more iron ore results, page-27

The restrictions are a pain though it is important that the entire north-west is not dug up and shipped to China (or we will lose the top half of the continent!!!!).

It is what kept me out of this at higher prices. I may take a punt around these prices hoping for a stupid rise like happened with IRM prior to the SP collapse once reality set in. At 15-17c entry you are unlikely to lose (much) and stand to gain plenty on a speculative spike (as long as you sell early).

I think you will get in at these prices or slightly below for a while as RIO's comments combined with environmental concerns are unlikely to let ROY go anywhere fast.

One thing in favour for ROY if environmental concerns blow over is that IF UMC, BRM, or POL get off the ground nearby and put in a rail link to joins FMGs rail then this will pass within a short distance of ROY's tenements. See a recent post on this subject on the BRM thread by Westcott repeated below. Very interesting the cross ownership/directorship up their and could lead to a few mergers to advance deposits.


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Forum: ASX - By Stock (Go Back)
Code: BRM - BROCKMAN RESOURCES LIMITED (Google BRM)
14/03/08 12:52 (View) Back Post Reply
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bello
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From http://www.theaustralian.news.com.au/story/0,25197,23370913-643,00.html

US slump won't stop boom: Rio Elizabeth Gosch | March 14, 2008
EVEN a recession in the United States could not put a dent in Western Australia's resources-driven boom, according to Rio Tinto's Sam Walsh.

The head of Rio Tinto's iron ore business said demand from the resource-hungry China would continue to grow, despite weakness in the US economy.

"People need to understand what is fundamentally driving China's growth. The growth we are seeing in steel and hence iron ore is actually coming from urbanisation, from the 10-15 million people who are moving in from a rural environment to a city environment. They need houses, they need infrastructure, they need a whole lot of things that have to be there next year," Mr Walsh said.

"In iron ore, 90 per cent of the growth in the recent past has actually emanated from China. Our analysis shows that even if the US goes into recession -- and I'm not quite sure that it's quite there yet but it is certainly slowing -- it will only have an impact of 1 per cent on China's GDP."

China recorded 11.4 per cent GDP growth last year and while the Chinese government has forecast growth of 8 per cent this year, economists are expecting 10 per cent growth.

"Some analysts thought we had gone too far with our upgrades in 2004, but, three years on, China's demand is still getting stronger. If we could export more we could sell more," Mr Walsh said.

China's iron ore imports jumped to a record high of 38.2 million tonnes in February.

Speaking at a leadership conference in Perth yesterday, Mr Walsh also talked up India's potential as a strong trading partner for Australia.

"There are a lot of sceptics about India but it is heading towards the same point China reached in 2002-03," he said. "I certainly see strength in commitments to steel projects in India.

"With 50 per cent of the population younger than 25 and very dissatisfied with the standard of living, I consider it is only a matter of time before India really takes off."

He also noted there was potential for growth in Russia, Brazil, the Middle East and even Africa.

"All of these areas have the potential to take off in the same way that China has, so there is a pretty good future."

Mr Walsh told the conference the miner was well on track to achieve its planned production increases of 320 million tonnes by early next decade and 420 million tonnes by the middle of next decade.

Rio Tinto is sticking to its guns on plans to chase a 70 per cent price increase for its iron ore this year, which would take the benchmark price to about $US110 a tonne.

14/03/08 17:13 (View) Back Post Reply
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"Rio Tinto is sticking to its guns on plans to chase a 70 per cent price increase for its iron ore this year, which would take the benchmark price to about $US110 a tonne."

$110 per tonne, and BRM's resource is currently valued at ..... 30 cents per tonne .


From http://www.theaustralian.news.com.au/story/0,25197,23370913-643,00.html

"People need to understand what is fundamentally driving China's growth. The growth we are seeing in steel and hence iron ore is actually coming from urbanisation, from the 10-15 million people who are moving in from a rural environment to a city environment. They need houses, they need infrastructure, they need a whole lot of things that have to be there next year," Mr Walsh said.

"In iron ore, 90 per cent of the growth in the recent past has actually emanated from China. Our analysis shows that even if the US goes into recession -- and I'm not quite sure that it's quite there yet but it is certainly slowing -- it will only have an impact of 1 per cent on China's GDP."

China recorded 11.4 per cent GDP growth last year and while the Chinese government has forecast growth of 8 per cent this year, economists are expecting 10 per cent growth.

