Asian Metal: Thank you for accepting this interview. Would you like to introduce yourself briefly?

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Jitesh: I am the commodity manager of Asia Global Commodities, which was founded by a group of individuals in the trading industry for many years. Each of the main shareholders has been trading for over 30 years. Our company differs from other trading firms in that we are increasingly investing directly into the mineral and mining assets. We are currently marketing our iron ore assets in Peru to suitable consumers interested in having a long term supply of high grade material through an off-take arrangement.

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Asian Metal: What is your market position in the steel scrap industry?

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Jitesh: We deal with an average of 5-7,000t/m of steel scrap, mainly via container shipments from Europe and Central America, supplying primarily India and South East Asian countries. Essentially we have 15-20 different countries that we deal with on the consumer side, and purchase material from a number of suppliers that can provide the quality sought at the best possible price.

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Asian Metal: Other than your iron ore assets in Peru, what is your involvement in iron ore trading?

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Jitesh: Regarding iron ore, we have worked in the export of this commodity from Venezuela as a trading company. In addition to this, we supply HBI, DRI fines and HRD out of Venezuela. The last few months trading in iron ore has been poor, mainly because the markets are very pessimistic. We believe the first 3 months of next year to see some improvement as the market begins to stabilise.

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Asian Metal: Can you please elaborate on the Peru iron ore assets?

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Jitesh: The assets in Peru are iron ore mines with estimated reserves of 150 million tonnes. The grades are between 58-66% across all the mines. One of the mines has historical exploitation but the mine owners stopped mining because they ran out of capital. The other three mines are all surface based mines within 120-170km from the Salaverry port.

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Asian Metal: What is the method of mining you will utilise for exploitation?

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Jitesh: All of the mine sites have geologically simple mineralisation structures close to the surface and is ideal for open cast mining. The initial mine we plan to exploit has an overburden of 300m and the other 3 are similar. With the estimates we have on the surface we do not expect to have a need to consider underground mining for quite a few years.

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Asian Metal: What is your plan for marketing of these mines?

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Jitesh: We are looking at a few different options for the marketing of these reserves. The most preferable is to arrange an off-take agreement with a steel mill, and we are happy to negotiate the transfer/collateral of equity to provide them with some assurance. We are also in conversation with a number of investment firms regarding a possible equity stake in exchange for the additional working capital.

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Asian Metal: What infrastructure and work force is needed to initiate the project?

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Jitesh: The infrastructure requirement to start the project in fact is very low because much of initial infrastructure was put in place during previous exploitation. There are a number of experienced contracting firms in the region that we can outsource mining operations so the necessary skilled labour force is already available. The required investment is for plant machinery and stock.

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Asian Metal: Will you be investing in rail links or use truck to transport to the port?

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Jitesh: The distances to the port is very short so the initial mining operation will be by truck transport. The minute you go down the rail route you have a lot more issues, not least because you have to delay the mines production.

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Asian Metal: What is your plan to get the initial mine into production and at what capacity?

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Jitesh: We plan to get the mine into operation within the first 3 months of next year. The port can manage 29-30,000t vessels and has two piers to load from, but we will not be looking to load more than one vessel a week to start.

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Asian Metal: How will the mine manage if market conditions decline like they did earlier in the year?

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Jitesh: Operating costs are low on the cost curve due to the close proximity to the port, so mines will continue to be profitable in most circumstances, even with a depressed iron ore price like we experienced earlier this year. The middle to long term outlook in the market is not overly optimistic so it is important that a mining venture can continue to be profitable if prices are low.

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Asian Metal: Mineralisation in Peru is known for its base metal content, will this be a commodity you will also be mining from your concession?

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Jitesh: We are aware that there is some base metal mineralisation in our mining concession, mainly copper, but our focus is to mine the iron ore and if there is a reasonable reserve of copper discovered when we conduct our detailed survey we look at the other products. We are also currently looking at investing into base metal mines with sizeable reserves 100-150km from where our iron ore reserves are located.

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Asian Metal: Is Peru a good country to invest into mining assets?

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Jitesh: Peru is very pro-investment in mining; the government has very clean and open legislation, which makes it a reasonable country for mining investment. People forget that a lot of gold mining has been going on in Peru for 1,000’s of years. The country is highly geared to mining, mostly in the base metals, rather than bulk commodities. Mining is very big source of revenue for the Peru government and they have a reasonably good protection policy for international companies. Even now the legislation is constantly evolving to cope with more mining from international companies. Previously there has been a lot of cowboy mining, which is not beneficial to the government so they are taking a more professional and cleaner approach to bring in more international organisations.

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Asian Metal: Is there a risk of export taxes being introduced by the government?

