Ansteel is definitely very patient with their investment in KML...

Ansteel is definitely very patient with their investment in KML mine, looking at the way they keep the mine afloat financially since 2012, the most challenging period of the KML stage 1 development. I am sure most long term GBG retail shareholders include me would also share this patient investment mentality.

Finally KML mine has achieved nameplate operation reliably for the last 3-4 years and the management had also declared in the ASIC FINANCIAL STATEMENTS for the year ended 31 December 2017 NOTES 2.e) that "KML's cash flow forecast as of the date of this report indicates that KML is projecting cash operating surpluses for 2018 and 2019".

At the current high price of KML premium concentrate produce of around US$100, compared to around US$82 in FR 2017, the projected cash operating surpluses will even be more substantial, making it financially viable and I believe this is the main reason Ansteel decides to take over GBG to gain the 100% ownership of KML mine before embarking on the stage 2 development as they see a very good long term value in KML.

The other reason is that KML mine fits into the China's green environmental policy of minimal pollution in steel production.

The capacity of KML mine can be expanded to 16 mtpa by adding another 8 mtpa concentrate processing plant with minimum additional infrastructure cost since most of it had been built in KML stage 1 development project. The work out KML mine stage 2 Upgrade.pdf included in my posting on 20 March 2019 estimates the building cost of the new 8 mtpa plant at about A$1.2 billions. This is well within the financing capability (both borrowing and capital injection) of Ansteel, if you look at the way Ansteel extended all the additional funds to keep KML afloat during the last 4 difficult years even without a promising possibility to turn it around.

At current premium concentrate price around US$100 and AUDUSD currency rate of 0.71, the 16 mtpa mine could generate a potentialprofit of up A$500m a year or a cash surplus of about A$400m after senior debts repayment. If my estimate turn out to be reasonable, the total costs of developing the KML mine stage 1 and 2 inclusive of stage 1 cost overrun (in the region of US$1,200m) as a result project commissioning delay, construction cost write off, would add up to about US$5,450m (stage 1-US$4,600m, stage 2-US$850m) or US$340 per dmt. This numbers are definitely tolerable and viable at the current concentrate price compared to the stage 1 alone at around US$575 per dmt.

My opinion is that the take over of GBG should be done at a fair and reasonable price to all the long term shareholders. The claims at about A$317m (excluding KML magnetite ore deposit) or A$0.33 per share determined in the paper prepared by fellow member, The Mole posted on 17/3/2019 in my opinion is close to fair and reasonable. If Ansteel is not prepared to pay a higher take over price of A$0.026 per share, then it is not in the best interests of Non Ansteel GBG Shareholders.

If Ansteel succeed in taking over GBG at A$0.026 per share with the help of BOD, they are paying a pittance amount of about A$24m ((.026 x 1500 - 33 + 10) * 64.29%) to the non Ansteel GBG shareholders. In return, Ansteel will have 100% ownership of 3.782 billion tonnes ofmagnetite IO deposits (KML 2.3 billion tonnes, Lordstone 1.482 billion tonnes) and an infrastructure built to support KML stage 2 16 mtpa mine operation.This is not only unfair and unreasonable to the Non Ansteel GBG Shareholders, it is also not in the Australian national interests since Ansteel is a China state owned entity. The natural wealth of Australia should benefit in long term the majority of Australian. Instead, Ansteel and by extension China state will take all the long term benefits if the buyout is successful. This lopsided buyout scheme should be brought to the attention of Foreign Investment Review Board (FIRB) besides the Independent Experts. Anyone got an effective way to do this?


Just my opinion, DYOR