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Mineral asset valuation report for Moonlight Iron Ore Project
Ferrum Crescent Limited
ASX: FCR, AIM: FCR, JSE: FCR
(“Ferrum Crescent”, the “Company” or the “Group”)
Independent US$33m Mineral Asset Valuation Report for Moonlight Iron Ore Project
Ferrum Crescent, the ASX, AIM and JSE quoted iron ore developer hereby makes disclosure of an
independent valuation report undertaken for the Company by The Mineral Corporation, an
independent mineral consultancy based in South Africa.
Highlights
- Ferrum Crescent’s mineral assets, comprising the Moonlight Iron Ore Project, valued
within a range between US$24.8m and US$41.3m, with a preferred valuation of US$33.0m
- Valuation carried out in compliance with the South African Code for the Reporting of
Mineral Asset Valuation (SAMVAL Code)
- Comparative transaction and Enterprise Value comparisons made with peers in
conjunction with exploration expenditure
- No value currently ascribed to further exploration potential
- Classed as advanced exploration project (excludes comparisons with operators)
Ferrum Crescent, the ASX, AIM and JSE quoted iron ore developer, today makes disclosure of the
independent valuation report commissioned on the mineral assets of the Company, carried out for
the purposes of obtaining the approval of the South African Reserve Bank for the approval of the
issue of shares by Ferrum Iron Ore (Pty) Ltd (FIO) to Anvwar Asian Investment (AAI). FIO is the
South African Group company that holds the Moonlight Iron Ore Project.
The Mineral Corporation’s independent valuation of the Moonlight Iron Ore Project in South Africa
(Moonlight or the Project) placed a value to the Project within a range from S$24.8m to US$41.3m,
with a preferred value of US$33m. The valuation of the Project used the principles and guidelines of
the South African Code for the Reporting of Mineral Asset Valuation (SAMVAL Code).
As Ferrum Crescent considers that it is important for shareholders and investors to read the report
in its entirety, a copy of the report has been posted on the Company’s website. Additionally, Ferrum
Crescent has set out below highlights from the report from The Mineral Corporation.
In addition, the Company notes recent press speculation regarding its financing of Moonlight. As
announced on 30 May 2014, the Company is in discussions with AAI and other parties around
providing financing options to fund the bankable feasibility study on Moonlight. These discussions
remain ongoing, and the Company will update the market in due course.
Introduction
The scope of work determined by Ferrum Crescent required the undertaking of a Mineral Asset
Valuation of the Moonlight Project using the principles and guidelines of the SAMVAL Code.
The valuation opinion contained in the report is only for the Mineral Assets of the Company, and
excludes the value of any surface infrastructure established at the Moonlight Project, any movable
assets which are part of the Project or the balance sheet circumstances of Ferrum Crescent. The
effective date of the valuation is 30 April 2014.
All opinions, findings and conclusions expressed in the report are those of The Mineral Corporation
and are based on information provided by Ferrum Crescent. These opinions, findings and conclusions
can change significantly with new information. Accordingly, the opinions, findings and conclusions
contained in the report may also be subject to change.
The report excludes all aspects of legal issues, commercial and financial matters, land titles,
agreements, excepting where such aspects may directly influence Mineral Resources and Mineral
Asset Valuation of the Moonlight Project.
It is to be noted, however, that mineral projects are inherently risky assets and therefore unknown
risks and uncertainties have the potential to materially impact on the future valuations of the
Mineral Assets. At this stage, The Mineral Corporation is not aware of any material risks to the
Mineral Assets of the Moonlight Project that may impede further development of these assets.
Description of the Mineral Assets
The Moonlight Project is an advanced exploration project for which it is understood that a Feasibility
Study is planned. The Moonlight Project comprises three adjacent properties, namely Moonlight 111
LR, Julietta 112 LR and Gouda Fontein 76 LR, which are covered by a valid Mining Right.
