forecasts, page-4

Dejavoo,

I find it hard to look for any real negatives within IDM. I'm sure that they four biggest shareholders would be with me on that thought - Macquarie, Sentient, Contango Microcap and Phil Garratt (CEO). All applied for the rights issue, Contango were lucky and picked up the 10% shortfall and just remember that Phil Garratt wrote a cheque out for $700k and has been buying on-market, he alone owns over 28 million shares.

I will however, go through some of your questions.

"drop in prices to long term average".
The worldwide use of foundry grade is approximately 1.5 million tonnes a year and growing at 5% a year. These numbers don't include the foundries presently using Zircon that are switching over, part of the reason why foundry grade pricing is increasing.

IDM will be producing 95,000 tonnes of paleo beach chromite, a product vastly superior to the South African chromite and on the same level as Zircon, hence the change of name and strong marketing campaign under the banner of Spherichrome.

Most foundry grade is sourced from underground mines in South Africa, it is crushed, screened and bagged. Now there have been ongoing issues from this supply network including power supplies, but more importantly the quality of grade has been falling over the last ten years. Now foundries have been yelling from the roof tops about these issues, but what can they do?

The current cost of foundry grade is $525 a tonne. I read a report yesterday from TZMI that prices of foundry grade have "firmed due to supply constraints out of South Africa". So you could safely say after viewing page 26 of the Noosa conference presentation, the price is around $550 - conservatively. Metallurgical grade is below foundry and that price is running around $450 a tonne. This product is furnaced and turned into ferrochrome (chrome). Metallurgical grade cannot be used in the foundry industry, mainly because of GFN structure, however foundry grade can be used for ferrochrome.

The other quick point I would like to make is this.
Many foundries moved to Zircon decades ago because its a better product, due to grain structure, heat transfer and binds better with polyurethane. But now Zircon is hitting $2,000 a tonne and forecasts have it at $3,000+ at the start of next year, so the foundries need an alternative and quickly.

Back in early 2010 when the industry was in the doldrums and foundry grade was at $250 a tonne. IDM was required by their financiers (Macquarie and Sentient) to obtain forward orders for 40% of production for 12 months of their two main minerals (Spherichrome and High Iron Ilmenite). They went to the two world leading suppliers of foundry industry products (HA International and Possehl) and struck a deal at 100% premium to foundry grade and 75% to the current Zircon price. Obviously HA and Possehl could see the possibilites with on-selling this product.

So your question regarding the long term view of Spherichome pricing should be based not only on foundry grade but also the price of Zircon.

Just with your question regarding Macquarie and Sentient and whether they've got enough of the pie.
I wrote about this in an earlier post, but yes they've got a good piece of it, but they did fork up the money and we don't have some chinese partner taking the supply at some silly rate for the life of the mine. It's in the best interests of both parties for IDM to obtain the highest price available. They both together own over 55% of the company and both parties have backed some very good projects together.

"Permitting"
13 of the 14 permits were acquired before they built the plant, the last permit related to noise at the plant, but that was signed off in June.

"Court Case"
There is a current appeal from three families that live approximately 2.5 miles from the tenement. They are taking the government to court (not IDM) believing they did not do enough study on the local fish (coho salmon) also they are not happy with the possible noise pollution. This is completely false and at every level of permitting they have never been successful. They were not happy with this and took it to court for an injuntion (we are is the U.S.) and again, it was thrown out by Judge Hogan - comprehensively. They appealed his decision to the 9th Circuit in San Francisco and did not make it to the court room. But they have now lodged an appeal in the court of Eugene to Judge Hogan for his original decision and that's where it sits today. If he again throws out their argument, their only recourse is the 9th circuit (again). If they were succesful in obtaining a hearing and then heard, the circuit would take "12-18 months" from that date of hearing for its judgement. The pit would have been totall rehabilitated by then.

I would just like to refer you to some of the pictures that have been provided in the past 6 months, you can then make your own mind up whether noise pollution is a problem. Just take notice of the tree height, the scrub and also how much equipment is on-site. Remember they're 2.5 miles away and they all signed a waiver 20 years ago that they are within a commercial / industrial site area.


June Quarterly (just a couple of quick points)
It's now the end of July, so this information is now 5 weeks old and I'm sure that the commissioning is well and truly ramping up. It's a brand new project that is having the normal issues found at any mineral sands processing plant. Its going to have a life of 25 years, so they might as well get it right now.

Phil Garratt did not mention pricing, but use the assumption fo $500 a tonne for 70,000. As for the other 25,000 I don't really know, but it's a "premium product" and I'm sure it will be priced accordingly.

I had to chuckle with this line under Zircon:
"The company is benefitting from the increase in price and demand"

Have you ever heard anything that low key before? The current price is $2,000 a tonne. They forecast $775. They are going to make 5,000 tonnes, here is what Iluka think the price will be.


I made reference in my previous post regarding the Ilmenite and how it would be priced at a premium, just take a look at where Iluka thinks Ilmenite sulphate will be next year.

Everything else in the quarterly tells its running as expected.

I've also noticed the company has put the RBS research report up on the website. The information within the report is based on figures from Feb 2010 and not from the Noosa revised report.

Just a couple of things with it. Just take a look at the risk value applied within the valuation. Break down each statement line by line and then add the re-jigged production numbers from the Noosa report and reduce the risk discount and you come up with something completely different.

All the best
Pep