NSL to benefit from China woes?
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”.