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ASX Code: FWL
29 July 2008
QUARTERLY ACTIVITY REPORT – JUNE 2008
Discussion progressed for off-take and investment
Capital raising by way of Convertible Notes advanced
Definitive Engineering Study activities continued
Western Haematite Prospect JV discussions underway
During the June 2008 Quarter the Company undertook the following:
Off-take & Investment Discussions – Yalgoo Iron Project
During the Quarter the Company hosted due-diligence visits to its Yalgoo Iron
Project (“the Project”) by potential merchant pig iron (“MPI”) customers and
other parties interested in product off-take and/or investment in the Project.
Discussion held during the Quarter has narrowed potential parties to four groups
that may separately, or in some combination, play a role in the development of
the Project.
Proposals vary from group to group but include funding to complete the
feasibility studies, providing other forms of financial assistance and potential
investment in the construction capital raising that will be required to build the
Project. In return the groups are seeking long term access to some percentage
of the proposed MPI production.
The Company is very pleased with the calibre of the groups seeking to assist the
Project as each of the four remaining are longstanding financially robust
organisations with excellent international reputations that will ensure the ability
of the Project to market its product and will add significant financial profile and
technical expertise to the Project’s credentials.
The Company hopes to secure key agreements with some or all of these groups
during the current quarter.
Convertible Note Raising
The Company continued to raise capital during the Quarter under the
Convertible Note offer announced at the end of March. In a very difficult
financial market the Convertible Notes have allowed the Company to continue
to fund its activities until funding agreements are finalised with off-take parties.
Phone: +61 8 9277 2600
Web Site: www.ferrowest.com.au
Email: info@ferrowest.com.au
Definitive Engineering Study
Activities on the Definitive Engineering Study into the Project during the
quarter have concentrated on assessing a proposed change of initial production
scale from 0.5 million tonnes per annum to 1.0 million tonnes per annum, which
was announced subsequent to the end of the quarter.
The Company’s engineering team also conducted technical briefings, project site
visits and responded to technical queries from the potential off-take and
investment parties that were conducting their respective due-diligence activities.
The quality and thoroughness of the Company’s study activities, particularly in
respect to exploration and resource evaluation has been positively reported back
to the Board by these parties.
As announced to the market, difficulty in securing drilling rigs has delayed the
completion of drilling required for the Resource upgrade at Yogi but during the
quarter further field reconnaissance was undertaken that resulted in the
identification of the Western Haematite Prospect. This potential direct shipping
iron ore (“DSO”) project adds another project to the Company’s business
activities, which if suitable, could provide early cash-flow during the
development of the Company’s ‘flagship’ operation, the Yalgoo Iron Project.
The Company also worked on two natural gas tenders during the quarter in what
is expected to be an ongoing process to secure the natural gas requirements for
the Project between now and early 2009.
As reported during the Quarter, MPI prices have jumped 120% in the last 12
months and are now 150% higher than the prices the Company used in its
financial analysis of the Project at the Preliminary Feasibility Study stage in July
2007. During the quarter the financial model was updated with the current high
sale prices and higher cost factors brought about by increases in oil and coal
prices in particular.
The results demonstrated that despite the strong Australian dollar and higher
input costs, the overall economics of the Project would be very strong if the
Project were operating in the current economic climate. The Company intends
however, to continue to use more conservative long term price assumptions in
the preparation of the financial analysis of the Project at the completion of the
Definitive Engineering Study. The Company remains confident that the Project
will remain financially robust under a variety of economic conditions and
vindicates the business plan approach of adding value to iron in order to secure
stronger operating margins and a more robust long term financial performance.
Phone: +61 8 9277 2600
Web Site: www.ferrowest.com.au
Email: info@ferrowest.com.au
In events subsequent to the end of the June 2008 Quarter:
The Company is continuing discussions with certain groups in respect of off-
take and investment in the Project and hopes to conclude key agreements
during the current quarter.
Further funds have been raised subsequent to the end of the June 2008
Quarter under the Convertible Note raising discussed above.
The Company is investigating how it might fast-track exploration of the
Western Haematite Prospect while maintaining its focus on the Yalgoo Iron
Project. Since announcing the Western Haematite Prospect, the Company
has been approached by several companies interested in funding the
exploration, and if feasible the development in exchange for a joint venture
interest in the project. This approach is very attractive to the Company
because it removes all risk from Ferrowest, provides all the funds necessary
without diverting resources from the Yalgoo Iron Project and still allows the
Company to manage the JV and apply its corporate expertise in iron to this
exciting opportunity. The Company will continue to advise the market as
discussions unfold.
