Update: BC Iron Is Back At 6 Mtpa At Nullagine

| About: BC Iron (BIRNF)
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BC Iron has successfully implemented operational changes and is back on track.

This is a positive surprise as I feared the clay-ish ore issue would take longer to solve.

The investment thesis has been severely impacted by the iron ore price crash. I will have to have another close look at the company in the current price environment.

BC Iron (OTC:BIRNF) has announced it was successful in ramping up its production once again to the level of 6 million wet metric tonnes per year after it temporarily had to reduce its production rate. It looks like the issue with the 'clay-ish' ore is now been resolved as BC Iron has implemented some operational adjustments and BC Iron allegedly clearly sees a benefit. This was important as it needed to get its production rate back up to 6 million wet metric tonnes per year. Now the project is running at full capacity again, BC Iron was able to reiterate the 2015 production target of 5.2-5.6M wmt.

As the iron price doesn't show any signs of improvement yet, BCI is also trying to tackle some additional costs. It has identified some measures which will allow the company to save $1.7-2.5 per wet metric tonne without doing much effort. As part of the savings, a more expensive road haulage contract has been cancelled and some consultants were thanked for their services and made redundant. The all-in cost for BC's iron ore is now expected to be $47-52 per wet metric tonne. As the freight cost has come down substantially I do expect the all-in cost to be reduced a bit more and it looks like BC Iron might be able to post a break-even result in FY 2015. However, shareholders shouldn't be hoping for a dividend this year as I think it'd be wiser to keep all the cash inside the company as a buffer.

I got killed by the BC Iron share price this year as it's down 92.5% from its 52-week high. However, the company is now trading at around its net cash value (or even below its cash value) so you basically now get the iron ore projects for free. I plan to average down now the company is trading at around $0.35 (but I will buy my shares on the Australian Stock Exchange).

Disclosure: The author is long BIRNF.

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