Philippines Iron Overview

Transcription

Philippines Iron Overview
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Philippines (Iron Sands) Overview
Introduction
Cagayan River Astra Philippines, Inc. (“CRA”) is a corporation registered
under Philippine Law with the main purpose of mining, land development,
construction, port and harbour development. Its principal office is at Port
Irene, Santa Ana, Cagayan. It formed as a strategic partnership between
Cagayan River Construction and Development Corp (“CRCDC”) and Astra
Resources PLC.
There is a sizeable deposit of magnetite sand in the Cagayan River and
offshore in the Babuyan Channel in the Philippines. CRA have validated
studies and evaluated its quality as well as the required technology to realise
its full commercial potential. The results had been enormously positive.
CRA was formed to mine and develop the Cagayan River
Project focussing on minertyal sands
Mission Statement
CRA’s mission is to be known as the leading construction and development
corporation in the Cagayan Valley and beyond and to be able to make a
difference to the local communities where the business operates.
The company also strives to seek bigger challenges within the core of
expertise of CRCDC and Astra Resources PLC, through strategic partnership
in order to have a strong edge in providing excellent and quality product and
service. CRA also intends to be a socially and environmentally responsible
company.
CRA’s mission is to be the leading development corporation
in Cagayan Valley and to make a difference to the local
communities
History and Current Status
For the most part of the last decade, CRCDC has made economic
development proposals for the Province of Cagayan. The total plan includes
agriculture, forestry, and marine development. One of the key elements of
the plan is to dredge the Cagayan River to make it navigable for trade and
commerce and at the same time, mitigate perennial yearly flooding that
causes havoc, damage, and even loss of lives.
The development plans were revived this year when the present Provincial
Board, through the present Governor, approved the participation of CRCDC in
this plan embodied in a revised Memorandum of Agreement.
On 17 November 2011, CRCDC and ASTRA entered into a joint venture
agreement for the purpose of infusing capital into the Cagayan River
Development Project in view of the commercial potential of the magnetite
sand present in Cagayan River.
In pursuance of the joint-venture agreement, Cagayan River Astra
Philippines, Inc. (“CRA”) was created. CRA will be the assignee of the
authority granted to CRCDC by the Province of Cagayan and will be the
corporate vehicle to execute the development plan of CRCDC and other
mining activities the joint venture will enter into.
CRA is now in the process of obtaining funding in order to implement its plan
for the Cagayan River Development Project.
Objectives, Goals and Target
Production
CRA plans to eventually produce 20 million MT per year
Initially CRA plans to start the Cagayan River mining with a maximum
production of 100,000 MT per month.
Upon acquisition of or application for a new Mineral Production Sharing
Arrangement (MPSA), 2015 the Gonzaga Offshore Mining is to start with an
expected additional 400,000 MT per month of production.
The ultimate goal of offshore mining is a maximum production of 20 million
MT per year through a plant on board.
CRA aims to achieve the proposed annual production plan as detailed below:
East Irene Port and Harbour
The proposed port and harbour facilities include land acquisition and
reclamation infrastructure covering roads, drainage, multi-stage sewer plant,
water sourcing, power communication, security, 50 x 500 metre pier on
precast/prestressed concrete pile, mechanical facilities such as cranes skid
train and container vans, 1.0 km breakwater seawall and an oil depot.
An integrated complex is also proposed by CRA for ports and industrial sites
to process steel products. The proposed site is a 75 hectare property located
on the South Side across the main highway. This would include the
development of Port Irene on the east side of the cove for bigger port and
harbour facilities to service the offshore mining operations of CRA featuring
berthing areas to offload/onload; pier for 2-50,000 tonnes ships and 1-60,000
tonnes container ships; ground facilities/warehouse; fuel depot; skid-train to
transport magnetic concentrate to smelting plant; and customs office and
ancillary facilities.
A smelting plant will be constructed with an initial production capacity of
360,000 MT per year.
Corporate Social Responsibility
In terms of corporate social responsibility, CRA will develop marine/fishery
facilities that will feature a training and demo farm.
CRA will develop marine and fishery facilities for the
surrounding local communities
For agriculture, CRA will develop the 20 hectare Culanto and Visitacion
valleys to become enriched farmlands, managed by an agricultural
cooperative with technological and financial assistance from CRA to
produce “cash crops” with provision for pre-harvest and post-harvest
facilities.
A business and commercial district will be established at Diora, adjacent to
the town of Santa Ana, where amenities will be put up featuring schools,
hospital, training centres with modern state-of-the art Australian technology.
Housing facilities will be provided for employees, subsidized by CRA,
alongside low cost multi-level dwelling facilities for other parties.
CRA will provide employees and workers with compensation packages and
benefits required by the Philippine Laws. A retirement plan will be set up
including distribution option for company shares.
