Importantly, development work carried out at the mine will allow ore mining to begin over the next few days with the first shipment of iron ore expected in December this year.
"This is a defining moment for the Mining Industry in Tasmania and truly a humbling experience for us at Shree Minerals," chairman Sanjay Loyalka said.
"With the NBR DSO project commencing production, we believe that Shree Minerals is now at an inflection point in its objective to create shareholder wealth. The development of NBR at benchmark capital costs & time despite the adverse climate, reinforces our core value of "Passion" to build a platform for growth."
Nelson Bay River Mine
The project is located in the west coast of Tasmania, in an area rich with infrastructure including proximity to roads and port.
Nelson Bay River currently has a goethite-hematite Inferred Resource of 1.4 million tonnes and magnetite Resources of 7.8 million tonnes at 38.3% DTR. It is expected to produce 400,000 tonnes of iron ore per annum.
The hematite ore is similar to ore found in Western Australia's Pilbara region; low alumina and a premium product and easy-to-extract.
The production schedule for the first stage of the project is to develop two relatively shallow open-cut mines to produce direct shipping grade hematite ore, which will require just crushing and sizing.
The second stage involves the continuation of mining of the second open-cut situated above the main magnetite orebody.
The hematite oxide cap consists of the central DSO ore section mined in stage one which is surrounded by lower grade ore considered to have potential to produce a commercial beneficiated oxide product.
Shree will then move to the third stage of the project, which involves open-cut mining of the deep magnetite orebody beneath the oxide cap.
DSO Project Economics
Production from Nelson Bay River should generate $110-$130 million for the mining of DSO+BFO material which will generate strong near term cash flows in 2013/14 and transform Shree Minerals from explorer to producer.
Projected earnings from Stage 1 NBR Project for Shree Minerals are compelling - with potential to earn between $16 million to $18 million over two and a half years.
In May, Shree entered into an offtake agreement for its Nelson Bay River Iron Ore DSO Project in Tasmania with Singapore based trader Frost Global.
Importantly, Frost will provide US$4 million in funding to progress development of the project by way of an advance towards the supply of iron ore.
This will be paid back over the first eight shipments of iron ore, or US$500,000 per shipment.
Shree Mineral's transformation to producer is almost complete. From exploration in 2010 by Pilbara iron ore explorer Mahendra Pal to first Maiden Reserves in 2012, along with the mine plan for the first couple of years of DSO operation.
Requisite studies have been completed for the DSO phase to a bankable feasibility level
Now with first ore to be shipped in December this year, Shree Minerals' current share price of $0.18 offers investors a transformational opportunity to take up a stake in a soon to be iron producer at a discount to its intrinsic value.
Based on DSO material, output from Nelson River of 400,000 tonnes per annum, could produce a net cash flow of $16 million per annum from DSO production for Shree Minerals.
This is against a current market cap. of just $17 million, indicating that at times opportunity knocks.
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