Southern Alliance Mining Ltd. (SGX:QNS) is principally involved in the exploration, mining and processing of iron ore. The Group undertakes the exploration, mining and processing activities directly or outsource part of such activities to contractors. The Group is based in Pahang, Malaysia and has been operating the “Chaah Mine” (Iron Ore Open cast mines) located at Johor, Malaysia since 2008. The Group has also been granted the right to carry out exploration and mining operations at three exploration sites (“Exploration Assets”) in Johor, Malaysia.
Operation at the Chaah Mine commenced in 2008. Almost 5.3 million tonnes of iron ore from the Chaah Mine were mined from 2008 to July 2020. The state authority has approved the mining leases at Chaah Mine till March 2039.
Below are three exploration projects being done by the company –
Iron ore extracted from mines are crushed and screened to prepare two different final category of products –
The iron ore processing facility has total monthly capacity of 60,000 tonnes.
Total Mineral Reserve
As at 31 July 2020, the total in situ Ore Reserves for the Chaah Mine was estimated at 5.3 million tonnes at 50.8% Fe (Iron) on the back of in situ Indicated Resources of 5.5 million tonnes at 51.7% Fe, which represents a conversion rate of 96% of Indicated Mineral Resources to Ore Reserves.
During the past 4-year, revenue has increased at a CAGR of 41.2%. Iron ore price during these times has increased from US$60 in 2017 to US$130 in 2020.
Net Current Assets/Liabilities
Company’s net current assets as well as its net assets – both are positive as of FY2020.
Price chart of Iron Ore Price (63.5% Fe)
Market price of iron ore has increased from US$49 in May 2016 to US$206 in May 2021.
Iron ore price is expected to remain high till Q2 2021, due to falling supplies from major miners.
Goldman Sachs expects the market to enter a surplus in the second half of the year on higher Brazilian exports. They expect price to fall back to $110 a tonne by the Q4 2021 and below $100 in 2022.
Its dividend yield is close to 0.5%.
Company is currently valued at almost 2.74 -times its FY2020 revenue. If we account for FY2021 revenue then its P/S will less than 2.
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