MHM Metals announced the location of their site US processing plant this morning. Contrary to most speculation the plant did not end up being located in Tennessee but ended up further north in Russellville, Kentucky.
There are a lot of positives to take from the announcement. Firstly the 115 acre site which MHM have selected is correctly zoned and has some existing buildings in place. This will help minimise the construction timeframe and may also allow some costs associated with the project to go through as “repairs and maintenance” rather than capital expenditure. From an accounting point of view this is beneficial as it will allow costs to be offset against profit, instead of being capitalised over time.
Secondly, the announcement details how this site was chosen because there is over 350,000 tonnes of salt slag and black dross produced within an economic radius, with the rail link offering the potential to expand this further. This clearly underlines the potential to increase the capacity of the plant over time and I would not be surprised to see a 300 – 400,000 tpa plant there in the future. MHM also mentioned that the original site they considered in southern Tennessee was close to two large salt slag producers, however the continuity of supply was in question as they operate on shorter term contracts. As a result it appears as though management took the more prudent approach by locating the plant in an area where demand should exceed supply (of the plants initial capacity).
Thirdly, management lived up to their word with both Local and State Government representatives, including the Governor of Kentucky, attending. They were on hand to detail the incentives that will be available to MHM. These include tax incentives of up to $825,000 through the Kentucky Busines Investment program and a $250,000 infrastructure grant The City of Russellville, Logan County and the Logan Country Industrial Development Authority. There is also the potential for further incentives to be forthcoming and I am sure that the company will be pushing for these now that the plant has been announced. All up I think the incentives came in where most people expected. For a $25m outlay to get circa 5% in grants is not bad at all.
Lastly, it is important to mention the number of aluminium company’s operating in the area and the access that we will have to a skilled workforce. Our operating costs will also be fairly good in my opinion as a number of articles have mentioned wages around the $12odd mark, considerably lower than what we would be paying in Australia.
My post above really does not do the announcement justice as there is a fair bit of information to take in. As a result I would recommend that you all take the opportunity to read it and do a quick Google search of some of the articles that have been written over the last few hours.
MHM also plan to release a conservative timeframe shortly. Note the use of the word “conservative”. I think management are finally learning to under promise and over deliver in regard to announcements and projections they make. The plan capacity also remains 200-250,000 tonnes with a budgeted cost of US$25 million.
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