SDL - Sundance Resources

[Piggy Bank]

I have been following Sundance for a long time now. The resource upgrade announcement today was predictable. The hype and any major positive market response to an iron ore resource upgrade that was present over 12 months ago has definitely waned. Yes, we know that they already have a very large resource and this will certainly increase with further drilling. However, given the current state of the financial markets and the global economy investors are now much more wary. Sundance needs to announce offtake partners, financial backing and plans to commence port, rail and mine infrastructure for this company to really take off. Until then the stock will remain volatile.

Getting the iron ore out of the ground and onto a ship will distinguish this company from the rest! Good luck to all long term SDL holders!

 

[RP_Automotive]

I agree todays announcement was kinda like the weather man saying "yeah it rained today" when he predicted it 4 days earlier...no surprises there really.

I think you summed it all up very nicely there piggy bank.....once all of those fractors mentioned are on the table then we will know whats going on.

 

[mayk]

Still , can someone summarize the new results (looks at Youngtrader ). Last time an interview of its CEO got every one excited about the results, hopefully this time it will be the same.

I agree with other posters for the lack of financial and infrastructre news. But they have to first locate their Iron ore potential (the bigger, the better). Any initial report for financial backing will look good if more proven resources of good quality are shown. I guess this is the motivation behind the lack of financial news.

Similarly, the governemt has to be willing and should support the infrastructure, which unfortunately because of its location is not an easy task to do. I guess these factors of increased risk because of geographic concern always overshadows this stock.

 

[Pythagerous]

G'day All. Relatively new to the Forum and SDL, so just trying to understand some basic fundementals of the stock. Placed below is some basic information sourced from the Sundance Website, Comsec and various announcements. It is probably just stating the obvious, but hopefully it will help with the understanding of SLD and the Mbalam Project.

Shares in Company: 1,873,400,000
Market Capitalisation: $487M (Based on SP of 26c)

Major Shares Holders:
Tablot Holding Group 19% (Aprox)
Lehman Brothers Prime Broker 6.26% (Aprox)
Concord Capital 5.10% (Aprox)

Top 20 Shareholders own 53% of SDL

Expected Development Costs:
$375m (Mining and Process)
$1,423m (Railway)
$529m (Port)
$442 (Indirects)
$508 (Contingency)
$3,277m (Total)

They are projecting 35mtpa x 20 Years (Minimum)

This is made up of: 222.6mt of DSO Hematite 61.6%FE (Target 300mt)
1,200mt of Itabirate 38%FE (Target 1,800mt)

High Grade DSO estimated between US$2-10/Per Tonne In Ground
Itibirate estimated between $1-3/Per Tonne In Ground

Est. DSO Opex Margin:
Average FOB Price (30% Lump + 70% Fines) US$57.34/t
Estimated Production Cost: US$19.65/t
Estimated Operating Margin: US$37.69/t


Timeline:
2008 JORC Resource Definition DSO and Itabirite
2008 Project Convention & Fiscal Terms
2008 Identify Strategic Offtakers
2009 Complete definitive Technical Studies
2009 Social Environmental Impact Assessment
2009 Project Financing
2009 - 2012 Construction
2012 Commence Ramp Up of Operations

Like most specs, there are a couple of things to get excited about, and a couple of things to be weary of. I will start with the negatives:

Negatives:
- The Stability of Cameroon and its Government, violence, corruption etc
- SDL need to find someone to finance $3,277m in order to get it up.
- Railway system and Ports need to be established

Positivies:
- It appears that they are sitting on quite a lot
- Talbot holding 19.9% provides some confidence
- Support of Cameroon Government

Would be interested to see the thoughts of people on the negatives.

Is there a possibility that the Cameroon Government or another company will assist with the financing and construction of the Railway System and Port?

How difficult is it going to be for SDL to find a significant funder?

What is the outlook on the stability of Cameroon?

I hold a small amount of SDL 30.5c and looking at increasing my stake.

 

[The Muffin Man]

Hi, first post in these forums.

My response to those negatives will be that the cost to get the project off the ground will not be $3.2Bn. There are numerous ways in which those costs will be brought down, including sharing infrastructure costs with other miners within the region. Also, if you go back through this thread, you will see that there are a number of groups looking at funding the construction and operation of port facilities within the region. To my knowledge, that $3.2Bn is a costing for the project if SDL were to pay for everything, that won't happen.

