Boardroomradio interview with Mr Charles Schaus (Managing Director) of Aurox Resources

BRR:

Today on Boardroomradio I am joined by the Managing Director of Aurox Resources Mr Charles Schaus. Charles thanks for your time and welcome to Boardroomradio and thanks for your time

Charles Schaus:

Hi James, I am very happy to be back on Boardroomradio

BRR:

Can you start by introducing the deal with MCC, who they are and why are they a suitable partner for Aurox?

Charles Schaus:

On Monday, Aurox announced the successful signing of a binding Heads of Agreement with the Chinese multi-national company MCC. The agreement covers the Engineering, Procurement and Construction services known as EPC services for our Balla Balla iron ore project.

The overall deal is actually quite simple really. MCC will assist Aurox to secure up to 80% of our required project funding through a debt arrangement with a Chinese bank and in return Aurox will award MCC the Balla Balla EPC contract. Importantly, Aurox has already been provided with a formal indication of interest from a leading Chinese banking institution.

As part of the agreement MCC were asked to provide a capital cost estimate to build Balla Balla. And their estimate indicated an overall savings of $233 million when compared to the total $2.0 billion capital cost estimate made public in our November 2009 Integrated Feasibility Study.   

As for MCC, they are clearly the right partner for Aurox because they have a strong and demonstrable track record in Australia of backing resource projects as well as building them.  And we could not have found a higher calibre partner to help build the Balla Balla Project, and what is interesting to note, I think at this point, is  that Clive Palmer’s multi billion dollar coal project which was announced on the weekend also included a $8 billion dollar contract with MCC.  So Aurox is certainly in good company.

BRR:

Charles, why do you think MCC was attracted to the Balla Balla Project?

Charles Schaus:

The findings of our November Feasibility Study are what attracted MCC to the Balla Balla Project. Balla Balla has a 25 year mine life and will commence producing iron concentrate at 6Mtpa going 10Mtpa in 3 years. The operations will also produce titanium and vanadium. The integrated production of three products from a single operation translates to significant cost saving which will make Balla Balla an extremely competitive operation in the raw materials steel market.

Also Balla Balla is extremely well located in comparison to other iron ore projects in the Pilbara and we have all major approvals in place – including regulatory, Government and environmental. And on top of that we have a signed port facility agreement with the Port Hedland Port Authority, which will allow us access rights to Utah Point for up to 30 years.

We are also in an enviable and unique position because Balla Balla’s tenements have the capacity to access up to 30 gigalitres of water per annum from local aquifers. And this will allow us to pump our Iron concentrate to Port Headland from site through a slurry pipeline and this provides us with a distinct cost advantages over our competitors. As we all know, transport costs are a significant hurdle in the Pilbara and we are able to demonstrate slurry pipeline transport costs will cost us just over one dollar/ton verses transport methods such as trucking which will cost something in the range of 12 dollars/ton so it is a significant savings.

And I guess James to summarise, MCC were attracted to Balla Balla because it’s a large, low risk ready to build project. Balla Balla has long mine life, it has low capital and operating cost, it has an excellent location near the coast, we have port access and of course we have all of our approvals in place. So, as I said, it is a ready to build project.

BRR:

Charles, to what extent do MCC have the ability to assist in the securing of debt finance for the Balla Balla project?

Charles Schaus:

Well the one remaining step to progress Balla Balla is financing, and MCC are the right partner to instigate the process. As we have said, they have the experience, knowledge and commitment to quickly move Balla Balla to the construction phase once we complete that financing step.

And I think in our Monday announcement, it would be best to point our listeners to that, we have set of a brief summary of MCC’s capabilities and I think our listeners will find those very impressive.

BRR:

Do you have a time frame in mind to finalise a financing deal?

Charles Schaus:

Well we haven’t committed ourselves to a specific timeframe.  What we did tell the market on Monday was that Aurox has already been provided with a formal indication of interest from a leading Chinese banking institution. So things are moving and will continue to move very rapidly.

MCC and Aurox have agreed that Balla Balla must be financed in such a way as to have a superior long-term competitive advantage in order to meet its goal of becoming one of the most competitive suppliers of iron ore to China. 

Aurox has already begun a process to secure equity financing for the project as well.  We have engaged in discussions with a number of quality partners which includes them looking at our data in our electronic data room.

BRR:

What should investors be looking for from Aurox in the coming months?

Charles Schaus:

Ok James, well as mentioned earlier we have spent a long period of time getting to the point where all the boxes are ticked on Balla Balla project. We believe Balla Balla is a  project with the level of quality, size and potential to attract a high quality partner as demonstrated by the recent involvement of MCC and interest from Chinese banks.  

Importantly, and I think this is important for the listeners to note, Aurox did not have to sacrifice any of it’s project equity in return for the provision of debt. Thus Aurox has retained 100% ownership of the Balla Balla project.  And this makes Balla Balla a very attractive investment and thus a lot of our time over the coming period will be spent talking to various parties interested in taking an equity position in the Balla Balla project along side Aurox. Obviously, this will be followed directly by construction start-up estimated to start before the middle of this year and eventual production startup in early 2012.

BRR:

Well Charles we appreciate you taking the time to give us an update on Aurox, and we look forward to speaking with you in the coming months.

Charles Schaus:

Thank you very much James it is always a pleasure