Value driver: More sales to Europe instead of ChinThere were some marvellous news in todays Q-report. This one in the MDA p. 5 is a potential real value driver:
“In addition to the above off-take agreements, the European Steel Industry has begun to show significant interest in using high-grade pellet feed and, in particular, its potential use as a feed into sinter plants. Initial testing indicates that the Northland magnetite pellet feed performs substantially better in sinter plants than had previously been expected, and that there are potentially significant benefits from using Northland concentrate when compared with some hematite concentrates. Product development work is planned with a number of European steelmakers in the coming years to try to optimize sales to European high-margin end users.”
This was a real news to me. Prior to todays Q-report my geographical distribution of sales of 5 million tonnes per year (mtpy) pellet feed from Kaunisvaara and 3 mtpy pellet feed from Hannukainen was:
Northern Europe: 2
North Africa: 2
China: 4
The above end customers are pellet producers.
Todays news indicates the potential for sales to European steel producers for use as sinter feed. Then the market for NAU's products expands dramatically. Then I possibly can change the sales distribution to:
Northern Europe: 5
North Africa: 3
China: 0
In the last scenario there will be substantial cost savings on freight. It’s worth an extra NOK 9 per share in increased unrisked DCF.