Astra Mining aiming high, to tap Asian growth with Frankfurt listing

Astra Mining is an unlisted public company that is based in Australia and holds a 30% ownership in the intellectual property rights operational and manufacturing control of T-Steel, a process to reduce the production costs for steel whilst improving the strength.

The company is currently engaged in a pre-IPO offering to sophisticated investors through KEA Funds Corporate, proposing the issue of 20 million shares at A$0.50, to raise A$10 million in seed capital, which shares will be escrowed for a period of 12 months from the listing date.

Astra aims to list via an IPO on the Frankfurt Stock Exchange from its UK based company known as Astra Resources PLC.

Shareholders of Astra Mining passed all resolutions in relation to the listing of the company on the German exchange.

The company is to be listed through its UK company, Astra Resources PLC before the end August or soon thereafter (or such later date depending on market factors).

T-Steel

The flagship asset of Astra Mining is the 30% interest in T-Steel along with full management and operational control over the technology.

T-Steel is a patented technology that has been proven to substantially reduce the cost of production, and to significantly strengthen produced steel.

The high value intellectual property in T-Steel has been valued at €4.47 billion on a NPV basis (around A$6.18 billion) by a Top 4 accounting firm and is on the verge of large scale commercialisation.

T-Steel has a strong commercial record (under various code names) in Europe. This has immediate effect in China and India who can increase the strength of steel per capita from existing operations, hence reduce the need of the number of new steel plants.

Astra acquired its 30% interest two years ago for $4 million in cash, and now shares the intellectual property with BPS International (a corporation with Hungarians holding 33% of the IP), and Astra Industries (a private company managed by Jaydeep Biswas and Silvana De Cianni, controlling 37% of the IP).

Astra Mining has full management and operational control over the T-Steel technology.

This enables effective delivery of T-Steel to the Chinese and Indian markets. The company’s strategy is to work in partnership, often with developing populated countries, to identify open-cut mines where:

- A resource has been defined;
- Mining licenses are in place (or are imminent);
- Sites are operational, or within 12 months of operation; and
- No major logistical or infrastructure investment is required to bring the mined products to market.

The technology was originally developed in Hungary to produce high quality steel, and has been in continuous use over a period of 35 years, both in Hungary, and various steel mills across Europe.

This process involves the utilisation of unique alloy based formulas that modify the metallurgical properties of steel at a molecular level, and increase its strength by a factor of two. Dr. Farkas Otto, who is a leading metallurgical scientist at the University of Miskolc, has independently verified these claims and also confirmed that the process reduces CO2 emissions by up to a factor of four, when compared to traditional steel manufacturing processes.

Monetising T-Steel

Astra’s business plan consists of two ways to monetise this asset, on the one hand they could produce the high quality steel through their DAM steel mill, and on the other hand there is the option to license the technology for a royalty payment per tonne.

Astra Mining believes royalty charges in the order of €150 tonne should be achievable.
Astra Resources is in negotiations to acquire the DAM steel mill in Hungary for production of T-Steel at a rate of around 500,000 tonnes per year.

The mill is currently shut down and requires €80 million for refurbishment and €30 million for purchase costs, for a total of €110 million. This compares with acquisition costs of between €500 million to €1 billion for a similar type of facility in Germany.

An off-take agreement for the production of steel is currently underway with a large German steel supplier, with re-commencement of steel production at DAM attracting the full support of the Hungarian Government.

Mining project

Negotiations are also underway to acquire an Indian steel plant in the state of Orissa, valued in the range of A$100 - $200 million.

The company may also pursue licensing of the technology, and believes that royalty charges of up to €150 per tonne are possible.

A penetration rate of 1% of the global steel market, which equates to annualised steel production of 14 million tonnes, produces a conceptual annualised royalty stream of €2 billion, which provides Astra with €630 million / A$840 million.

Discounting the royalty to €50 per tonne still produces an annualised royalty stream to Astra of €210 million. Plant upgrade costs to deploy the T-Steel technology are estimated at an attractive €20-30 million per plant.

KPMG has completed a study that assumes a penetration rate of the global steel market by T-Steel technology of 7.5% by 2025, resulting in a Nett Present Value of €4.46 billion, and Internal Rate of Return of 50.7%, based on a Weighted Cost of Capital of 14.1%, for the period 2012 – 2025. This values Astra’s 30% interest at almost €1.5 billion / A$2.0 billion.

