: FWL - Ferrowest Limited

Hmm another large sell order!

I had a friend email me about it,

Very interesting, yesterday when stock was about to break a 500k sell order came on at 26c but it got cleared, today it looked like it would break up strong and another order appears 450k at 31c

Want my opinion?

As Martin Place securities hold about 5m shares (through various top 20 accounts) and 8m options (underwriterrs), I think they are trying to cap the stock to allow clients to get on board,

Look at it like this, they try and cap the stock at 31c, if someone takes out there order, no biggie they can convert 450k worth of opies at 25c +4c cost = 29c so they're actually up 2c

So I think there is manipulation going on, you don't sell like that i your serious, be interested to see if there are any opie conversions soon

Thoughts?
 
Re: FWL - Ferrowest Limited

OK. Mentitoned yesterday on ASF by YT; today it runs.

Up to 35c on vol of 800,000, which will place it as the biggest trading in the life of FWL... ...

No selling depth... ... small sells appearing; day traders cashing out in the first hour?

First time I have seen a stock run like this... ... quite beautiful really. shame i am not in.

Enjoy the ride.
 
Re: FWL - Ferrowest Limited

yeh your on the money again YT.

even in amongst exams you still pull out winners like this for everyone.

well done!
 
Re: FWL - Ferrowest Limited

At 35c the mkt cap = $30m (includes $7.5m in cash from options)

So its by no means expensive,

With the JORC due out in the next 2 weeks and then the PFS by first week of July interesting times lie ahead,

My guess is PFS will show a net profit of $40m - $50m a yr for 20-30yrs to begin within and the only way from there will be up IMO,

To begin with the JORC should be 75Mt@25%Fe = 30yrs mine life
But it could be 2-3 times as big = 60yrs - 90yrs mine life or ramp up production!

YOUNG_TRADER said:
I have found anohter Iron Ore gem and unfortunately its started running alot sooner than I had hoped, so before it runs to far I'm starting an FWL thread.

This company is looking at producing Pig Iron which should generate $75m a yr in EBIT for 30yrs vs a current mkt cap of $21m

It has a largish low scal magnetite deposit,

We can expect a JORC in 1-2weeks

With a PFS By start of JULY,

I am seeking to get a discussion going to assess whether my assements of the company are reasonable

At 25c Current Mkt Cap = $21m
An EBIT of $75m a yr for 30yrs = NPV $1Billion+ (EBIT of $2.25Billion)
So I'd say once PFS is out I'd expect a mkt cap of $50m minimum = 60c


Advantages
- Management = Ex MIS MD in charge of their Magnetite Project, Excel Coal
- TOP 20 = Hold 80% so very tight
- Capital raisings will be done sparingly = When they issued rights options instead of being free or 1c they were at a 4c cost so company could raise $1m from the rights, sounds very very prudent to me
- Infrastructure amazing, on the main highway to Port Geralton = truck ore no rail! 14kms away from main town of Yalgoo, can use all exisiting port facilities, gas and water run through or near deposit
- Mkt cap tiny vs NPV
- Backed by Martin Place
- Pig Iron in high demand, much higher than magnetite ore as its a value added product
- Japanese Steel firm Kobe already taking Iron Ore samples, they could easily underwrite the development of Yogi project


Disadvantages
- Cap Ex = $350m+


It all looks good but I want to hear some others thoughts and feedback,

I found most of my info on the companies web
Project- http://www.ferrowest.com.au/yalgoo.html
Top 20 (old) - http://www.ferrowest.com.au/shareholders.html
Management - http://www.ferrowest.com.au/directors.html

And also recent announcements



p.s. DYOR!
Click to expand...
 
Re: FWL - Ferrowest Limited

for all followers of FWL this is an article from todays Australian newspaper.


Ferrowest is the pig end of town

June 13, 2007

WHO are these Ferrowest supporters?
And why is there suddenly a jump in the share price and the amount of securities being traded?

It can't be investors using Ferrowest as a tax loss before the end of June because the share price has moved to a record high.

And there is also a distinct lack of news from the company which might explain the sudden interest in the $20 million company.

Or is it just that people are cottoning on to the potential of the West Australian pig iron hopeful which is on the verge of delivering its first JORC resource for its Yalgoo project?

