“Ghost Value” in Myanmar

There are obvious things that create value in a mining or oil and gas project.

Size, grade, booked reserves, existing facilities.

But there can also be “ghost value” that isn’t as apparent. Look at recent announcements from the newly-opened nation of Myanmar. Officials from that country’s Ministry of Rail Transportation said this week that a 1,215 kilometre railway from the southwest port of Kyaukphyu to Chinese centre Kunming is a go.

This is a major development. As the map below shows, it will span the entirety of this large nation, built in conjunction with major oil and gas pipelines.

infrastucture1_20110505

Imagine you own a base metal project near to this planned route. Your costs for shipping copper, lead or zinc concentrate get a lot less with this rail transport option to a major market close at hand.

And when costs go down, profits (and net present values) go up.

Of course, the rail isn’t scheduled for completion until 2015. Standing on the landscape right now, you wouldn’t see any trace of this value-adding element.

But forward-minded developers recognize the ghost value here. Seeing how what will be will make the difference between a marginal project and a moneymaker.

Big developments like this are never a certainty. But with all indications being that the railway is a go, it’s worth considering that this strip of land may have just become a lot more valuable, project-wise.

Here’s to location, location, location,

Dave Forest

dforest@piercepoints.com

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