Products
Features
CRA will produce magnetic concentrate and pig iron ingots from its Cagayan
River operations
CRA will produce and sell both magnetic concentrate and pig iron ingots
from its Cagayan River operations.
M agnetic Concentrate
Magnetite sand has recently been mined in the Cagayan River and along the
shorelines. These are collated by exporters and shipped to China. Processing
is carried out locally, making quality dubious and inconsistent.
CRA will produce magnetic concentrate from its river and offshore mining
operations. Processing the mined magnetite sand through a four-stage
separation process produces it.
Pig Iron Ingots
The magnetic concentrate is then used as a raw material for production of
pig iron ingots through iron smelting operations. These will be collated and
shipped in bulk to buyers abroad.
There are plans to incorporate T-Steel Technology into CRA’s iron smelting
operations in Santa Ana. The operations will then incorporate the new
technology and enable the production of T-Steel for the Asian market.
Pig iron ingots have always been in high demand by steel producers
worldwide as it is the key raw material required to producing various steel
and steel based products. With the continuous growth in world demand, the
market for pig iron ingots has essentially been a seller’s market as demand
generally exceeds supply.
Benefits
Iron smelters prefer using magnetic concentrate over iron ore as a raw
material in their smelting operations. This is because the use of iron ore first
requires grinding and separation in order to produce magnetic concentrate,
which is then used as input to their iron smelting operations. The use of
magnetic concentrate from magnetic sand will therefore save steel
producers both time and expense.
Schem atic Integration of Resources
Stage of Development
CRAs products are key raw and semi-processed materials
required for steel processing
Steel production is an essential element of world commerce and
development. As magnetic concentrate and pig iron ingots are key raw and
semi-processed materials in the production of steel, it is considered that
there will always be a market for these products.
The technologies intended to be used in the respective production of the
magnetic concentrate and pig iron ingots will ensure their quality, cost
efficiency and price competitiveness.
CRA is in a position to embark on its development strategy once funding has
been obtained. After funding, all other concerns embedded in this business
plan will be readily addressed.
Market and Industry Analysis
Market Size and Growth
The value of steel produced worldwide is over USD 200 billion annually. Steel
is an essential material in the world economy as steel and steel-based
products are part of everyday life in both the developed and developing
world. It is used in providing transportation such as automobiles and
railroads, building shelters from small housing to large dwellings, delivering
energy such as electricity and natural gas, producing food with tools like
tractors and hoes, supplying water with pumps and pipelines, and enabling
health care with medical equipment.
Over 96% of world steel production in 2000 was produced in 36 countries.
China was the largest steel producing country in 2000 with 127.2 million
tonnes. Two other nations produced over 100 million tonnes of steel in 2000
– Japan at 106.4 million tonnes and the United States at 101.5 million
tonnes. Together, these 3 nations account for almost 40% of world steel
production. If consideration is extended to the top 10 steel producing
nations, just over 70% of world steel production is accounted for. The top 20
steel producing nations produced almost 87% of the world’s steel in 2000.
While China is the world’s largest producer of steel, it is also the world’s
largest consumer of steel with an apparent annual consumption of 141.2
million tonnes. United States ranks as the second largest consumer of steel
at 115.0 million tonnes, followed by Japan at 76.1 million tonnes. The top 10
nations accounted for almost 69% of steel consumption in 2000, while the
top 20 nations made up 83% of world steel consumption.
By inference and extrapolation from the Chinese, Japanese and South
Korean graphical figures, the Santa Ana annual steel production goal for
magnetic concentrate and pig iron ingots can easily supply the scarce
market.
Strategically, the product mix of magnetic concentrate and pig iron ingots
provides added value to Santa Ana operations.
Trends
Demand for steel is expected to continue thereby ensuring that the demand
for CRA’s products will continue also
Looking at the trends in steel consumption, China shows the greatest
increase from 1990 to 2000 with an annualized increase of almost 10%.
Other countries in Asia accounted for the second largest increase with 5.7%,
while the NAFTA trading area demonstrated the third largest increase with
4%.The greatest decrease in steel consumption occurred in the former
USSR, registering a 14% decrease. It can be noted, in general, the more
industrialized countries utilised between 250 kg and 600 kg of steel per
person.
As of 2010, the consumption per capita for markets that CRA is targeting is
as follows: South Korea with 1077 kg/capita, Taiwan 772 kg/capita, Japan at
503 kg/capita and China at 427 kg/capita.
Target Market
CRA will target steel producers in China and South-East Asia
As China is the world’s largest producer of steel, it will be CRA’s main target
export market for its magnetic concentrate and pig iron ingot products.
Existing mining operators in the Cagayan province have currently only
exported to China.
Growth in the economy and, more specifically, the steel industry of China is
expected to continue and consistently exceeding its target of 8% annually.