Astra is also developing a business plan that will provide the company with an ongoing source of raw materials for its steelmaking business and has secured land and is completing export licenses and permits at the Port of Paradip, which is the major Indian port that serves Eastern and Central India, including the State of Orissa.

Mining projects

Astra Mining has identified a mining cluster of 10 iron ore mines in the Keonjhar district of Orissa, India that has the potential to become an Iron Ore export province. The company already optioned two iron ore projects, and is currently in negotiations with eight others.

There currently is a non-JORC compliant resource estimate of 35 million tonnes at plus 61% Fe, with a potential for an additional 400 million tonnes in the eight other possible acquisitions. An official valuation of the two optioned projects resulted in a combined value of approximately US$360 million.

Astra expects the acquisition costs to come in around $1-3 per tonne of resource.

Options have also been secured over two operating iron ore mines in Orissa, with resources of 35 million tonnes at 61% Fe.

Typical acquisition costs for a 20 million tonne mine outputting 20,000 tonnes of iron ore per month is estimated at $1 – $3 tonne of resource. Upgrading production to a rate of 200,000 tonnes per month is estimated at $10 million. An additional 8 acquisition candidates have been identified within 200 to 400 kilometres of Paradip that are accessible by road and rail.

Cash operating costs are estimated at $80 – 100 per tonne FOB, with long term market pricing of iron ore at $140 per tonne providing Astra a conceptual $400 million in annualised cash flow from acquisition of multiple small scale mines. Addition of a local steel plant to produce T-Steel has additional cash flow potential.

Astra has executed a Joint Venture Agreement over a Nigerian coal resource located in the Kogi District, which is located 60 kilometres from a river that will support barge traffic to an export port.
An exploration license has been secured over a historical non JORC coal resource that was previously drilled, and is estimated to contain 100 million tonnes of coking coal, and 400 million tonnes of thermal coal. A Nigerian iron ore project and steel plant are also under evaluation as a potential T-Steel producer.

Additional projects include a producing gold mine in Cambodia, with potential to grow resources and production up to 300,000 ounces of gold per year.

Negotiations are underway to acquire a producing copper and gold mine in Vietnam and a world class coking coal project in Central Queensland.

A Rockhampton housing project has also been established to complete 3,000 housing units for mining projects in the Bowen Basin. These units are estimated to return approximately 20% based per year based on market rental rates.

Two new renewable energy technologies have been added to the portfolio of projects that includes a technology that produces recycled rubber granules and a reactor that reduces CO2 emissions from carbon burning facilities.

Other projects

Astra is actively seeking partners in developing countries, where open cut mines are already in production, or have production pending and show significant potential for resource upgrades. These mines must be located in areas where no spending is required for infrastructure development, and can be brought into production within 12 months of acquisition.

Additional projects include production of thermal coal, gold, manganese, mine site housing for mining personnel, and several environmental technologies with projects located in Australia, India, Hungary, Vietnam, Cambodia and Africa.

IPO Frankfurt Stock Exchange

Kea Funds Corporate is looking to raise $10 million in seed capital for Astra. It will look to issue 20 million shares at a price of A$0.50.

Astra Mining will then look to raise €1 billion in an initial public offering on the Frankfurt Stock Exchange.

Of the €1 billion, around A$700 million is understood to be already committed. A Korean private company has indicated a willingness to invest A$200 million for a 15% stake. In addition, a major American investment bank has already informally pledged its support to subscribe for a significant portion of the float. 

This means a significant amount of the IPO is already accounted for and significantly de-risks the opportunity.

Renell Wertpapierhandelsbank AG has been retained to assist Astra with their listing process on the FSE, which is expected to occur late August. Renell is one of the top listing brokers for the Deutsche Börse, and has multibillion dollar companies like Commerzbank AG (FSE: CBK) and Deutsche Postbank (FSE: DPB).

While early days, Astra Mining has lofty global ambitions.

It seeks to deliver efficiencies from the steel making process and tapping the expanding resource demands of the world’s largest urbanising nations, China and India.

With Renell Wertpapierhandelsbank AG to assist Astra with their listing process on the Frankfurt Stock Exchange, Renell is one of the top listing brokers for the German Börse, Astra is methodically ticking the boxes.

Originally published at: http://www.proactiveinvestors.com.au/companies/news/18446/astra-mining-aiming-high-to-tap-asian-growth-with-frankfurt-listing-18446.html