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Amex Resources Engages In New Talks As Old Deal Falls Out

Amex Resources Limited has been in negotiations over the past three months with a world –recognised construction firm to finalise a new construction contract for its Lautoka port facility. This
25 Apr 2015 11:55
Amex Resources Engages In New Talks As Old Deal Falls Out
Chinese dredging experts from China Communications Construction Company (CCCC) First Harbour Consultants Company, reviewing the Mba Delta iron ore project.

Amex Resources Limited has been in negotiations over the past three months with a world –recognised construction firm to finalise a new construction contract for its Lautoka port facility.

This is in order for the project to be advanced towards production.

The construction of the port facility for Fiji’s first iron ore miner was supposed to have started off the past year.

However, a number of factors led to Amex Resources terminating the Chinese contractor’s contract earlier this year.

Managing director, Matthew Collard, said: “In January this year, Amex made the decision to terminate the signed and funded US$100 million (FJ$203 million) contract with chinese firm, MCCO.

“The company’s decision to terminate the contract was due to the contractor’s non-compliance and continued lack of performance.

“This was despite Amex’s efforts to ensure that construction at the Lautoka port site was commenced as required.

“The company then called on the Bank of China guarantee for its US$20 million advance payment to be returned and the funds were repaid to the company in March.

 

What the delays means

Mr Collard said these recent events have delayed construction by potentially up to 18 months.

“Whilst Amex has pursued options to reduce construction periods, the extent of the earthworks and port infrastructure is still tabled as an 18-month period,” he said.

“It is important to highlight that Amex, during this delay period, has remained fully-committed to the project and continues to maintain its local workforce including the Lautoka and Sorokoba offices.

“Environmental baseline programmes are being continued with the anticipation that construction will be underway by July this year.”

 

Financial performance

Amex Resources, an Australian Stock Exchange listed company, posted an AU$16 million (FJ$25 million) loss for the six months ended December 31, 2014.

Mr Collard highlighted delays in the construction of the project had directly impacted on Amex’s balance sheet as overseas loans had been put in place to accommodate the construction.

“Whilst the contractor did not commence work at the Port, Amex still had to meet its responsibilities of servicing those loans,” he said.

Mr Collard said Amex, to date, has invested FJ$66 million into this project and the most important priority for the company was to commence work on construction.

 

The challenge

While their commitment and priority for the Mba Delta iron ore project remains, one of the other factors not in their favour is the iron ore prices.

Mr Collard said iron ore has plummeted to 12 year lows with prices ranging between US$47-49 (FJ$95-99) per tonne a week ago.

This, he said was a far cry from the five year average of US$135 (FJ$275) per tonne.

“The consequence is that many iron ore producers outside Rio Tinto, BHP and Vale are under severe pressure to reduce operating costs and service debts taken out to finance the construction of the projects,” he said.

“The result has already seen smaller producers placed into administration, or suspension on the ASX (Australian Stock Exchange).

“Fortunately for Amex, with its extensive Chinese shareholder support, the recent iron ore price is not halting progress.

“Combined with the project’s low operating costs this project remains viable.”

 

Alternative markets

But Mr Collard said an additional consequence that flows from the very current low iron ore prices was the drive to identify alternative markets for the magnetite product, in addition to iron and steel manufacture.

“Amex has progressed identification of other potential uses for its concentrate to provide market diversification,” he said.

“Some of these include premium pricing for specialised material.

“The objective is to ensure long-term stability to the project by increased revenues and the company will maintain a proactive attitude to its future sale contracts.”

 

 




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