Secondly, the Cameroon Government is rubbing it's hands together with glee at the prospect of such a project for their country. It will provide jobs and royalties. Jobs means happy people. The Government will do all they can to get this moving, they won't be hindering any development.

 

[golfmos123]

I agree with you Muffin Man,

All this talk about raising so much money is important but not as important as is made out. Much money will come from Govt and will be paid back many times over as royalties and the like. Other companies are looking at developing infrastructure, particularly the deep water port and there might yet be some sharing on rail costs as well. All looks good to me, but patience is required.

 

[jwrt]

Negatives:
- The Stability of Cameroon and its Government, violence, corruption etc

It's pretty stable. No "violence" that i've heard of either.

 

[Piggy Bank]

Negatives:
- The Stability of Cameroon and its Government, violence, corruption etc

It's pretty stable. No "violence" that i've heard of either.

That is a very bold statement jwrt.

To give the alternative view....
I would stress that as far as African nations are concerned Cameroon is relatively stable and is one of the safer African countries to do business with. They have a "democratically" elected President with broad ranging powers and a legal system based on French Civil Law. However, we do not need to dig too deeply to find recent problems with government, violence and alleged corruption. We must remember that Cameroon is a "developing" nation with vast mineral resources but many social problems.

Do not be too quick to forget the turmoil recently in Feb/Mar 2008.

http://www.nytimes.com/2008/03/02/world/africa/02cameroon.html

A simple internet search will reveal more.

 

[Pythagerous]

The fact that the Mbalam Project is based in Cameroon, probably concerns a lot of investors, as they are a bit wary of the stability of the Country and the Government. So at the moment it is probably something that limits the share price currently, as Cameroon is not a country that people know a lot about, so share investors are probably a bit hesitant to jump right in, without some assurance or evidence of stability. This just adds to the risk, and higher the risk higher the potential reward.

Just got some further questions that hopefully some people may be able to answer.

At the moment SDL have a around 1.8b Shares with a current market cap of around $500M. If SDL find a major investor, how does this affect the number of shares and market cap. If they find an investor who puts forward another $500M, does this effectively mean that they own half of SDL, meaning that the weight of my shares is halved?

Considering the number of SDL shares in circulation, and the amount of resources they have identified. Potentially, how high could SDL shares get if everything goes to plan?

Has SDL pretty much allready identified all of their available resources, or potentially is there still a chance that with further drilling they may uncover more then what they first assumed they had?

Where do people see the price of Iron Ore heading by 2012. Will it be in even higher demand?

 

[Speedemon]

If they find an investor who puts forward another $500M, does this effectively mean that they own half of SDL, meaning that the weight of my shares is halved?

Your share price won't be halved, has the share price itself is dependent on the buyers and sellers.

If you want to sell your share price for half the amount though, I'd be willing to buy them off you!

 

[The Muffin Man]

The fact that the Mbalam Project is based in Cameroon, probably concerns a lot of investors, as they are a bit wary of the stability of the Country and the Government. So at the moment it is probably something that limits the share price currently, as Cameroon is not a country that people know a lot about, so share investors are probably a bit hesitant to jump right in, without some assurance or evidence of stability. This just adds to the risk, and higher the risk higher the potential reward.

Just got some further questions that hopefully some people may be able to answer.

At the moment SDL have a around 1.8b Shares with a current market cap of around $500M. If SDL find a major investor, how does this affect the number of shares and market cap. If they find an investor who puts forward another $500M, does this effectively mean that they own half of SDL, meaning that the weight of my shares is halved?

Considering the number of SDL shares in circulation, and the amount of resources they have identified. Potentially, how high could SDL shares get if everything goes to plan?

Has SDL pretty much allready identified all of their available resources, or potentially is there still a chance that with further drilling they may uncover more then what they first assumed they had?

Where do people see the price of Iron Ore heading by 2012. Will it be in even higher demand?

If there is another raising of capital, where more shares are issued, yes the 'weight' of your shares will be less. You will effectively own less of the company. There are a lot of other ways in which possible deals with other parties could be structured though, that don't involve capital raising through the issue of shares. If more shares are issued, it won't necessarily mean a fall in share prices, but SDL is already a sweetheart of day traders I think, and another issue I'm guessing would add to this problem.

