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Mardie PFS optimisation study

BCI Minerals 23 May 2019 Update
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BCI Minerals

Mardie PFS optimisation study

PFS optimisation study

Metals & mining

23 May 2019

Price

A$0.20

Market cap

A$80m

A$1.4547/US$

Net cash (A$m) at 31 March 2019

35.4

Shares in issue

397.6m

Free float

63%

Code

BCI

Primary exchange

ASX

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

17.1

36.7

32.3

Rel (local)

12.7

29.3

23.3

52-week high/low

A$0.20

A$0.13

Business description

BCI Minerals has two major assets in Western Australia, including a 100% interest in the Mardie salt and potash project and a royalty-type interest in the Iron Valley iron ore mine operated by Mineral Resources. It also has exploration tenements in iron ore and other minerals.

Next events

Q419 activity report

July 2019

Mardie DFS

Q4 CY19

Mardie investment decision

Q1 CY20

Analyst

Charles Gibson

+44 (0)20 3077 5724

BCI Minerals is a research client of Edison Investment Research Limited

On 17 May BCI announced the results of its PFS optimisation study at its Mardie salt and potash project in north-western Australia. Relative to its earlier PFS study (the results of which were announced in June 2018), the principal differences are an increase in salt and sulphate of potash (SOP) production, by 14.3% and 33.3% respectively, and the development of a dedicated port at the Mardie site. While this has increased the project’s capex estimate by 48.7% to A$498m, it has increased its pre-tax NPV10 by 67.2% and our estimate of post-tax NPV10 by A$111.2m to A$345.5m (or 86.9c per existing BCI share). At the same time, the project’s operational lifespan has been extended to 60 years (from 30 years previously).

Year end

Revenue (A$m)

PBT*
(A$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

06/17

64.3

6.0

1.9

0.0

10.5

N/A

06/18

33.0

(16.9)

(4.3)

0.0

N/A

N/A

06/19e

60.7

(7.0)

(1.4)

0.0

N/A

N/A

06/20e

59.8

(3.1)

(0.3)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items.

Mardie stand-alone valuation increases to 9.76cps

In our report Gold stars and Black holes: Analysing the discount: From resource to sanction, published in January 2019, we observed that, excluding outliers, the average valuation of companies at PFS stage is 9.9% of attributable NPV. On this basis (and assuming a post-tax NPV of 70% of pre-tax NPV of A$560m), an average valuation for Mardie would be A$38.8m, or 9.76 cents per share. However, if the DFS on Mardie, which is underway, is completed on approximately the same terms, we would expect this valuation to increase more than threefold, to c 30.9% of NPV, or 30.46c per share. This excludes the 19.51c at which we valued BCI’s other operating assets in our Outlook report, BCI Minerals: Salt plus potash plus iron equals value, published on 7 February 2019. It also excludes the 2.43c value of BCI’s other non-operating assets – ie Buckland (see BCI Minerals: Increasing iron ore royalties supporting Mardie, published on 16 April 2019).

Initiative broadens funding options

One additional consequence of its plans to develop a dedicated port at Mardie could be that BCI’s potential for concessional debt funding via Australia’s federal North Australia Infrastructure Facility (NAIF) is increased.

Valuation: Still almost 2x share price

In the wake of its quarterly activities report, we value the stream of dividends payable to BCI shareholders from Iron Valley and the development of Mardie at 35.13c (cf 31.62 previously). To this should be added a further 2.43c for its Buckland assets to take the total to 37.56c. Further upside then exists if iron ore prices remain at elevated levels beyond June and/or the Australian dollar remains at its currently depressed levels.

Mardie PFS optimisation

BCI is preparing a DFS for its Mardie salt and SOP project, which it expects to be completed in the final quarter of calendar year 2019. As part of the process, it has been investigating a number of optimisation opportunities relative to its PFS, which it has incorporated into the development case and compiled in a separate PFS optimisation study, the results of which are summarised in Exhibit 1. The main differences between the PFS and the PFS optimisation study are an increase in salt and SOP production by 14.3% and 33.3%, respectively, and the development of a dedicated export facility at the Mardie site (as opposed to trucking output to either Cape Preston East Port or the Dampier general cargo wharf for export).