"Some analysts thought we had gone too far with our upgrades in 2004, but, three years on, China's demand is still getting stronger. If we could export more we could sell more," Mr Walsh said.

"There are a lot of sceptics about India but it is heading towards the same point China reached in 2002-03," he said. "I certainly see strength in commitments to steel projects in India.

"With 50 per cent of the population younger than 25 and very dissatisfied with the standard of living, I consider it is only a matter of time before India really takes off."

He also noted there was potential for growth in Russia, Brazil, the Middle East and even Africa.

"All of these areas have the potential to take off in the same way that China has, so there is a pretty good future."

Rio Tinto is sticking to its guns on plans to chase a 70 per cent price increase for its iron ore this year, which would take the benchmark price to about $US110 a tonne.
14/03/08 17:23 (View) Back Post Reply
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Mozart56
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What we need the scoping study to tell us is the threshold of profitability. For example, if it reveals that the likely post beneficiated FOB full cost(including capital depreciation) is say $40 tonne, then we can reliably calcuate the long-term profitability of the mine which would be good even if the Fe price halved.. say to $55/tonne. If it is in reality $40/tonne then hold onto your hats, because at least for the next 5 years margins could be $65/tonne +. That would invoke a re-rating of a biblical scale. Of course if it comes up to $80/tonne then things start to get a bit too tight.

As a wildcard if it's as low as $30/tonne we could make the Sinosteel offer look like entree as BRM becomes the main course.

Anyone else care to comment on the numbers?
14/03/08 17:58 (View) Back Post Reply
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Mozart56, I think the market is discounting BRM right now on the basis that there is still a chance that the ore may not be beneficiable to saleable standard. Alot of posts treating it as a given, but note that management have always said "potentially" saleable. I agree that there will be a large price spike if in fact testwork reveals that contaminants can be reduced to acceptable levels due to the sheer size of the resource - but I think there is still a fairly widespread perception that this is not as simple as management have represented. This is not helped by them revealing only Fe head grade in their beneficiated end product and not the resulting contaminant levels. Should they clarify this, then it will either make or break the share price.

However I have another concern around transport of the ore to port. You have to ask yourselves, why would anyone with port and rail facilities want to let BRM use their rail line? BRM's end product is going to be mid grade, high contaminant shipping ore at best... FMG have a couple of billion of that stuff lying around...

BRM will have to build their own rail and port to ship any of their detrital ore.

I'm not saying BRM has no upside but would like to present an alternative view with some more objective questions raised. If and when these issues are resolved I may very well jump into BRM head first.

Cheers
UIO
14/03/08 18:21 (View) Back Post Reply
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Appreciate your thoughts UIO.

I agree with you that until the beneficiation process is completely costed and final product ratified that BRM needs to be discounted and I think that the current relative value of $/tonne has proven that the market will discount it heavily until it is.

I personally don't think that BRM has any hope of building its own railway line and don't for a minute believe that it intends too. It wouldn't be economic and by the time it finished it Fe prices could be anything.

Even if the scoping study is positive and the end product saleable they still need a buyer and I think the next logical step is an off-take agreement. Then and only then can BRM argue strongly that it should have access to BHP rail-line. Of course BHP could tie them up in court for years, and to some extent FMG is fighting the fight for them, although in FMG's case I think the tenament they are fighting for isn't as economic as BRM's (correct me if I'm wrong)

If they can prove that they have a 500MT + product that a buyer is willing to take, then it's odd's of getting infrastructure definitely improve.

The interesting thing for BHP is that the deposit straddles their own tenament. Not that BHP needs the money, but effectively "for free" they could allow BRM to mine both sides of the tenament in return for splitting the profits and using the rail. I don't believe that any other Fe junior is in this position.

FMG also have excess rail capacity. They may have billions of tonnes of the stuff, but will be dependent on other users of its rail to subsidise its use. If 49% interest is sold (as planned) then that investor will be seeking a return which I beleive can only come from 3rd party use.

There are definitely risks, but should these risks be overcome the rewards are huge. A $10/tonne valuation would put BRM in the $5 billion club. Definitely enough upside to take a punt at least, and with WR at the helm I can't think if anyone else better qualified to make it happen.
14/03/08 18:36 (View) Back Post Reply
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Yup Mozart, risk vs reward is always the key. Take on more risk for more upside, but be willing to accept a large loss in return. I've made money on some of these and lost large amounts of money also, you don't get one without the other.

