Perwaja - It is on track to get a giant share in one of the largest iron oremines in Malaysia

It is on track to get a giant share in one of the largest iron oremines in Malaysia, fending off competition from other local steel playerseyeing the mine located in resources rich Terengganu.

State government officials say they are evaluating the iron ore miningconcession in Bukit Besi but are committed to giving Perwaja a large tract asthey had agreed in 2011.

Perwaja is in the advanced stages of completing an iron ore concentrateand palletizing plant. The plant needs iron ore as raw material and Perwaja hadapplied for a long term concession in Bukit Besi. The state government agreedin 2011 but with no new developments, there were concerns about the delay inawarding the concession.

It is on track to complete the first phase of the iron ore concentrateand palletizing plant by 1QFY2013. The output will be used by Perwaja toproduce DRI, which is eventually processed into steel.

With the supply of iron ore from domestic sources the cost ofproduction DRI will be cheaper. Perwaja will not be exposed to the volatileprices of imported iron ore that caused it to suffer margin compression inmargins in the past.

Apart from Perwaja, Hiap Teck is poised to get an iron ore miningconcession in Terengganu. It has yet to get the documentation on the award ofthe concession.

The Lion group is also eyeing an iron ore concession in Bukit Besi.

Since FY2008 ended Dec 31, Perwaja has been recording losses. Howeverits cash flow from operations was in excess of rm50 million indicating theoperations are cash flow positive.

In the 1QFY2012 it posted a net profit of rm16.2 million.

The concentrate and palletizing plant when commissioned willsignificantly reduce the company’s production cost and position itsproducts at more competitive pricing.