The PortfolioDirect rating for Sundance Resources has been reduced. Risks have risen on two fronts. The production start has been delayed. The earlier rating had been assuming a 2017 start. The delay reduces the potential value proposition but also pushes production beyond the critical 2017-18 period when the next iron ore supply imbalances are thought likely to emerge. The risk for Sundance is that others will get in ahead to lock in production leaving Sundance with fewer potential buyers from whom to choose. It is still possible that the more optimistic demand forecasts are not realised and Chinese demand will be declining at this point placing Sundance in an even more difficult position. The investment risk is also elevated while the company waits for finalisation of a funding package which is now not expected to be in place before mid 2015.
The proposition for development of this asset really looks challenging in the current environment. It is hard to see negotiations and commitments on the infrastructure side to move quickly with the current weakness in iron ore prices.