My point is that rail capacity will be reserved for high grade only. Even with FMG's excess rail capacity they will want to use that to take on high grade ore to blend with their CID. This has been flagged in recent announcements and they even contemplate using magnetite conc. for that reason.

The reason - if you have limited tonnage shipping capabilities, every tonne you ship you will want to get the highest price for. This means shipping off either high grade direct or high grade blended ore in order to get the best return on your rail and port facilities.

BRM need something else IMO to get this off, one scenario may be the discovery, purchase or development of a concurrent magnetite project to blend the magnetite concentrate with their detrital ore.

BRM's big advantage is scale. Their big disadvantage is that nobody has ever targeted detrital ore of this grade and purity in the Pilbara before.

Ex BHP management are a plus.

In my mind at the moment, the final ore quality is the wildcard. Unless they get it above 60% they will find it hard to organise transport.

Cheers UIO

14/03/08 18:51 (View) Back Post Reply
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Hi (uio)
Brockman are going to blend the benificated ore which they say will be 57-59%,with the fines from the CID ore which should then be over 60%Fe.
Regards
Westcott.
14/03/08 18:59 (View) Back Post Reply
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Hi (uio)
Did you read my post at 2.03pm Thursday on BRM postings?
I spoke with the BRM geologist Aning.
Regards
Westcott.
14/03/08 19:12 (View) Back Post Reply
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If 60% is the threshold of getting on the tracks then BRM are awfully close or possibly even there. Production will much cheaper than a magnetite operation too. The grade might be classed as "medicore" but never underestimate mediocrity. K-Mart is medicore too, but they do sell a lot of low margin stuff :)
14/03/08 21:30 (View) Back Post Reply
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Neil_WA
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With regards to rail there are a few possibilities.

BHP and RIO are planning to increase output substantially and will likely be using the full capacity of their rail themselves.

FMG will have significant spare capacity right up to about 250-300 million tonnes per year so that is one option. Don't forget that allowing BRMs ore on their rail at a price of about $10 per tonne could give them another $50m per year profit for very little outlay (minimal increase in maintenance costs).

Another possibility is that a situation such as with MMX/MIS could occur where a new line could be put in by a number of juniors/mid-caps in the region (likely with Asian backing). BRM now have a big enough resource to entice considerable outside interest in a very beneficial JV (better than MMX/mits), which would give them the cash to fast-track a new rail project. I'm not sure it would necessarily go ahead as the state govt. would likely force FMG to share their rail if it wasn't willing to voluntarily.

Should POL prove up the potential at their Carina tenement or UMC prove a similarly massive resource nearby there will be an awful lot of ore outside the clutches of the "evil two" that the Chinese will be looking to diversify their supply chain with by putting some of their $1.5 trillion of foreign currency into a rail line and a few JVs. Things can happen very fast with enough cash injected (Note a 2800km railway was built across the USA at speeds of up to 16km per day in the 140 years ago without the heavy lifting and earth-moving equipment now available).



You have no idea of my motives when you read this post.

Be skeptical of what you read on a forum (No matter how apparently well-respected the poster).

Research any information yourself before acting on it.
14/03/08 22:16 (View) Back Post Reply
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Agree Neil, the Empire State building went up in 13 months in 1930, so anything is possible with respect to rail.
14/03/08 22:31 (View) Back Post Reply
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Hi guys,

Yup I've read the post on the communication with BRM's geo. I believe that they do believe that a saleable product will be the result of further bulk testwork. However my only concern is that the testwork done thus far hasn't 100% confirmed it. The analogy of blue and red marbles is a good one but what if there are blue, red and purple marbles in the mix. The final key to this equation is if they find a process that can turn that purple marble into a nice high Fe, low contaminant marble. Trust me guys, if they had managed to do this successfully, this would be clearly spelt out in their announcement. This leads me to believe that they have not succeeded thus far but have a fair expectation of success in the future. The risk is that management are typically bullish on their own prospects and one MUST not discount the risk of failure, especially when you look around the projects in the Pilbara and there are no 40% grade hematite RESERVES around.

The issue around grades and rail/port is one of economics. For bulk minerals where transport costs become a very important part of the equation, in an infrastructure constrained environment the companies who control the infrastructure will logically act in the following ways:

1) If you can only ship XX MT of ore a year regardless of grade, shipping the best ore means your cost per tonne as a percentage of revenue is decreased.

