Bulk Metals: Iron ore is now making good cash for BCI, but it still wants out
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BCI Minerals (ASX:BCI) is probably grateful it wasn’t able to previously sell all of its iron ore assets, because it just made a tidy $12.2m from one of them.
But it is still very much intent on getting out of iron ore.
BCI has a royalty in the Iron Valley mine in the Pilbara that is operated by Mineral Resources (ASX:MIN).
The strong iron ore price delivered BCI $6.2m worth of EBITDA (earnings before interest, tax, depreciation and amortisation) for the June quarter and $12.2m for FY19.
It was the second highest quarterly EBITDA from Iron Valley since operations started in 2014 and the highest since the December 2016 quarter, which delivered $8.1m EBITDA.
“Iron Valley is benefiting from current iron ore prices, which have increased significantly over the first half of 2019 due to supply constraints in Brazil and Australia coupled with healthy steel demand,” BCI said.
Benchmark 62 per cent iron ore price averaged $US100 ($142.20) per tonne during the June quarter.
The current spot price sits around $US120 per tonne – its highest level in five years.
BCI said discounts for lower grade iron ore production like Iron Valley were at “multi-year lows”.
S&P Global Platts senior managing editor Paul Bartholomew told Stockhead earlier this month that the iron ore price looked set to stay well supported in the near-term due to ongoing supply tightness.
He noted that at the same time China continued to produce an “incredible amount” of crude steel despite slimmer margins as it struggled to pass through higher iron ore prices to finished steel prices.
“Steel output to date is up around 10 per cent on last year and given there is an expected iron ore supply shortfall of around 40 million [metric tonnes] this year, naturally that will put pressure on iron ore prices,” he said.
“Until China trims production in a meaningful way – and at the moment that doesn’t seem to be happening – strong demand for iron ore will keep prices high.”
Even though iron ore prices are strong and set to remain so for some time, BCI said in its quarterly it is still continuing to divest its iron ore assets and exploration tenements.
During the quarter, BCI completed the $2.25m cash sale of its Marble Bar tenements to a private group.
The company wants additional funding to advance the development of its Mardie salt and potash project.
A definitive feasibility study on a 4-million-tonne-per-annum salt and 100,000-tonne-per-annum sulphate of potash operation is scheduled for release in the March 2020 quarter.
BCI had $33.7m cash in the bank at the end of June.
Shares advanced over 5 per cent to 20c on Tuesday morning.
Image Resources (ASX:IMA) has reported its second full quarter of mineral sands production. The company said overall it beat expectations, with higher ore grades delivering more heavy mineral concentrate production, which led to increased sales. However, revenue came in lower because of a weaker zircon price. Image booked $42.5m in revenue (85 per cent of its target) and $5.7m net profit after tax (65 per cent of its target). Image managed to improve the margin though with “significantly lower” operating costs.
Perpetual Resources (ASX:PEC) has been granted exploration licences for the Eneabba and Sargon projects in Western Australia.
“Through the expansion of our footprint in the region we have gained exposure to potentially high purity silica sands proximal to the port of Geraldton and construction sands advantageously located at Eneabba,” managing director Rob Benussi said. “Perpetual intends on evaluating each of these opportunities in parallel for both domestic and international markets.”