Gulf?s manganese project has potential to return $628m EBITDA

By Romel S. Gurky

ASX-listed Gulf Manganese Corporation Limited (GMC), formally Gulf Minerals Corporation Limited, revealed on Monday the findings from the Timor Smelter Study regarding the development of a smelting and sales marketing business to produce high carbon ferromanganese alloys in Timor, which is to be carried out through GMC?s Indonesian-based subsidiary PT Gulf Mangan Grup.

The financial analysis of the study shows that the project has the potential to return an EDITDA of US $623.8 million over a 20 year period supporting an estimated Net Present Value of $201.4 million, using an 8% discount factor.

In commenting on the significance of the study, Gulf Manganese Chairman, Graham Anderson said: ?We are pleased to be able to provide shareholders with this Study as it further validates our early belief of the highly prospective nature of the project and our ability to stage a process of ultimately delivering a highly profitable outcome for all shareholders?.

The project requires a modest start-up capital investment of $67.5 million, which is staged over 4 years, plus working capital, and provides estimated returns supporting an internal rate of return of 45.6%.

As described in the study, GMC will develop a fully integrated manganese business that provides the following value propositions:
? Sound project economics
? Operating costs at 80% industry average cost
? Highest quality ore supply (+50% Mn)
? Producing a premium manganese alloy (78%Mn)
? Established port and infrastructure
? Government full support, fiscal incentives of 10 year Tax Holiday
? Board/Management depth of manganese and Indonesian experience
? Global sales network
? Modest capital requirement
? Early cash flow from exporting ore
? Proposed Singapore listing
? Robust dividend policy with distribution of 50% of profits.

Editing by Johannes Simbolon