Therefore, the demand for magnetic concentrate and pig iron ingots is
expected to continue and remain high.
Outside China, demand for iron ore will continue to rise marginally.
European and American economies will eventually recover, along with Japan
as it rebuilds after the recent natural disasters.
The buyers of CRA’s products are steel producers and iron smelting plants in
the private sector in China, Japan, South Korea, and Taiwan. This target
market will welcome additional supply in view of rising demand given the
continued increase in production.
The respective buyers make buying decisions. Approval levels go to the top
of the company, as the product is the primary resource of their operations.
The criteria used to make buying decisions include price, distance from
supplier and quality.
Budgeting is done on an annual cycle with updates quarterly. Ordering is
done monthly or quarterly, as the operating level requires. Generally, it takes
about 3 months from first contact to receipt of order, including introduction,
accreditation, and validation. The payment policy will be via Letter of Credit
FOB.
Industry Structure
Aside from the government requisites and monitoring, the industry is
organized mainly by industry associations defined by geographic locations
i.e. by city and by province culminating on a national level.
Magnetic concentrate and pig iron ingots are produced within China and also
imported. For those produced within China, delivery is primarily by rail
transferred to bulk carriers from the production site and to buyer plants. If
imported, they are shipped in bulk from origin to the destination port nearest
to the buyer then transferred to rail and bulk carriers as may be applicable to
buyer plants.
CRA’s products will be shipped in bulk from the operations in Santa Ana,
Cagayan to the port nearest to the buyer’s operations. From the destination
port, it will be transported by rail depending on the relative distance from the
buyer’s operations. This will in turn be transferred to bulk carriers for
transport to the buyer’s plant.
Competitive Environment
Companies in the marketplace compete primarily on price and quality.
Problems and concerns customers have with competitors relate mainly to
delivery and quality. There are no government regulations such as import
restrictions and none are expected to be forthcoming.
Prices are set by established industry practice. Bargaining strengths of
customers are price and terms. Bargaining strengths of suppliers, on the
other hand, are quality and schedule.
No single company has dominant control of either supply or demand.
Agreements between customers and suppliers as well as strategic partners
are primarily for the achievement of long-term goals. Customer loyalty in
terms of long established relationships is not prevalent which enables new
entrants such as CRA to enter the market and compete in terms of product
quality and availability.
New entrants are free to introduce and accredit with customers and industry
associations. Common barriers to entry for new entrants are in the form of
the high capital investment required.
Competition
The advantage of CRA’s competitors is that they are in the market with
existing relationships and networks, which they currently operate. Their
weakness is the known shortfall of supply due to continued increase of
demand. This limits their ability to satisfy customer’s demand requirements
and provides an opportunity for CRA to enter the market with its quality
product.
Opportunity
CRA has an abundance of raw material and is strategically
located within close proximity to customers
The demand for steel and raw materials required for steel making is
expected to continue into the future.
Supply, on the other hand, hinges on the availability of raw material,
technology and investments. These elements will determine the ability of
supply to match demand.
Presently, demand exceeds supply which creates an opportunity for CRA.
CRA perceives its key competitive advantages as:
•
Access to an abundance of raw material i.e. magnetite sand
•
CRA directly extracts and produces magnetic concentrate and pig iron
ingots
•
Close proximity to the major target markets in China, Japan, South
Korea and Taiwan
Marketing Plan
Target Market Strategy
CRA will directly market to iron smelters and steel producers
CRA plans to directly market to iron smelters and steel producers in the
selected target markets. Customers make buying decisions based on the
supplier’s accreditation and capability. Visiting and inspecting the supplier’s
operations and facilities is common practice. CRA will focus on highlighting
its competitive advantages.
Positioning
The products will be positioned in the market on a parity basis as is
applicable to products of this nature. Differentiation from competitors will be
on consistency of quality and promptness of delivery schedule.
Pricing Strategy
The pricing strategy will be determined by the prevailing commodity price, as
this is industry practice.
Sales Strategy
An in-house sales force headed by a senior executive in charge of sales will
be responsible for the sales and marketing of CRA’s products. Leads will be
generated via accreditation with the government and with industry
associations i.e. iron smelters and steel producers. Internal staff will support
the sales effort.
Operations Plan
Operations Strategy and Scope of Operations
Offshore production of magnetic concentrate and pig iron ingots will be
progressively undertaken based on a production schedule. CRA’s production
is on-site where the raw materials are located. Coupled with the company’s
proximity to the target markets, this provides a competitive advantage over
competitors.
Based on the production schedules, sales will be contracted with the target
markets. The finished products will be compiled in bulk carriers for shipment
to buyers.
Ongoing Operations
The business will operate continuously extracting the magnetite sand,
producing magnetic concentrate from its dredging and offshore mining
operations. It will also produce pig iron ingots from its iron smelting
operations.