The latest Mineral Resource update for the Moonlight Project was compiled by The Mineral
Corporation in April 2014. The Mineral Resources are stated in terms of the 2012 Edition of the
Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the
JORC Code (2012)), and are summarised in the table below. The Mineral Resources were reported
using a cut-off grade of 16% Fe, geological losses of 5% and a depth constraint from surface to
between 100m and 250m.
Moonlight Project Net attributable to
Category Grade
(100%) Ferrum Crescent (97%)
Tonne Contained Fe Tonne Contained
Fe (%) SiO2 (%) Al2O3 (%)
(Mt) (Mt) (Mt) Fe (Mt)
Inferred 172.1 43.5 166.9 42.2 25.3 51.2 4.8
Indicated 83.0 22.7 80.5 22.1 27.4 50.1 4.0
Measured 52.6 16.5 51.0 16.0 31.3 47.3 2.5
Total 307.7 82.8 298.5 80.3 26.9 50.3 4.2
The valuation opinion contained in the report has been estimated on a 100% ownership basis.
Furthermore, Inferred Mineral Resources form some part of the basis for this valuation. There is a low
level of geological confidence associated with the Inferred Mineral Resources and there is no
certainty that further exploration work will result in the determination of additional Indicated or
Measured Mineral Resources.
The Project has a well developed concept in place: Ferrum Crescent plans to mine and beneficiate at
Moonlight and then pump the magnetite concentrate slurry by pipeline to a manufacturing facility
near a railhead at Thabazimbi in Limpopo Province where it is planned to manufacture direct
reduction and blast furnace grade pellets. It is anticipated that the exported product will be railed
from Thabazimbi to the port of Richards Bay. Ferrum Crescent has an offtake agreement in place
with Swiss-based Duferco SA, and it is expected that its direct reduction grade product will find a
market with customers using electric arc furnaces to produce steel. It is understood that Ferrum
Crescent is shortly to commence with a phased Feasibility Study on this basis.
Valuation Methodology
The SAMVAL Code requires the consideration of two different approaches to the valuation of a
mineral asset. As the Project is at an advanced exploration stage, The Mineral Corporation considers
that the cash flow valuation approach is not appropriate. The Mineral Corporation does consider the
market approach to be appropriate for the stage of project development, and has elected to apply
two methods thereof. In addition, the cost approach has also been applied and used to corroborate
the market approach. Furthermore the SAMVAL Code precludes the application of certain logic in
valuation, such as ‘gross in-situ-value’ simply determined from the product of the estimate of mineral
content and commodity prices(s).
The Market Approach relies on the principle of ‘willing buyer – willing seller’ and requires that the
amount obtainable from the sale of Mineral Asset is determined as if in an arms-length
transaction. The Market Approach is often applied to Exploration Properties.
The Mineral Corporation does consider the Market Approach to be appropriate for the current
stage of project development, and has elected to apply two methods thereof. These included a
comparative transaction approach based on magnetite project transactions which have traded on
a ‘willing buyer-willing seller’ basis and secondly, a comparative Enterprise Value which considers
the (debt and cash adjusted) market capitalization-derived valuation of listed companies which
own magnetite projects.
These two Market Approach methods derive their value from the price paid by the market for the
mineral assets being valued. Exploration Properties by definition have a Mineral Resource
estimate as their only asset, and as these Mineral Resource estimates vary in size, it is necessary
to normalise the price paid by the market, by the size of the Mineral Resource. A Market Approach
which is normalised for the size of the Mineral Resource does not therefore constitute an ‘in situ
valuation’.
The Cost Approach relies on historical and/or future amounts spent on the Mineral Asset and is
quite widely used for Exploration Properties. The Competent Valuator has applied the Cost
Approach as a third method to corroborate the Market Approaches applied.
The Market and Cost Approaches applied are the two generally accepted approaches to Mineral
Asset Valuation appropriate for projects at this stage of development.
