BCI pockets a tidy $32.2m iron ore royalty… for the quarter
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While most junior companies are forced to raise capital to fund their activities, BCI Minerals (ASX:BCI) has the rare luxury of boosting its cash position from healthy iron ore royalties.
And we are not talking beer money either. Thanks primarily to the robust iron ore price averaging nearly US$200 per tonne and the completion of a 40% royalty rebate by BCI to operator Mineral Resources, the company has pocketed a tidy $32.2m from its Iron Valley royalty in the June quarter.
This is up 60% from the previous quarter and takes the total FY2021 contribution from Iron Valley up to $69.5m, a three-fold increase from the $23.1m it made in FY2020.
BCI’s cash balance sits at $79.4m as at 30 June 2021 and has zero debt.
The strong position ensures that the company can truly focus its efforts on developing the Mardie Salt and Potash Project, a potential Tier 1 project located on the Pilbara coast in the centre of Australia’s key salt production region.
BCI recently secured a win after the Western Australia Environmental Protection Authority recommended to the state’s Environment Minister Amber-Jade Sanderson that the project be implemented as proposed with 19 conditions to be adhered to during construction and operation.
The company noted that none of the conditions have a material impact on the design and economic assumptions supporting the project’s development.
While the optimised feasibility study includes additional project areas located on newly acquired tenements that are not included in the EPA recommendation, the company noted that their smaller size and Mesquite weed infestation means that the assessment process is expected to be less complex.
As currently envisioned, Mardie is expected to generate annual EBITDA of $260m over an initial mine life of 60 years.
Capex is estimated at $913m while operating costs are estimated to be about $21.50/t of salt and $337/t of potash versus a 60-year average price of US$40/t for salt and US$578/t for potash.
Highlighting the advanced nature of Mardie, the company has already secured a positive investment decision from the Northern Australia Infrastructure Facility for a $450m loan over 15 years that underpins the debt funding element, which makes up about 60% of its funding requirements of about $1.2bn.
The strong royalty stream also means that BCI is targeting to fund a minimum of $180m of its $480m equity component during the construction period.
BCI is also working closely with the Pilbara Ports Authority and the Department of Planning, Lands and Heritage to finalise the tenure and agreements required to develop the Mardie Port facilities within the new Port of Cape Preston West.
Contracts totalling $129m have been awarded in 2021 to date while additional contract packages were put to tender for transhipping and the primary seawater intake pump station.
With strong funding from its Iron Valley royalty stream and progress on finalising contracts and securing approvals, there’s every reason to believe that BCI is on track to start construction at Mardie in the fourth quarter of 2021.
This article was developed in collaboration with BCI Minerals, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.