Perwaja

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

The concentrate and palletizing plant when commissioned will significantly reduce the company’s production cost and position its products at more competitive pricing.