SDL hasn't fully identified all of their resources that lay inside their permit area. (They just obtained another licence directly opposite the one they are drilling also) The current identified numbers are listed above, but they are shooting for around 300m tonnes of DSO iron ore, and who knows how much of the lower quality ore is under the surface. I think the exploration target for that is 2 billion tonnes, but have a look on the website at the presentations given because I'm sure numbers are mentioned in there.

Who knows where iron ore prices will be in 2012, way too many factors involved in trying to predict that. Brazil might fall over economically and the country descend into chaos (hampering production and therefore boosting the price), or the Chinese boom might begin to stall. (Lowering the price)

The key is to control costs as best as possible, so that if there were falls in iron ore prices, the company in question is still able to be sufficiently profitable to keep it's shareholders happy. SDL is apparently lucky in this area as it's projected production costs are quite low.

The hard part is getting to the production stage.

 

[Agent 86]

I saw some earlier blogs that the World Bank or IMF might be able to assist Sundance/Cameroon govt to partially finance this project.

Does anyone have an angle on this?

 

[Pythagerous]

Can't answer your question sorry Agent86.

Can anyone confirm that the Lehman Brothers in the below story are the same Lehman Brothers that own a major stake in SDL?

Lehman Brothers racks $US3.9b Q3 loss

US investment bank Lehman Brothers has announced an estimated loss of $US3.9 billion ($A4.88 billion) in the third quarter (June-August), but did not unveil plans for an injection of fresh capital for the ailing firm.

Shares of Lehman Brothers went into freefall on Tuesday as hopes faded for an injection of fresh capital for the ailing firm.

Lehman, one of Wall Street's most prominent investment firms, saw its shares tumble 44.95 per cent to end at 7.79. The shares have plunged 88 per cent since February.

The company had been scheduled to release its earnings and recovery plans on September 18.

Analysts had expected more hefty losses after an unprecedented second-quarter loss of $US2.8 billion ($A3.5 billion).

http://compareshares.com.au/show_news.php?id=S-513806

 

[Jewels]

Hi Fellow Sundance resources shareholders. Just a bit of heads up to let you all know that Don Lewis (MD of SDL) will be speaking at the 3rd anual Iron ore insights conference, in Berlin on the 30th of September. The following is how his talk is advertised in the program;

Mbalam iron ore project, Cameroon coming onto the global radar as a world-scale iron ore project

Overview of the Mbalam iron ore project
Resource definition
Project scope
Supplying the strategic markets in Europe, Middle East and Asia
Development timeline
Don Lewis, Managing Director/CEO, Sundance Resources Limited.

I have heard an unsubstansiated rumour that Sundance may be looking towards European steel mills for sale of their DSO quality ore, is anybody able to confirm this.

Do you think that we may see interest from European Insto's in SDL post the conference? Remembering that SDL is also listed in Germany.

Can anybody tell me if it is possible to arbitrage SDL, and if anybody is doing it, which brokers they could recomend? I suspect that there may be some arbitrage opportunities coming up in the near future.
Thanks.. J.
Go to www.iron-ore.eu for Iron ore insights program.

 

[Lucky_Country]

Thanks for the info I would have to say that the EU would be the obviuos place for SDL to ship to.
Ken Talbot has got connections with ArcellorMittal through his MCC dealings.
Seems SDL is going places and news is coming out more and more the market is just in no mood to jump in just yet but should do well on a recovery.

 

[Piggy Bank]

Good find Jewels.

Agree that SDL is a very proactive company. Positive news and project advancement has been moving along steadily. This has supported the share price during the current financial turmoil and bodes well for significant upside along with a general market recovery.

 

[Jewels]

Confirmation of previous unsabstantiated rumour. New presentation available on Sundances website, possibly the powerpoint presentation for the European conference. Very interesting figures quoted, suggesting current market cap is a fraction of what it should be.
Have a look and let me know your considered opinions.

 

[Piggy Bank]

Confirmation of previous unsabstantiated rumour. New presentation available on Sundances website, possibly the powerpoint presentation for the European conference. Very interesting figures quoted, suggesting current market cap is a fraction of what it should be.
Have a look and let me know your considered opinions.

