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UPDATE - Ferrex boosts funding chances at Mebaga with new desktop study

Published: 08:03 13 Aug 2014 EDT

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-- adds broker comment--

Ferrex‘s (LON:FRX) hopes of arranging new funding for its Mebaga iron ore project have been boosted by a desktop study highlighting its low costs .

Two scenarios for shipping ore directly from the deposit in northern Gabon, one at 1mtpa and the other at 3mtpa, indicated competitive  production costs of US$41 and US$45 per tonne, which rise to US$61 and US$65 per tonne adding in freight and insurance.

An independent assessment of the direct shipping ore (DSO) material from Mebaga also indicated it should command a premium over the 62% iron benchmark price, which currently sits at US$95 a tonne.

Mebaga benefits from its being the closest DSO project to the Libreville port in the Belinga supergroup  area, with a large amount of existing infrastructure to transport the ore to port already in place.

The developer is looking for finance  after Anglo American withdrew a funding offer two weeks ago despite having carried out substantial due diligence on the  project.

Dave Reeves, Ferrex’s managing director, said Ferrex closing a new funding option for the project was its current focus, with drilling scheduled  to recommence in the next dry season December 2014/ January 2015.

“This drill programme will be followed by a more in-depth scoping study that will investigate the operating costs in more detail and define the capital costs associated with the project.“

Brokers said the numbers underlined the appeal of the project,  but more detail on capital costs would be needed, according to VSA, while a partner will be needed to provide additional capital.

Finncap, Ferrex’s house, added that the study indicated a cash profit of US$30/t to US$34/t.

The target is 8.3p against today's price of 1.22p.

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