Media inquiries should be directed to: Brett Manning – Managing Director +61 8 9277 2600
The Yalgoo Iron Project - Outline
Ferrowest Limited is developing the Yalgoo Iron Project aimed at producing seaborne traded
merchant pig iron (96%Fe) from the Yogi magnetite deposit near Yalgoo in the mid west region
of Western Australia. Proposed initial production is 1,000,000 tonnes per annum. The plan to
process the iron ore to pig iron is premised on the ITmk3® technology and excellent existing
infrastructure servicing the Project area. The resulting value added merchant pig iron product
will be a relatively high margin, high quality, low volume product for export to quality electric
arc furnace steel making plants worldwide.
The Western Haematite Prospect – Outline
Ferrowest Limited has identified a potential zone of direct shipping ore (“DSO”) grade
haematite at its Yogi iron ore deposit 14 km east of Yalgoo in the mid west of Western Australia.
The prospect is to the west of the main magnetite ore body that forms the basis of the Yalgoo
Iron Project. With a surface expression of 2km in length and with varying widths up to 50m
wide it has significant potential as a DSO project. Surface rock chip sampling along the
Western Haematite Prospect produced an average grade of 55%Fe. Exploration of this deposit
is currently underway.
The information in this report that relates to Exploration Results, Mineral Resources or Ore Reserves is based
on information compiled by Graeme Johnston, a Fellow of the Geological Society of London.
Graeme Johnston is a Director of the Company and a geological consultant to it through Corad Pty Ltd.
Graeme Johnston has sufficient experience which is relevant to the style of mineralisation and type of deposit
under consideration and to the activity which he is undertaking to qualify as a ‘Competent Person’ as defined in
the 2004 Edition of the ‘Australian Code for Reporting of Exploration Results, Mineral Resources and Ore
Reserves’. Graeme Johnston consents to the inclusion in this report of the matters based on his information in
the form and context in which it appears.
Phone: +61 8 9277 2600
Web Site: www.ferrowest.com.au
Email: info@ferrowest.com.au
Appendix 5B
Mining exploration entity quarterly report
Rule 5.3
Appendix 5B
Mining exploration entity quarterly report
Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98, 30/9/2001.
Name of entity
FERROWEST LIMITED
ABN Quarter ended (“current quarter”)
14 074 009 091 30 June 2008
Consolidated statement of cash flows
Current quarter Year to date
Cash flows related to operating activities $A (12 months)
$A
1.1 Receipts from product sales and related debtors - -
1.2 Payments for (a) exploration and evaluation (151,757) (2,838,427)
(b) development
(c) production
(d) administration (286,173) (1,012,226)
1.3 Dividends received
1.4 Interest and other items of a similar nature 3,251 67,832
received
1.5 Interest and other costs of finance paid (20,878) (45,921)
1.6 Income taxes paid
1.7 Other - GST recoverable 155,779 105,624
Net Operating Cash Flows (299,778) (3,723,118)
Cash flows related to investing activities
1.8 Payment for purchases of: (a)prospects - -
(b)equity investments - -
(c) other fixed assets (24,486) (176,846)
1.9 Proceeds from sale of: (a)prospects - -
(b)equity investments - -
(c)other fixed assets - -
1.10 Loans to other entities - -
1.11 Loans repaid by other entities - -
1.12 Other – Bonds - (46,000)
Net investing cash flows (24,486) (222,846)
1.13 Total operating and investing cash flows (carried
forward) (324,264) (3,945,964)
+ See chapter 19 for defined terms.
30/9/2001 Appendix 5B Page 1
Appendix 5B
Mining exploration entity quarterly report
1.13 Total operating and investing cash flows
(brought forward) (324,264) (3,945,964)
Cash flows related to financing activities
1.14 Proceeds from issues of shares, options, etc. - 2,116,859
1.15 Proceeds from sale of forfeited shares
1.16 Proceeds from borrowings 295,000 510,000
1.17 Repayment of borrowings
1.18 Dividends paid
1.19 Capital raising costs - (145,599)
295,000 2,481,260
Net financing cash flows
Net increase (decrease) in cash held (29,264) (1,464,704)
1.20 Cash at beginning of quarter/year to date 107,123 1,542,563
1.21 Exchange rate adjustments to item 1.20
77,859 77,859
1.22 Cash at end of quarter
Payments to directors of the entity and associates of the directors
Payments to related entities of the entity and associates of the related entities
Current quarter
$A
1.23 Aggregate amount of payments to the parties included in item 1.2 47,731
-
1.24 Aggregate amount of loans to the parties included in item 1.10
1.25 Explanation necessary for an understanding of the transactions
Non-cash financing and investing activities
2.1 Details of financing and investing transactions which have had a material effect on consolidated
assets and liabilities but did not involve cash flows
2.2 Details of outlays made by other entities to establish or increase their share in projects in which the
reporting entity has an interest
Financing facilities available
Add notes as necessary for an understanding of the position.
