NSL to benefit from China woes?

Published at Jan 18, 2016, in Mining

NSL Consolidated (ASX:NSL) may be the only Australian iron ore company to benefit from a slowdown in the Chinese manufacturing sector.

It told its shareholders in a release today that it is currently working with a Chinese manufacturer responsible for the prefabrication of NSL’s phase two wet beneficiation plant on the ultimate cost of the plant.

As the Chinese manufacturing sector is undergoing a slowdown, there is potential to“significantly improve on the cost and the payment terms” associated with the wet plant.

With a slowdown in work, Chinese manufacturing firms have become more competitive on price when completing projects – as they are seeking to secure the work.

NSL had previously told shareholders that it would move to draw down $1.3 million from a previously announced $5 million loan facility, with $1.1 million to be placed in escrow.

It stressed the talks were ongoing, but should the variation be reached it may not need to draw down the $1.1 million to place in escrow.

Instead, it has drawn down another $300,000 for security.

On phase two

NSL’s phase two beneficiation plant will bring low grade iron ore from its projects in India up to grades at around 58% to 62%, with an ultimate production capability of 200,000 tonnes per year.

The construction of the wet plant is being underpinned by offtake agreements penned with industrial giants JSW Steel and BMM Ispat.

NSL has been hard at work tying up various offtake deals for its phase one, phase two, and specialised ‘lump’ product in recent times, but several of these deals are non-exclusive meaning NSL has scope to pursue a better deal should one come up.

Last week it secured a memorandum of understanding with the regional Andhra Pradesh government, which could see NSL own and operate a pellet plant in the region.

Under the terms of the MOU, the government will also help NSL with prompt land acquisition, adequate infrastructure development, and by offering incentives for project development.

NSL told investors that the MOU “positions NSL to be producing in excess of 8 million tonnes per annum of iron ore”.

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

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