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CZR lifts iron ore reserves 230% with exceptional IRR of 70 per cent
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CZR Resources has today unveiled a whopping 230 per cent increase in reserves at its Robe Mesa iron ore project in the Pilbara – and in the process demonstrated the exceptional investment returns which can flow from being a boutique iron ore producer.
CZR said reserves at Robe Mesa now total 27.3 million tonnes with a mine plan which underpins an eight-year life at 3.5Mt a year.
The latest studies forecast C1 costs of just A$57/t, driving an exceptional internal rate of return of 70 per cent at an iron ore price of US$90/t. This compares with the current price of ~US$106/t.
Forecast free cashflow over the eight years is A$260m and the project has a net present value (NPV) of $138 million.
At an iron or price of US$106/t, the IRR soars to 149 per cent with an NPV of A$342m. In this scenario, free cashflow exceeds $600 million.
CZR Managing Director Stefan Murphy said the forecasts showed Robe Mesa was set to generate extremely strong returns regardless of the recent fall in the iron ore price.
“These numbers show that Robe Mesa is set to generate outstanding returns for CZR shareholders,” Mr Murphy said.
“The returns on capital are extremely strong by any measure and the free cashflow is absolutely superb.
“These numbers reflect the quality of the Robe Mesa deposit, its low costs and close proximity to the port.”
As well as boasting strong financial returns, Robe Mesa is strategically located immediately north of Rio Tinto’s Mesa F iron ore project.
And CZR also owns the Robe Mesa South project immediately south of Mesa F, meaning Rio is bound top and bottom by CZR’s deposits.
Mr Murphy said: “The increased Reserves allow CZR to design a larger, lower-cost and more sustainable iron ore project than identified under the 2020 PFS.
“Importantly, the new cashflow modelling shows Robe Mesa generating an outstanding internal rate of return of 70% based on a base case iron ore price of US$90/t.
“At this price, the modelling shows the project generating free cashflow of $260m over an eight-year life at an annual production rate of 3.5Mt, but at the current spot price the returns escalate to $604m in free cash flow over the life of mine and an IRR of 149%.
“With the consolidation of Robe Mesa South, only 5km from our Robe Mesa processing plant and incorporating lower-grade stockpiles in our production plans, we see further opportunities to grow the project and deliver more value to shareholders and local stakeholders”.
This article was developed in collaboration with CZR Resources, 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.