Exhibit 1: Mardie optimised PFS parameters vs PFS

Assumption

PFS*

Optimised PFS

Change (%)

Inputs

Salt production

3.5Mtpa

4.0Mtpa

+14.3

SOP production

75ktpa

100ktpa

+33.3

Seawater intake

132Glpa

4.2Mtpa salt

135ktpa SOP

147Glpa

4.7Mtpa salt

150ktpa SOP

+11.4

+11.9

+11.1

Concentrator pond area

70km2

79km2

+12.9

Crystalliser area

17km2

20km2

+17.6

Salt recovery

83%

85%

+2.5

SOP recovery

56%

67%

+19.6

Salt logistics

Trucked c 70km to Cape Preston East

Exported directly from Mardie Port

SOP logistics

Trucked c 100km to Dampier Cargo Wharf

Exported directly from Mardie Port

Capex estimate

A$335m

A$498m

+48.7

Sustaining capex

A$1.7m pa

A$6.0m pa

+252.9

Salt cash cost estimate

A$20/t

A$16/t

-20

SOP cash cost estimate

A$250/t

A$211/t

-15.6

Operating life

30yrs

60yrs

+100.0

Salt price

US$30/t FOB

US$30/t FOB

u/c

SOP price

US$500/t FOB

US$500/t FOB

u/c

Exchange rate

US$0.75/A$

US$0.70/A$

-6.7

Exchange rate

A$1.3333/US$

A$1.4286/US$

+7.1

Outputs

Pre-tax NPV101

  Using a 10% discount rate.

A$335m

A$560m

+67.2

Pre-tax NPV82

  Using an 8% discount rate.

N/D

A$875m

N/A

IRR

20.1%

20.3%

u/c

Annual EBITDA

A$102m

A$155m

+52.0

Source: BCI Minerals, Edison Investment Research. Note: *The results of the Mardie PFS were announced to the market in June 2018.

Operational and capital cost estimates for the purposes of the PFS optimisation study were undertaken to an accuracy of ±25% (cf -15% to +25% for the PFS), qualifying it as an AACE Class 4 estimate (as before), as defined under Association for the Advancement of Cost Engineering Recommended Practice Number 18R-97 (ie a pre-feasibility study). In the meantime, Mardie’s projected operational life of 60 years is predicated upon the grant of a mining licence for 21 years plus two extensions (3 × 21 = 63) minus three years for construction.

Capex

To achieve the increase in production, BCI and its independent experts increased the project footprint layout to 79km2 for the concentrator ponds and 20km2 for the crystallisers. Both of these increased parameters were factored into the Environmental Review Document submitted to the Environmental Protection Agency (EPA) in April this year.

As a result, total capex for the Mardie project is now estimated to be A$498m (cf A$335m previously), comprising A$401m for the salt production circuit and port and A$97m for the SOP production circuit, with almost all of the increase accounted for by the inclusion of the Mardie port into the new project scope.

Exhibit 2: Mardie capex estimate by project component, PFS optimisation study vs PFS

Salt capex

SOP capex

Total capex

Description

Previous
(A$m)

Optimised (A$m)

Previous
(A$m)

Optimised (A$m)

Previous
(A$m)

Optimised (A$m)

Concentrator and crystalliser ponds

62

70

15

16

77

86

Processing

25

29

46

50

71

79

Supporting infrastructure

14

18

4

5

18

23

Accommodation village

1

0

1

Port

73

200

0

4

73

204

Temporary construction services

10

4

15

Project management

14

7

21

Owner’s costs

28

51

4

14

32

65

Contingency

21

33

7

8

28

41

Total

248

401

87

97

335

498

Source: BCI, Edison Investment Research. Note: Totals may not add up owing to rounding.

The Mardie Port will comprise a trestle jetty with a conveyor (or light rail) and road, designed to traverse the intertidal zone for c 3km before extending into the ocean for a further 3.5km to reach ship loading infrastructure and a transhipment berth pocket. Salt will be conveyed in bulk form to the end of the jetty before being loaded onto transhipment vessels via a ship loader and transhipped to ocean going vessels anchored c 15 nautical miles (17 miles or 28km) offshore. SOP will be exported in a similar manner, albeit via a crane onto smaller vessels and packaged in bulka bags (that typically measure 90cm × 90cm × 120cm).

BCI’s contracting strategy is designed to ensure it has adequate control over key production processes, but that non-production activities (eg accommodation, power supply, etc) are contracted out. Consequently, these are excluded from Mardie’s capital cost estimate but are included in its opex estimate (below).