Either way, Ferrowest shares have jumped nearly 50 per cent in the past two days in what is largely a very tight share register.

According to the Daily Assay's Bloomberg terminal, the top five shareholders - directors Graeme Johnston, Barry Wyatt, Phil Evers, chairman Rob Duffin and managing director Brett Manning - hold 30 per cent of all capital.

But the top 20 shareholders own between 70 and 80 per cent of the stock, so that makes the sell orders very thin as the shares march higher. Biggest shareholder is Comet Resources with a stake around 16 per cent.

Ferrowest are looking at a 500,000 tonnes per annum, 20-year, pig iron project at its Yalgo project about 230km east of the port of Geraldton and nearby key infrastructure. Interestingly, the ground was previously held by Comet who went looking for gold and instead discovered magnetite.

Latest drill results from the Yogi deposit at Yalgoo showed week average magnetite iron grades of around 25 per cent as the company advances its pre-feasibility study. Sometime this month Ferrowest will also send its first 80 kilogram concentrate sample to Japan where Kobe Metals' subsidiary Midrex will test for pig iron potential using the ITmk3 technology favoured by Ferrowest.
Pig iron is still hot property as an alternative to scrap iron at feed electric arc furnaces and analysts reckon that demand will grow by 4.5 per cent, each year, up until 2011 at least when Ferrowest could be in production. Value adding in the WA iron ore industry hasn't had much success in the past, think of BHP Billiton's $2 billion hot briquetted flop.

A bankable feasibility study for Yalgoo is slated for December next year before financing, construction and production in January 2011.

But the calculations for revenue are compelling, even though some liberties are taken.

On the company's own forecasts, the MPI could be worth $US423 a tonne by January 2011 and production margins will be around $US155 a tonne.

So at capacity, that's worth $US77.5m for the company in the first year. Assuming prices stay around that mark for the next two decades (highly unlikely) Yalgoo is worth $US1.55 billion.

Obviously there are a lot of assumptions in that calculation - a long-term offtake buyer is found, Midrex's ITmk3 technology to turn the MPI into nuggets is successful, the steel boom continues in Asia and so on.

But the prospects are enough for Martin Place Securities, the same broker behind the now infamous $25-a-share call on Cudeco, to rate Ferrowest as a long-term speculative buy. And no, Martin Place have not put a price forecast on it.

According to Ferrowest managing director Brett Manning, the company has pretty much been talking to potential partners ever since the company listed in July last year.

“There's nothing that's come to a point yet,” he said.

“We are still on track for a JORC resource sometime this month, maybe that's why there has suddenly been a lot of interest. It's always going to take longer (to be in production) than a dig and ship operation when you value-add a project.”

“There hasn't been a lot of broker interest to date, people like the story but they are in wait-and-see mode.”

“What we are looking at is very strong margins and a low cost, high value operation.”

Forget Pig Iron Bob, we could one day see Pig Iron Brett.
 
Re: FWL - Ferrowest Limited

lol, the article pretty much sums my research and I ain't no investigatory journalist (pun from Zoolander!)

Mick do you have a link for that article?

I'm amazed at the lack of interest today though given that the article pretty much sumed up my sentiments,

Anyway note that the EBIT is $77.5m US thats $90m AUD p.a., I wonder how the mkt will react to a PFS that announces $90m p.a. for 30yrs in EBITDA!

But the calculations for revenue are compelling, even though some liberties are taken.

On the company's own forecasts, the MPI could be worth $US423 a tonne by January 2011 and production margins will be around $US155 a tonne.

So at capacity, that's worth $US77.5m for the company in the first year. Assuming prices stay around that mark for the next two decades (highly unlikely) Yalgoo is worth $US1.55 billion.

Obviously there are a lot of assumptions in that calculation - a long-term offtake buyer is found, Midrex's ITmk3 technology to turn the MPI into nuggets is successful, the steel boom continues in Asia and so on.

But the prospects are enough for Martin Place Securities, the same broker behind the now infamous $25-a-share call on Cudeco, to rate Ferrowest as a long-term speculative buy. And no, Martin Place have not put a price forecast on it.
 
Top