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Monday, August 1, 2011

Perwaja poised to reap huge cost savings (BT)

Perwaja Holdings Bhd has received approval in principle from the Terengganu state government to mine iron ore in Bukit Besi near Dungun.

The approval, announced by Terengganu Menteri Besar Datuk Seri Ahmad Said over the weekend, will help Perwaja bring down its costs, especially importing and shipping costs significantly.

"We've in principle agreed to Perwaja's request to mine iron ore in Bukit Besi and to have it pelletised here," Ahmad said.

Two weeks ago, OSK Investment Bank, in its notes to investors, said if Perwaja secures an iron ore mining concession, its immediate savings would be US$100 (RM296) a tonne because the cost of mining was less than US$50 (RM148) per tonne.

The firm added that the potential margin from pelletising should benefit Perwaja as transportation costs would be below US$10 (RM29.60) per tonne compared with the current capesize bulker freight of more than US$10 and US$20 (RM59.20) per tonne from Australia and Brazil, respectively, to bring iron ore here.

OSK's analysis was based on the assumption that Perwaja secures a 400ha iron ore mine in Bukit Besi with an initial capital outlay of US$10 million (RM29.6 million), producing 500,000 tonnes of iron ore in 2012, one million tonnes in 2013 and up to two million from 2014 onwards to 2031.

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