Opex

The main consequence of developing a dedicated port at the Mardie site is that it obviates road haulage costs, as shown in the updated schedule of operating costs reproduced below:

Exhibit 3: Mardie salt and SOP opex estimates (A$/t), PFS optimisation study vs PFS

Salt

Potash

Description

Previous
(A$/t)

Optimised

(A$/t)

Previous
(A$/t)

Optimised

(A$/t)

Production (Mardie site)

5.8

6.25

171.4

147.00

Haulage

3.3

0.00

7.1

0.00

Port handling & transhipment

5.3

4.85

20.0

12.20

Corporate & overheads

1.9

1.80

0.0

0.00

Contingency

1.6

1.30

19.9

15.90

C1 cash costs (FOB)

17.9

14.20

218.4

175.10

Marketing (2% of revenue)

0.8

0.85

12.8

14.30

State government royalty

*0.7

0.75

**16.0

17.85

Native title royalty (0.5% of revenue)

0.2

0.20

3.2

3.55

Cash costs (FOB)

19.7

16.00

250.4

210.80

Sustaining capex

0.3

1.00

10.0

20.00

All in sustaining costs (AISC)

19.9

17.00

260.4

230.80

Source: BCI. Note: *A$0.73/t for salt and **2.5% of revenue for SOP; totals may not add up owing to rounding.

Note that operating cost estimates have been calculated on a free on board (FOB) basis.

Valuation considerations

On the basis of the above assumptions and that the first full years of production are FY24 and FY26 for salt and SOP, respectively, we estimate the following valuations for the project (assuming a 30% standard rate of corporate tax in Australia):

Exhibit 4: Mardie valuation, Edison vs PFS optimisation study and PFS

PFS

PFS Optimisation Study

Item

Mardie PFS

Edison

Mardie optimised PFS

Edison

A$/US$

1.3333

1.4008

1.4286

1.4547

Project life (years)

30

30

60

60

Steady-state annual EBITDA (A$m)

102

111.7

155

153

Pre-tax NPV10 (A$m)

335

*396.0

560

595.5

Pre-tax NPV10 per existing BCI share (Australian cents)

84

99.6

140.9

149.8

Pre-tax NPV8 (A$m)

N/D

N/D

875

930.2

Pre-tax NPV8 per existing BCI share (Australian cents)

N/D

N/D

220.1

234.0

Pre-tax IRR (%)

20.1

20.7

20.3

20.0

Payback

5

5

5

5

Post-tax NPV10 (A$m)

N/D

*234.3

N/D

345.5

Post-tax NPV10 per existing BCI share (Australian cents)

N/D

58.9

N/D

86.9

Source: BCI, Edison Investment Research. Note: *Discounted back to the start of capex.

Note that the extent by which our NPV estimates exceed those of the formal studies can largely be explained by its adoption of a (weaker) prevailing forex rate in its calculations.

In our report Gold stars and Black holes: Analysing the discount: From resource to sanction, published in January 2019, we observed that, excluding outliers, the maximum and minimum valuations for companies with projects at different stages of development are as follows (Exhibits 166 and 173 of the original report):

Exhibit 5: Company EV as percent of attributable project NPV (%), by study type, ordinarily valued companies, excluding statistical outliers

Percent

Scoping study/PEA

PFS

BFS/DFS

Maximum

50.7

51.3

133.5

Mean

11.7

9.9

30.9

Minimum

-4.8

-15.4

-10.1

Source: Edison Investment Research

Assuming a post-tax NPV of 70% of pre-tax NPV of A$560m (as per its formal PFS optimisation study), an average valuation for BCI of 9.9% of Mardie’s NPV (excluding its other assets) would be A$38.8m, or 9.76 cents per share (cf A$23.2m, or 5.84cps, previously). If the DFS on Mardie is completed on approximately the same terms, however, we would expect this valuation to increase more than threefold, to c 30.9% of NPV, or 30.46c per share (cf 18.22c/share, previously). Note that this excludes the 19.51c at which we valued BCI’s other operating assets in our Outlook report, BCI Minerals: Salt plus potash plus iron equals value, published on 7 February 2019. It also excludes the 2.43c value of BCI’s other non-operating assets (ie Buckland – see BCI Minerals: Increasing iron ore royalties supporting Mardie, published on 16 April 2019).

In the meantime, BCI has stated that it will advance development funding options for the project in detail during the preparation of the Mardie DFS. Currently, project development capex of A$498m is ‘likely to be funded from a combination of project debt, equity, product offtake pre-commitments and via build-own-operate (or similar) models where feasible.’ However, it has also said it ‘will consider all feasible funding structures for the equity component including raising equity in BCI for investment into the project, or raising direct equity into the project’. In addition, its plans to develop a port at Mardie may attract concessional debt funding via Australia’s federal NAIF.