2) If you have as much lower grade ore as you need for the foreseeable future (say, a couple of billion tonnes of reserves @ 57%) then in order to achieve point 1, you obtain high grade from ppl who need to use your infrastructure. You may also choose to blend this higher grade ore in order to obtain a better price on your lower grade ore.

3) Following on from points 1 and 2, there is no incentive to let someone else ship lower grade ore and pay you a margin of $10 hypothetically. Why do that when you can dig out and ship your own ore cheaper and make more than $10 on it? If you have to let third party ore onto your rail line, all things being equal you are bound to choose high grade high quality ore because you can demand a higher margin AND use it to blend.

I could be completely wrong on this but recent iron ore strategies announced by the big three have implied this to me. FMG with their ann. on blending and Rio and BHP with their flagging conservation of their higher grade deposits and increasing their blending of high grade with lower grade CID. This is all pointing towards a shortage of high grade in a capacity constrained environment.

The current advantage of magnetite over low grade hematite is that you can ship a far lesser number of tonnes of high grade magnetite concentrate over capacity constrained infrastructure in order to blend, because magnetite conc. is typically in the high 60's. Differences in cost are negated by the fact that infrastructure providers can reap the benefit of higher grade conc in addition to the $10/tonne.

I think the MD of the company so often referenced in these iron ore junior threads is a good analogy for the current situation with BRM. Cast your mind back to the days when Andrew Forrest was assuring everyone that the new technology being pioneered in immediate large scale by Anaconda was sure to work. This was followed by many unanticipated issues as is often the case with unproven methodologies.

He did the same thing with Fortescue, using Wirtgen surface miners on CID ore that most at the time regarded as barely DSO. This time he succeeded.

Brockman could go the way of Anaconda or FMG and this is the risk one takes with any unproven ventures in terms of the benficiation process. However unless they really come up with the goods in terms of contaminants, the infrastructure is a huge impediment in my layman's opinion. I just can't see why someone would want to rail lower grade ore when FMG just have so much of it already.

A Chinese party coming in and building a dedicated rail and port is a possibility, though again they may shy away due to the unproven nature of the deposit.

On the upside is the scale of the resource, the free digging nature of the detrital ore and relatively experienced management for a junior.

High risk, high reward. People with different risk appetites will jump in at different times, or not. I will be watching for them to hit various targets for sure, and I'm sure we will all learn alot from this company if nothing else.

Speaking to the company is a great start. I'd be asking them what the Si and Al levels were with the testwork they did initially and also what sort of beneficiation process exactly they are planning to try.

I suspect at these volumes none of us on Hotcopper are going to influence the future of this company much so go with the flow and don't be concerned with up or down ramping! ;)

Cheers
UIO
14/03/08 22:42 (View) Back Post Reply
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Hi (Mozart56)
I have just come across a leaflet from Brockman.
Marillana-Iron ore project (update)Forging Ahead in 2008.

Mieralisation update.
Marillana has provan to be the host of Two prominent iron ore types within the tenement:
>Buried CID (Channel Iron ore Deposit-Haematite/goethite)
>Detrital/pisolite ore (Pisolite=haematite pea gravel)
>Three zones of mineralisation have been identified:
>North-West Sector (43.5Mt of CID +detrital mineralisation)
>Rockhole Bore (CID + detrital mineralisation)
>Abalone (CID + detrital mineralisation)
>Recent testwork has confirmed the ;upgradability ofthe detrital ore to a comparative 58%Fe product
>The detrital ore is easily upgraded through simple screening and represents a significant potential resource of Direct Shipping Ore.
>The detrital ore upgrade process may result in a fines product PLUS a pellett-like granular product of >6.3 mm (resulting in a potential premium priced product)
>All detrital/pisolite ore is free dig at minimal incremental mining costs,as the ore overlays the CID mineralisation.
Regards
Westcott.
14/03/08 22:54 (View) Back Post Reply
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Hi (uio)
I have a few minutes ago sent a post on BRM which may explain what you are asking for.
The original contaminants figures where high on a couple of items,but as Aning told me they will be VERY LOW after screening and blending with the fines from the CID ore.
Regards
Westcott.
14/03/08 23:05 (View) Back Post Reply
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Appreciate the effort Westcott. Unfortunately until they actually do the screening and blending and announce the results, there will still be some risk around the process.

