Philippines Iron Overview
Transcription
Philippines Iron Overview
Phi l i ppi nesI r onOr e 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”). 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