Sundance prepare powerpoint presentations similar to the one you mention frequently. It may well be the backbone of what will be presented at the upcoming EU Iron Ore Conference.

An interesting read is the Hartley's Report (29 Aug 2008) that was posted on the SDL website today. It pretty much sums up this forum's discussion regarding project potential and risk. This report was obviously written before today's Itabirite Resource upgrade and the DSO upgrade from the 3rd September.

http://www.sundanceresources.com.au/media/15864/company report hartleys august 2008.pdf

I can't seem to get the PDF of the Shaw Stockbroking Report (July 2008) that was posted yesterday? Does anyone have it?

 

[Jewels]

I can't seem to get the PDF of the Shaw Stockbroking Report (July 2008) that was posted yesterday? Does anyone have it?[/QUOTE]

Hey Piggy Bank,
This may be the Shaw report that you are looking for, enjoy:
Sundance Resouce’s Limited (SDL) share price appears a victim of global equity markets and associated portfolio de-risking. This is in stark contrast to the fundamentals of the iron ore sector where contract prices have risen over 80% year on year to record levels, with prices forecast to remain buoyant well into the future.

SDL has 90% of JORC compliant inferred iron ore resources containing 1.2bt of Itabirite (38%Fe) in addition to 200mt of Direct Shipping Ore (DSO) in Cameroon (60%Fe).

Management is currently planning for production at a rate of 35mtpa of DSO from 2012 with a forecast FOB cost of less than US$25/t (Feb08).

With it’s project potentially at the lower end of the cash cost curve, SDL could be in a strong position to capitalise on these solid fundamentals.

Mbalam, Cameroon (SDL, 90%)

The Mbalam Project is located approximately 490km (by proposed rail) west of the Cameroon coast, in the southern border area. SDL has a 90% stake in the holding company CamIron, while local management and investors own the remaining 10% stake. A provision exists for the Cameroon Government to acquire a 10% interest in CamIron.

Stripping ratio of the Mbarga deposit is estimated to be less than 0.2:1 for DSO. The Itabirite strip ratio is also estimated to be very low at 0.5:1. Itabirite is mined in Brazil, and requires processing through grinding and flotation.

Project Planning

The Mbarga deposit in Cameroon is part of a series of deposits in an ironstone belt, which stretches south through the Republic of Congo, and Gabon.

China National Machinery and Equipment Corporation (CNMEC) are intending to develop the Belinga project in Gabon, situated to the south-west of Mbarga. An agreement with the government is believed to have been signed recently.

The company is presently negotiating a fiscal development ‘framework agreement’ with the government, and anticipates progress on this front in 2008. Significant incentives in the form of tax concessions, land acquisition for the rail corridor, and other assistance could be forthcoming.

The company is aiming to complete resource definition and BFS studies sufficient to achieve project go-ahead by mid-2009.

SDL is planning 7-8 years of DSO operations producing 35mtpa, prior to transition to a 35mtpa high grade haematite concentrate production through processing of itabirite ore. A rail line to transport DSO lump/fines and concentrate product is planned, with a slurry line alternative being investigated. Capex estimates for the DSO operation were estimated at US$3.3b in February 2008, including a US$500m contingency.

Sovereign Risk & Investing in Cameroon

The Federal Republic of Cameroon is located in central West Africa and has a population of about 18m people.

Total international investment in Cameroon is in the 10’s of billions of dollars, with planned projects including a Co-Ni mine, further oil/gas development and expansion of Rio Tinto-Alcan’s refinery. International companies operating in Cameroon include Rio Tinto Limited, AES Corp, Exxon Mobil/Texaco, Petronas and Geovic (TSX).

Key milestones coming up include negotiation of government agreement, increasing JORC compliant resources/reserves, completion of BFS and arrangement of funding. Site visits from prospective offtake/JV partners have recently been undertaken.



Disclosures and Disclaimers

SHAW Stockbroking ABN 24 003 221 583 ('SHAW') is a participant of ASX Limited and holder of Australian financial services licence number 236048.
ANALYST CERTIFICATION
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[trendster]

concord capital are back again taking a 5.10% holding in SDL.

If you recall they came in March this year and cashed out shortly after a 30-40% surge.

any idea who this mob is?