It is very promising that a company representative would be willing to put their neck out and state that though.

Low contaminant levels will go a very long way towards a resource to reserve conversion.

I will eagerly await their update on the project.
14/03/08 23:12 (View) Back Post Reply
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Hi UIO,

I'm a bit confused with what conditions may be imposed on junior iron ore companies by FMG. I found this article from last year that talks about FMG letting juniors use its railway and port to move their ore because they see econonmic benefit in receiving payment for the trains etc. No doubt they see themselves out of making some $ out their unused capacity.

I'm a bit miffed about the fee charged perhaps being contingent on the ore quality, or at least that's the way I've interpreted it. I figure it costs X dollars to move the ore irrespective of its quality, but it's up to the junior miner to determine if it's financially viable based on the fee sought by FMG. The article doesn't indicate conditions they imposed on Atlas, but it seems Atlas is not selling any ore to FMG, it just using the infrastructure to get their ore to market. Maybe things have changed.

It's also interesting that in the article FMG specifically mention Brockman (nee Yilgarn Mining) as being in discussions about rail access - which flies in the face of the assertion made by one of the journalists last week about Brockman not having yet spoken to FMG.

As you say, much depends on the screening of the detrital and getting it to a saleable grade. However, the drilling they're doing now they anticipate proving up 'significant CID tonnage at Abalone', which hopefully will double the amount of CID that is of good grade. They did have a few drill holes which found 7-8 mtrs of CID and that had ended in mineralisation. Hopefully they'll have enough good quality CID to mix with the detrital to make a saleable product that can be transported.

By the way, you seem pretty knowledgeable on iron ore. Do you know the degree of reliability magnetic surveys give for identifying buried ore bodies?

The reason I ask is because there are 8 magnetic gravity zones that the company has targeted in Marillana. MG1 was the Northwest sector and has 47MT of CID. MG2 falls within Abalone and 2 drill holes 800metres apart both ended in the CID mineralisation. The MG2 zone seems larger than the MG1 zone, so perhaps has just as much CID.

There are 5 MG zones in the sth east sector that they intend drilling this year - and they look much larger than the MG1 zone so appear quite prospective. I just don't know how accurate/reliable these magnetic surveys are.

Anyway, the article from last year about FMG's willingness to share its railway starts below.

Fortescue shows how by sharing berth
Jamie Freed
June 13, 2007

THE first iron ore shipped from Fortescue Metals' new berth at Port Hedland might be produced by another company.

In an apparent demonstration of its commitment to open-access infrastructure in the middle of its long-running battle to gain access to BHP Billiton's railway line, the Andrew Forrest company yesterday signed a memorandum of understanding with tiddler Atlas Iron.

The deal would allow Atlas to start shipping 1 million tonnes a year from Fortescue's port from March, subject to state environmental approvals.

Fortescue plans to ship its first iron ore from its $3.2 billion Pilbara iron ore project in May, cyclones having delayed construction of its railway line.

Fortescue is fighting in the Australian Competition Tribunal for approval to run its own trains on BHP's railway line to help develop a secondary project but other junior miners in the region are merely wanting BHP or Fortescue to carry the ore on the existing infrastructure at a commercial price.

BHP is believed to be discussing haulage arrangements with a number of companies, including Iron Ore Holdings.

Rio Tinto said it had not been approached to haul outside ore or provide access to its railway.

Small producers did not want to buy trains and rolling stock, Fortescue government relations head Julian Tapp said.

"This is just going to be a profit stream for us. We're going to make money helping other people ship their iron ore."

He said several other iron ore explorers, including BC Iron and Yilgarn Mining, had also expressed interest in using Fortescue's infrastructure but most would find BHP's railway more convenient geographically.

Fortescue's agreement with Atlas allows the companies 60 days to negotiate commercial terms for the port handling and ship loading services but it is not legally binding.

Atlas plans to haul ore from its Pardoo hematite project 75 kilometres east of Port Hedland using road trains and will use Fortescue's port only until a new public facility is completed in 2009.

Atlas managing director David Flanagan said hauling the ore on BHP Billiton's railway line would be more cost efficient and better for the environment but the parties had not come to an agreement after two and a half years of discussions.

"In the event BHP and Atlas could come to a workable agreement we would grab it with both hands," he said.