Edison’s financial model assumes that BCI funds Mardie via equity into the company, in which case we estimate that the company would have to raise A$195.3m (gross) in FY20 (cf c A$100m previously) to maintain a maximum leverage ratio (net debt/[net debt+equity]) of no more than 50% in FY23 when net debt to fund the project would peak at A$273.9m (cf A$191.9m previously) – some of the equity having been provided in the form of retained earnings from income from BCI’s Iron Valley interests. If conducted at the current share price of A$0.195 (cf A$0.16 previously), our long-term estimates of BCI’s earnings (maximum potential), dividends per share and valuation trajectory are then as follows:

Exhibit 6: BCI EPS and (maximum potential) DPS forecasts, FY18–83

Source: Edison Investment Research. Note: Income derived from Iron Valley and Mardie, combined; no contribution assumed from Buckland or any other assets.

Discounting at our customary discount rate of 10% per year, the (fully diluted) value of these cash flows to shareholders is 35.13 Australian cents (cf 31.62c at the time of our update note, BCI Minerals: Increasing iron ore royalties supporting Mardie, published on 16 April 2019) as at 1 July 2018, rising to 38.64c at 1 July 2019. To this should then be added a further 2.43c for its Buckland assets to take the total to 37.56c

Note that our valuation, on this basis, peaks at 80.12 Australian cents in FY28 (cf 70.66c previously), when EPS will be 5.77c (cf 5.43c previously), therefore putting BCI on a contemporary P/E ratio of 13.9x. Self-evidently, this valuation could increase further to the extent that iron ore prices remain at elevated levels beyond June 2019.

Other matters

Politics

Last weekend, Australia concluded a general election in which all 151 seats in the House of Representatives (lower house) and 40 of the 76 seats in the Senate (upper house) were up for election (note that Australia enforces compulsory voting). In yet another upset to the pre-election polls, the incumbent minority coalition government, led by Prime Minister Scott Morrison, won a third three-year term against the Labor (sic) opposition, winning enough seats to form a right-of-centre Liberal majority government in its own right.

Australian interest rates are set by the Reserve Bank of Australia, which is independent. Nevertheless, on the basis of the Liberals’ pre-election manifesto, the new government is expected to pursue economic policies that are consistent with low domestic interest rates to keep the Australian unit of currency weak in order to maintain the competitiveness of its exports – a policy that should align favourably with BCI’s and Mardie’s development initiatives.

Economics

At the same time as the Australian dollar has been weakening in response to political considerations, the prices of both standard grade 62% iron ore and 58% lower grade ore have continued to exhibit material strength and the discount of the latter to the former has continued to narrow.

Exhibit 7: 62% iron ore price (US$/t) vs 58% iron ore price, July 2014–present

Exhibit 8: Discount of 58% iron ore price vs 62% iron ore price, July 2014–present (%)

Source: Refinitiv, Edison Investment Research

Source: Refinitiv, Edison Investment Research

Exhibit 7: 62% iron ore price (US$/t) vs 58% iron ore price, July 2014–present

Source: Refinitiv, Edison Investment Research

Exhibit 8: Discount of 58% iron ore price vs 62% iron ore price, July 2014–present (%)

Source: Refinitiv, Edison Investment Research

Our forecasts for BCI for FY19 are predicated on a Q419 58% iron ore price of US$78.54/t, whereas (on current trends) the price actually looks likely to average US$79.46/t, as the shortage of iron ore supply as a result of Brazilian mine shutdowns in the wake of Vale’s tailings dams disasters continues to squeeze prices higher. Self-evidently, the extent to which this trend continues into the future will affect our earnings forecasts and Iron Valley valuation positively, especially into FY20 and beyond.

Exhibit 9: Financial summary

A$000s

2015

2016

2017

2018

2019e

2020e

Year end 30 June

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

281,211

151,279

64,324

33,029

60,737

59,775

Cost of Sales

(278,465)

(158,210)

(55,190)

(47,442)

(64,913)

(60,412)

Gross Profit

2,746

(6,931)

9,134

(14,413)

(4,176)

(637)

EBITDA

 

 

2,746

(6,931)

9,134

(14,413)

(4,176)

(637)

Operating Profit (before amort. and except.)