Amount available Amount used
$A $A
3.1 Loan facilities - -
3.2 Credit standby arrangements - -
Estimated cash outflows for next quarter
+ See chapter 19 for defined terms.
Appendix 5B Page 2 30/9/2001
Appendix 5B
Mining exploration entity quarterly report
$A
4.1 Exploration and evaluation 200,000
4.2 Development -
Total 200,000
Reconciliation of cash
Reconciliation of cash at the end of the quarter (as Current quarter Previous quarter
shown in the consolidated statement of cash flows) to $A $A
the related items in the accounts is as follows.
5.1 Cash on hand and at bank 77,859 107,123
- -
5.2 Deposits at call
- -
5.3 Bank overdraft
- -
5.4 Other (provide details)
77,859 107,123
Total: cash at end of quarter (item 1.22)
Changes in interests in mining tenements
Tenement Nature of interest Interest at Interest at
reference (note (2)) beginning end of
of quarter quarter
6.1 Interests in mining
tenements relinquished,
reduced or lapsed
6.2 Interests in mining
tenements acquired or
increased
+ See chapter 19 for defined terms.
30/9/2001 Appendix 5B Page 3
Appendix 5B
Mining exploration entity quarterly report
Issued and quoted securities at end of current quarter
Description includes rate of interest and any redemption or conversion rights together with prices and dates.
Total number Number quoted Issue price per Amount paid up per
security (see note security (see note 3)
3) (cents) (cents)
7.1 Preference
+securities
(description)
7.2 Changes during
quarter
7.3 +Ordinary 58,703,990 39,153,990
securities
7.4 Changes during
quarter
(a) Increases
through issues
(b) Decreases
through returns of
capital, buy-backs
7.5 +Convertible debt 1,275,000 # - $0.40 face value $0.40 face value
securities
(description)
7.6 Changes during
quarter
(a) Increases 737,500 - $0.40 face value $0.40 face value
through issues
(b) Decreases
through securities
matured, converted
7.7 Options Exercise price Expiry date
(description and 3,325,000 - $0.20 1 January 2011
conversion factor) 26,900,561 26,900,561 $0.25 1 June 2010
580,000 - Various Various
7.8 Issued during
quarter
7.9 Exercised during
quarter
7.10 Expired during
quarter
7.11 Debentures
(totals only)
7.12 Unsecured notes
(totals only)
# The principle terms of the Notes are as follows:
Number: 1,275,000
Face value: $0.40 per Note
Term: 2 years from issue
Conversion price: $0.40 per share
Interest rate: 10%
+ See chapter 19 for defined terms.
Appendix 5B Page 4 30/9/2001
Appendix 5B
Mining exploration entity quarterly report
Compliance statement
1 This statement has been prepared under accounting policies which comply with
accounting standards as defined in the Corporations Act or other standards acceptable
to ASX (see note 4).
2 This statement does /does not* (delete one) give a true and fair view of the matters
disclosed.
Sign here: ............................................................ Date: 29 July 2008
(Director/Company secretary)
Print name: Brett Manning
Notes
1 The quarterly report provides a basis for informing the market how the entity’s
activities have been financed for the past quarter and the effect on its cash position.
An entity wanting to disclose additional information is encouraged to do so, in a note
or notes attached to this report.
2 The “Nature of interest” (items 6.1 and 6.2) includes options in respect of interests in
mining tenements acquired, exercised or lapsed during the reporting period. If the
entity is involved in a joint venture agreement and there are conditions precedent
which will change its percentage interest in a mining tenement, it should disclose the
change of percentage interest and conditions precedent in the list required for items
6.1 and 6.2.
3 Issued and quoted securities The issue price and amount paid up is not required in
items 7.1 and 7.3 for fully paid securities.
4 The definitions in, and provisions of, AASB 1022: Accounting for Extractive
Industries and AASB 1026: Statement of Cash Flows apply to this report.
5 Accounting Standards ASX will accept, for example, the use of International
Accounting Standards for foreign entities. If the standards used do not address a topic,
the Australian standard on that topic (if any) must be complied with.
== == == == ==
+ See chapter 19 for defined terms.
30/9/2001 Appendix 5B Page 5