The deal with Fortescue would also allow Atlas to use its port facilities for a potential magnetite project and its railway and port for a second hematite project, neither of which now has a resource.

Mr Flanagan said the company would release a 800 million tonne to 1 billion tonne magnetite resource next month and the hematite resource would be released in 12 to 18 months.

Atlas shares yesterday closed 18.5c higher at a record $1.085, having nearly doubled in the past month. Fortescue shares closed 21c lower at $35.79.

14/03/08 23:24 (View) Back Post Reply
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UIO

I cant understand how you can think that Magnetite is better than low grade hematite, you claim magnetite up to 60%, never heard of such a thing with magnetite, almost all IO operations in OZ are hematite, Magnetite usually grades between 35% -40% FE, our low grade hematite is 40% -50% FE will a simple screaning process upgradeable to 59% or there about, i just dont think that your debate Magnetite even comes close to making sense.

WRs certainly has stuck his neck out on this upgrade of product, i have spoke to Wayne a couple of times and he seems to be as confident as a heart surgeon doing heart surgery, i get the feeling that the tonnage/saleable product is in the bag and that we just need rail access.

This debate about the upgradeable material to me seems absolutely mute, i dont have any doubt in my mind about the process, the only hurdle i see in front of BRM is raila nd port access which is ofcoarse a big one.

You could be correct as the market having some uncertainty about BRMs claims about benefication, when the markets accepts this as gospil, i think the SP will be alot higher.

So it does come down to the risk/reward senario, hop in now with more risk and receive more reward, hope in later with less risk and receive much less reward.

It really comes down to a companys market cap, lets compare FDL and BRM, BRM has a $2 SP and FDL 10c, FDL hasnt drilled a hole and is in value not that far behind BRM in its MC, go figure and then compare apples to oranges.

Take the benefication material out of the eqaution and BRM still have just under 60 million Tonnes JORC of DSO, no other junior has that in the Pilbara.

Its good to ask questions and weigh up risk/reward, but just compare other junior Market caps and stand BRM beside wny single one of them and BRM is way ahead of the game in every aspect by a long shot and not really costing much more at all, SP yes market cap no, thats the problem with most people that buy shares, they wouldnt know what a market cap was, just stand all of BRMs peers beside BRM and let me know what you think in terms of value, risk/reward

Cheers
14/03/08 23:45 (View) Back Post Reply
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Hi guys,

It looks like a few tempers are being raised by my presence on this thread. Say the word and I will happily stay away. If you like though we can continue to discuss the issues.

Goldensnapper if you don't know what grades magnetite concentrates are typically... then you should probably look it up. I am NOT comparing magnetite ORE to hematite ORE, but magnetite CONCENTRATE to hematite ore. You are right in that magnetite is typically definitely inferior to high grade hematite. But not all hematites are created equally. There are widely applied magnetite beneficiation processes in practice and it is the critical issue of infrastructure capacity that determines what is of value. This is not a simple equation of grades. By the way GS I totally agree with you on FDL ;)

In relation to magnetics I am not a geo but they can point towards potential drilling targets - though not often in the most obvious ways. Magnetite is magnetic and hence magnetic surveys can be quite prescriptive for that kind of deposit. Hematite is not magnetic and thus coupled with some idea around how the hematite has formed one can sometimes use magnetic surveys to target your drilling. This often can be counterintuitive i.e. a magnetic low could indicate areas of an orebody worth drilling as the magnetite could have metamorphosised to hematite in that area (in an extremely simplistic analogy which is about all I can conjur up with my limited knowledge around geology)...

It's getting late so I will reread the thread to try to discuss the other issues raised but have a closer look at Atlas - what do they primarily have as a resource? ;)

Magnetite.

They may be the only junior with an MOU with FMG at this stage. There is a reason for that. I am not a big fan of magnetite either but there are companies that will develop magnetite projects and these are the ones in close proximity to port with very large scale projects. Eventually BRM may be able to do the same, all I'm saying is that there is some risk there, as with any company.

Blending with CID fines is a good idea BUT... most companies are looking to blend even their CID. If FMG wants to blend their CID to get a better product what would BRM's combination CID/detrital blend be worth in comparison?

Cheers
UIO
15/03/08 00:00 (View) Back Post Reply
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gringokonyo
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Hi UIO,

No you haven't upset me - sorry if my email gave you that impression. I like to hear everyone's views and you certainly seem to be knowledgeable. Chances are you're probably a lot more cautious than I am in investing in iron ore companies.