Method 1: Market approach - comparable transactions
The Mineral Corporation holds a database of transaction information from transactions involving
magnetite projects or mines since 2005. The price paid per contained Fe tonne (US$/Fe-t) in each
transaction has been derived. These prices have been grouped by development category, from
Inferred Mineral Resources to Operations.
The Mineral Corporation estimated a transaction price for the Moonlight Project of between 0.30
and 0.90 US$/Fe-t, after normalising for the Projects’ development stage, and the iron ore price.
Method 2: Market approach - Comparable Enterprise Value per tonne
The Mineral Corporation considered the value of 12 comparable listed magnetite mining and
exploration companies and estimated an Enterprise Value calculated for each from publically
available documents. As an advanced exploration project, Moonlight should be compared with
other similar projects, rather than operations. The Mineral Corporation considers Ferrum
Crescent’s “peers” in this regards to have an Enterprise Value per contained Fe tonne of between
0.10 and 0.50 US$/Fe-t
Method 3: Cost approach - historical exploration cost
The Mineral Corporation estimates the total relevant historical exploration expenditure on the
Project to be US$22.4m, including US$21.4m by Ferrum Crescent and an estimated US$1.0m by
the previous owner’s Iscor.
Valuation opinion
The Mineral Corporation’s view is that the EV per contained Fe tonne method is probably more
cognisant of the current market conditions for publically listed exploration companies than the
comparable transactions method. On this basis, The Mineral Corporation valuation range would be
between US$25m and US$41m, with a preferred valuation of US$33m, as at 30 April 2014.
The Mineral Corporation / Competent Person’s Consent
This information in this statement that relates to Mineral Asset Valuation has been compiled by
Stewart Nupen and the Mineral Asset Valuation is signed off according to the 2008 Edition of the
South African Code for the Reporting of Mineral Asset Valuation (SAMVAL Code). Mr Nupen is a
Fellow of the Geological Society of South Africa, a registered Natural Professional Scientist and has
the necessary qualifications, ability and relevant experience to act as a Competent Valuator. The
valuation has been peer reviewed by Mr John Murphy. Both Mr Nupen and Mr Murphy are directors
of The Mineral Corporation. The Mineral Corporation operates as an independent technical adviser
and consultant, providing Mineral Resource evaluation, mining engineering, mineral processing and
mine valuation services to the mining industry. The Mineral Corporation has received, and will
receive, professional fees for its preparation of this report. However, neither The Mineral Corporation
nor any of its directors or staff who contributed to this valuation has any interest in the Mineral
Assets reviewed.
The information in this statement that relates to Exploration Targets, Exploration Results and
Mineral Resources has been compiled by Stewart Nupen, a Competent Person who is a Fellow of the
Geological Society of South Africa and a registered Professional Natural Scientist with the South
African Council for Natural Scientific Professionals. Stewart Nupen is employed by The Mineral
Corporation, an independent consulting firm to Ferrum Crescent Limited.
Stewart Nupen has sufficient experience that is relevant to the style of mineralisation and type of
deposit under consideration and to the activity being undertaken to qualify as a Competent Person as
defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves’. Stewart Nupen consents to the inclusion in this statement of the
matters based on his information in the form and context in which it appears.
For more information, please visit www.ferrumcrescent.com or contact:
Australia and Company enquiries:
Ferrum Crescent Limited
Ed Nealon T: +61 8 9380 9653
Executive Chairman
Tom Revy T: +61 8 9380 9653
Managing Director
UK enquiries:
Pareto Securities Ltd (Broker)
Guy Wilkes T: +44 (0) 20 7786 4370
RFC Ambrian Limited (Nominated Adviser)
James Biddle/ Andrew Thomson
T: +44 (0) 20 3440 6800/ +61 8 9480 2500
Ferrum Crescent Limited
Laurence Read (UK representative)
T: +44 7557672432
South Africa enquiries:
Sasfin Capital
Megan Young T: +27 11 809 7500
11 June 2014
Sponsor
Sasfin Capital (a division of Sasfin Bank Limited)
Date: 11/06/2014 08:01:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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