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Jitesh: Peru mines petroleum, precious and base metals so they very focussed on mineral exploitation. A lot of the country is unexplored and the government is not in a position to put too much restriction on these minerals as they cannot invest into this themselves. There was rumours about the government putting a tax on the export of natural gas, but because iron ore is not a strategic interest to the country they are highly unlikely to introduce this to iron ore.

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Asian Metal: Would you say the risk of nationalisation in Peru is very low?

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Jitesh: Although I cannot say the country is fully insulated, as it is in South America, I believe the risk is relatively low because they have not done much privatisation in mining historically, and secondly the way the mineral is extracted, which is highly capital intensive, it is not a commodity that many countries are interested in nationalising. In Bolivia where nationalisation has occurred, the iron ore market has been slowed down significantly, which is a mistake we hope that the Peruvian government are unlikely to make. It is a very low value mineral and consumers can source the commodity from a number of alternative locations. Higher value minerals have a strategic importance to the commodity so have this risk of nationalisation but globally low value minerals like coal and iron ore relatively low risk of this occurrence.

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Asian Metal: Thanks for the update on your company. I would now like to discuss a little on the market. What is your view on the US fiscal cliff?

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Jitesh: I seriously doubt we will fall of this US fiscal cliff, but people find this very interesting so people are very keen to look over the edge and get agoraphobia. It is talked about every month because we are all wary that we are close to this cliff, but the steps needed to fix the economy are very radical and I don’t see it really happening so this will be around for many years to come.

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Asian Metal: What is your view on the short term trend of the iron ore market?

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Jitesh: Regarding iron ore, I believe the prices will stay at the level they are, but this could be more a hope because it is reliant on China continuing its growth and expansion. The only thing that is holding up the price levels of iron ore is the internal cost of production of the mineral in China. While this sits at USD120/t, this is expected to be the benchmark that price will not fall below.

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Asian Metal: But we did see iron ore prices fall far below this benchmark price. Why is this?

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Jitesh: Earlier this year the international price did fall far below this value, but this was only because China drastically reduced the level of imports, and domestic prices could not fall as it was supported by the cost of production and transport. Most of Chinese steel mills buy on the spot market, which makes prices much more volatile. This is a case of one single consumer with the majority of market share having considerable impact on the market. Europe and USA do not really buy much iron ore, comparatively, and countries like Korea and Japan are nowhere near as large as China. This one country, China, who is very open about what price everyone is paying so it can easily lead to medium to long term market manipulation. Realistically, if you’re the main importer of a commodity, it is not in your interest to have a high price.

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Asian Metal: Do you think we will see the sort of price levels of iron ore we experienced earlier this year and last?

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Jitesh: The days of having iron ore at USD180/t are behind us for a while to come. If it happened I will feel like I have won the lottery, but, like everyone on the supply side of this industry, I will be happy if the price remains at current levels. Will it fall down again significantly in the future? I am sure it will as there will be another crises that causes a temporary drops in price, but I expect it will always return to the price of production in China.

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Asian Metal: Where do you expect the price will be for iron ore in the first 3 months of next year?

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Jitesh: The way the market is looking, with the US and Europe looking very quiet; I believe next year is going to be a wait and see scenario. It is very difficult at this time to accurately forecast the price until we have a stronger indication on how China will grow.

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Asian Metal: What impact do you expect India will have on the market in the years to come?

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Jitesh: I believe India will grow in the import market. They have high reserves of low-med grade iron ore and are a net exporter of this product, while they import the higher grade. In India local taxes are a lot higher and there has been a lot of illegal mining that the government is trying to control, so now exports are down. All countries know a mineral resource is a finite product, and I don’t believe India will change their current situation in the short term. In the long term, however, I expect in the next 5-10 years they will be importing more and more minerals because internal logistics and production costs continue to rise, making domestic iron ore supply more expensive than imports. There will always be exports from pocket areas. In different regions will be importers of iron ore.

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Asian Metal: Finally Europe, what comment do you have on the crises in this region?

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Regarding Europe, I believe the crisis will continue for a long while. This week USD30 billion is lent to Greece to cover their debts, and next year another few billion. It will continue because Greece is the “sick man” of Europe. Spain follows closely, followed by a few others. The only way this can change is if they start generating revenue, which is not going to happen with austerity measures. They will have to borrow more and more; how long can you delay the inevitable? The problem is that all of us are tied by a single rope and we can’t really afford for Greece to fall. To prevent this snapping we will continue to throw money at them.

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Asian Metal: When do you think the Eurozone will finally start to grow again?

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Jitesh: If things go well maybe we can get out of this in 2015, but this is because I profit from a positive market. Unfortunately I do not believe we will see the large growth levels we had in the past for another 15-20 years and we will see a long period of low interest rates. The world will have to get used to it. None of the western world governments have reduced their debt in the last few years. The only reason this is different from the bust times in the past is because previously governments were happy to go through the bust process.

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