Mesa Minerals Limited
Manganese Ore Pricing Prospects
This is my site Written by Alan on August 1, 2008 – 2:24 pm

With HiTec and its joint venture partner Auvex Resources pushing hard to get a manganese lump ore export operation underway, based upon our Pilbara mining leases, shareholders’ minds, and their questions, are increasingly being focused on the likely pricing that might be achieved for any ore sales in the short to medium term.

HiTec, as the marketing manager for the joint venture, has formed a firm view on where current prices stand for various grades of ore, based on the market intelligence available, and we can place our prospective ore grade on this spectrum of current prices with some confidence. However, predicting what the pricing of sales over the next few years will be, or even the pricing for the earliest shipment of ore, involves the consideration of a number of key factors besides the current price context and these include:

  • Understanding the ore’s value-in-use to an alloy maker;
  • Understanding the supply/demand situation for ores, alloys and steel; and
  • Determining whether or not whether any sale has a longer term relationship component in its nature or whether it is strictly short term and transactional in nature.

The only advice that HiTec can offer a shareholder struggling with this ore pricing question is that which can be gleaned from our recent published quarterly reports. This being that prices for all grades of manganese ore are very strong of late and that whatever the grade of ore initially produced by the Mesa Mining Joint Venture (our new name for the business) it will be readily saleable at an attractive price.

Looking a little further forward we have also said that in our view supply will continue to fall short of demand for a few more years at least, despite the new production such as ours that will inevitably be brought to market. In this regard, it was reassuring to note that other participants in the market who are far larger than us appear to concur with this view, viz:

So my advice to those shareholders who are struggling with this issue is to just take a conservative view on pricing, rather than trying to finesse your predictions, and to instead focus on our ability to deliver tonnes into this market over the next few years. If you conclude that we can deliver the tonnes foreshadowed in our quarterly reports to market, then, on the publically available pricing evidence, you have to conclude also that we can sell those tonnes at attractive prices. Please note however, that the question of whether profitable sales and positive cash flow will have the desired impact on our share price, is a one that I will leave to people who understand the stock market a lot better than I do to answer.

Posted in  

Comments are closed.