Joe,
Perhaps IVN is down because the market is concerned that the Savage River Iron Ore mine might drag down IVN in a similar fashion to how Shooting Star Gallery sunk Itemus(another company on the Friedland corporate scrap pile)? See the article below. Also, the market may have written off Freidland for rolling in the Savage River "assets" for about 50% of IVN. As for the Chinese porphyry copper-gold project currently being drilled, its just an exploration liability with lots of political risk attached to it.
Weakening global iron demand puts the bite on Savage River
James Hamilton
06 August 2001
THE immediate viability of Ivanhoe Mines' Savage River iron ore mine in Tasmania has been left open to question after the company announced on Friday that the operation was to undergo a major restructuring.
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Weakening global iron demand puts the bite on Savage River
Savage River, which is run through Ivanhoe subsidiary Goldamere Pty Ltd, has been hit hard by the slowdown in the global steel industry and resulting weaker demand for its iron ore pellets.
Savage River is hurting as global demand for iron ore weakens.
Already this year Goldamere's customers have cancelled three shipments of pellets, or 148,000 tonnes of product, and the company says it is unsure whether "additional scheduled shipments will be deferred or cancelled". Currently, the cancellations represent about US$4 million in lost revenue.
Speaking in Singapore, Ivanhoe Mines president Daniel Kunz said the restructuring of the mine plan and financing for Savage River had become a priority.
He said Goldamere had received a two-month deferral of its currency hedge obligations with its major creditor, UBS Australia Ltd. Kunz said the agreement with UBS (which is subject to certain conditions) provides a period of interim liquidity relief during which Goldamere will attempt to negotiate with its major stakeholders.
The credit facility Goldamere struck with UBS Australia on June 30 this year consisted of a A$36 million project loan and an obligation to deliver US$100 million under a foreign currency hedge which on a marked-to-market basis would result in an accrued loss of about US$26 million.
But this arrangement is hurting Goldamere greatly.
The hedge arrangement requires Goldamere to deliver US$5 million a month until February 2003 in exchange for A$7.33 million. The hedge, locked in at an exchange rate of US68.17c, currently costs the company about A$30 million a year, or A$2.5 million per month, in foregone revenue.
"It is essential that Goldamere acts decisively in the face of weakening iron demand," Kunz said. "There are no immediate prospects for an early recovery in the iron market, so Goldamere must explore all possible cost savings that could help mitigate the financial impact of the downturn."
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