(26,090)

(12,622)

5,665

(17,330)

(7,093)

(3,554)

Intangible Amortisation

0

0

0

0

0

0

Exceptionals

(170,881)

(40,108)

(302)

0

17,818

0

Other

(2,935)

812

(5)

0

0

0

Operating Profit

(199,906)

(51,918)

5,358

(17,330)

10,725

(3,554)

Net Interest

(3,505)

(951)

311

420

98

413

Profit Before Tax (norm)

 

 

(29,595)

(13,573)

5,976

(16,910)

(6,995)

(3,141)

Profit Before Tax (FRS 3)

 

 

(203,411)

(52,869)

5,669

(16,910)

10,823

(3,141)

Tax

44,912

(27,086)

0

0

1,510

0

Profit After Tax (norm)

12,382

(39,847)

5,971

(16,910)

(5,485)

(3,141)

Profit After Tax (FRS 3)

(158,499)

(79,955)

5,669

(16,910)

12,333

(3,141)

Average Number of Shares Outstanding (m)

174.8

196.2

316.7

394.6

396.1

898.3

EPS - normalised (c)

 

 

7.1

(20.3)

1.9

(4.3)

(1.4)

(0.3)

EPS - normalised and fully diluted (c)

 

7.1

(19.5)

1.9

(4.3)

(1.3)

(0.3)

EPS - (IFRS) (c)

 

 

(90.7)

(40.8)

1.8

(4.3)

3.1

(0.3)

Dividend per share (p)

0.0

0.0

0.0

0.0

0.0

0.0

Gross Margin (%)

1.0

-4.6

14.2

-43.6

-6.9

-1.1

EBITDA Margin (%)

1.0

-4.6

14.2

-43.6

-6.9

-1.1

Operating Margin (before GW and except.) (%)

-9.3

-8.3

8.8

-52.5

-11.7

-5.9

BALANCE SHEET

Fixed Assets

 

 

154,904

86,546

78,059

85,768

78,669

190,312

Intangible Assets

60,237

33,618

33,063

43,615

39,433

44,433

Tangible Assets

94,667

52,928

44,996

42,153

39,236

145,879

Investments

0

0

0

0

0

0

Current Assets

 

 

102,374

23,204

46,429

20,270

42,607

112,907

Stocks

9,886

61

0

0

83

82

Debtors

24,427

13,694

10,053

7,213

14,976

14,739

Cash

67,671

9,449

36,376

13,057

27,548

98,086

Other

390

0

0

0

0

0

Current Liabilities

 

 

(77,222)

(21,769)

(12,107)

(9,373)

(12,279)

(11,864)

Creditors

(70,947)

(19,749)

(12,107)

(9,373)

(12,279)

(11,864)

Short term borrowings

(6,275)

(2,020)

0

0

0

0

Long Term Liabilities

 

 

(20,773)

(11,307)

(5,225)

(6,054)

(6,054)

(6,054)

Long term borrowings

0

0

0

0

0

0

Other long term liabilities

(20,773)

(11,307)

(5,225)

(6,054)

(6,054)

(6,054)

Net Assets

 

 

159,283

76,674

107,156

90,611

102,944

285,302

CASH FLOW

Operating Cash Flow

 

 

(77,686)

(19,721)

11,860

(11,957)

(9,117)

(814)

Net Interest

(1,120)

0

0

0

98

413

Tax

44,912

(27,086)

0

0

1,510

0

Capex

(10,987)

(8,075)

(2,220)

(10,074)

(5,000)

(114,560)

Acquisitions/disposals

24,338

0

(5,151)

(1,288)

27,000

0

Financing

6,118

1,510

24,403

0

0

185,499

Dividends

(18,652)

0

0

0

0

0

Net Cash Flow

(33,077)

(53,372)

28,892

(23,319)

14,491

70,538

Opening net debt/(cash)

 

 

(94,473)

(61,396)

(7,429)

(36,376)

(13,057)

(27,548)

HP finance leases initiated

0

0

0

0

0

0

Other

0

(595)

55

0

0

0

Closing net debt/(cash)

 

 

(61,396)

(7,429)

(36,376)

(13,057)

(27,548)

(98,086)

Source: Company sources, Edison Investment Research.

General disclaimer and copyright

This report has been commissioned by BCI Minerals and prepared and issued by Edison, in consideration of a fee payable by BCI MInerals. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by BCI Minerals and prepared and issued by Edison, in consideration of a fee payable by BCI MInerals. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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