In terms of personnel, the company will hire locals with the required skills
and expertise and enlist foreign consultants as required.
The layout of the production process for magnetic concentrate is illustrated
below:
Development Plan
Development Strategy
CRA has a four stage development plan for the Cagayan
Iron Sands operation
The development strategy involves four stages that will take place once
financing for the project has been obtained.
The four stage development plan for the Cagayan Iron Sands project
is as follows:
Phase I: Dredging
The company will commence dredging of the Cagayan River Delta with a top
production of 100,000 metric tonnes per month. Estimated reserves are 130
million tonnes. The dredging award passed through the assessment of the
Provincial Committee on Environment Protection. Moreover, there is also the
Provincial Environmental Code of 2005, which regulates controls and
monitors environmental issues. CRA will comply fully with the terms and
conditions of the Memorandum of Agreement with the Province of Cagayan
dated 4 May 2012.
Phase 2: Acquisition of M PSA
Acquisition of an existing MPSA on the mineral lode area and/or apply for a
new MPSA (2 years processing) to a top production of 300,000 – 500,000
metric tonnes per month. At this time Phase 1 will be terminated.
The magnetite resource reported by Peniel is shown in the table below at
various depths. The average magnetic content was reported as 46.2%.
The Peniel reported “Potential Reserves” in million tonnes:
The mineral resources estimated for the PAIDC Areas 1 to 4 are summarized
in the table below. The resources are of the “Inferred” category.
The inferred magnetite‐rich marine sand resource has an equivalent of
13,044 million metric tonnes averaging 30.85% magnetic fraction. The
magnetite concentrate inferred resource is 4,023.81 dry metric tonnes with
an average grade of 62.7% Fe.
The quick estimates tallies well with the polygonal resource estimate.
Phase 3: Port and Harbour Developm ent
This phase will take place in parallel with Phase 2. There will be development
of East Irene Ports and Harbor and an industrial complex to set up a
smelting plant for Ingot Production. Production of 30,000 metric tonnes of
ingots per month will take place, supplied by the magnetic concentrate from
Phase 2.
Phase 4: Acquisition of Dredging Ship / Processing Plant
The company will acquire an off shore dredging ship/processing plant with
an expected 6 million metric tonnes of magnetic concentrate production per
annum.
Management Plan
Company Organisation
The Board of Directors of CRA are:
•
Mr. Arnold S. Bernabe - Director
•
Ms. Florian B. Young - Chairwoman
•
Ms. Nancy Ester B. Aguinaldo – Treasurer and Corporate Secretary
•
Ms. Silvana De Cianni – Astra representative
•
Mr. Jaydeep Biswas – Astra representative
60% of CRA’s equity is Filipino held and foreign nationals hold 40%.
Mr. Arnold S. Bernabe has extensive experience in sales, marketing and
management. Ms. Florian B. Young’s area of expertise is in marketing. Ms.
Nancy Ester B. Aguinaldo is into media and public relations as well as
administration. Mr. Rocky T. Young’s background and experience is
management.
Management Team
CRA has engaged the services of the following consultants to handle
corporate concerns in their respective areas:
•
Atty. Millicent C. Smith - a lawyer who has extensive experience in
legal concerns of corporations
•
Mr. Raul C. Roque – a certified public accountant whose professional
exposure is in management information, accounting, and auditing
•
George Francis F. Siton, Jr.- a certified public accountant whose
expertise is in international business
•
Engr. Modesto D. Soriano, Jr. (MBA) – a civil engineer whose area of
expertise is in business development, and strategic planning
engineering and reclamation
CRA has also engaged a foreign consultant, Dr. David T.W. Cheng, a
professor at the National Taipei University of Technology in Taipei, Taiwan
under the Department of Materials & Mineral Resources Engineering,
Institute of Mineral Resources Engineering.
CRA will hire top-notch professional managers who will be responsible for
the day-to-day concerns of CRA operations. Marketing, administrative,
finance and technical staff assistant managers, supervisors, as well as rank
and file employees who will be hired as required to complete the group
management will amply support the General Managers.
CRA Organisational Chart
Disclaimer
This document has been prepared and issued by Astra Resources PLC (“the
Company” or “AR”). It is based only on the structure and activities of AR and
its associated companies, as at the date of this document. In this document
no representation or warranty is given as to the achievement or
reasonableness of any plans, future projections, valuations, prospects or
financial returns and nothing in this document is or should be relied upon as
a promise or representation as to the future.
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complete. The document does not purport to provide all of the information
an interested party may require in order to investigate the affairs of AR. The
information contained in this document is not to be relied upon by you in
making a decision as to whether you ought to invest in AR. This is not a
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In preparing this document AR did not take into account the investment
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