BC Iron has a memorandum of understanding with FMG for ore haulage and minegate sales etc. I'll post the information from BC Iron's website. Interestingly, they have lower or similar grade Fe to BRM, but do indicate low contaminants. They too also say that they have low grade ore that they're looking at benefication to get it to DSO grade. BC Iron info below.

BC Iron Limited was formed to explore for and develop the channel iron deposits within its Nullagine Project located in the Pilbara region of Western Australia. It lies immediately north of Fortescue Metals Group Limited�s (�Fortescue�) Chichester Project comprising the Cloud Break, and Christmas Creek deposits. Fortescue are currently constructing a major port facility at Port Hedland and as well as rail haulage from Cloud Break and first ore on ship is scheduled for May 2008. Since listing successfully on the ASX in December 2006, BC Iron Limited has:
Sustained strong support for its share price,
Commenced exploration drilling on the Channel Iron Deposits (CID),
Discovered several zones comprising high grade CID ore with low contaminants suitable for direct shipping,
Completed JV obligations to earn-in 100 % of the Project,
Signed an MoU with Fortescue covering future options such as provision of bulk commodity transport services, mine gate sales and joint venture arrangements,
Commenced a Scoping Study over the "Bonnie Creek CID Project", and
Successfully raised $9M through a placement of 5.4M shares at $1.70
Exploration is initially being carried out on a broad scale aimed at identifying areas which have the potential to produce direct shipping quality iron ore (�DSO�) product. To date, exploration targets of up to 30 Mt grading 55% to 58% Fe have been identified by drilling, mapping, and rock chip sampling. Furthermore, several areas have been identified which contain lower grade material which may be amenable to selective mining or simple beneficiation to produce additional sources of DSO.
15/03/08 00:24 (View) Back Post Reply
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Hi Uio - every stock needs a good devil's advocate and I for one encourage the questioning.. it is no different to any questioning a potential BRM investor should ask themselves, and we need investors to drive the share price up :)

I don't think the quality of ore has anything to do with the prospectivity of getting rail access. It is the price you are willing to pay. If you pay the price I'm sure FMG would let you haul a tonne of dirt on their rail line if you wanted to. It is this price that ultimately dictates your profitability, not your access. BRM need a buyer first. Once that happens they know what they are prepared to pay for rail access and still remain profitable. I'm certain they aren't too far away; and if I were a buyer I'd be looking for a consistent secure long-term supply (not necessarily the highest grade ore - Indian suppliers have proved this). I think BRM has the potential to fullfil the criteria don't you?
15/03/08 00:30 (View) Back Post Reply
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No worries at all. I must admit all I know about BCI is that it is relatively close to FMG. They do appear to have relatively low impurities and their presentation recently has some interesting slides.

Would definitely be worth comparing the two to see if one can ascertain similarities and differences between the two resources.

Good work mate

It is late though and I'm off to bed ;)

Cheers
UIO
15/03/08 00:33 (View) Back Post Reply
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Mozart - yes definitely has the potential to be a longer term project. Management may also be able to pull strings where other juniors cannot.

Good to see some good alternative views constructively cropping up. After all, this is what "discussion" forums are for.

15/03/08 00:36 (View) Back Post Reply
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Agree UIO - look forward to seeing your ongoing comments as further announcements are made. Don't disappear on us now :)
15/03/08 06:13 (View) Back Post Reply
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goldensnapper * Top 10 Poster for Last 30 Days
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Hi Uio

I also dont mind your questioning at all, this is good, its the way you aproach the question is what is important and you do that in a well mannered way, so im happy to compare notes with you, your questions are certainly in depth and you have taken some time to look at BRM and i respect that.

Mate i have held BRM from the middle of last year and in at a very reasonable price, most of the other guys on this thread in much earlier and lower entry, i first bought when BRM has 30 million tonnes JORC and a market cap of about $50 million, so i thought i will take a peice of them and bought 100,000 shares, then not long after Wayne Richards joined the board as MD and i went in much harder and tripled my holdings on his appointment alone, if you were ever to have a chance to sit down and talk to Wayne which i havnt only by phone, you can just tell that this guy knows what he is on about, just check out his resume and its second to none, so i have to say i have put alot of faith in the man and feel completely comfortable the way he is steering the company.

So as far as the benfecation process as i said previously im convinced that it can be done and not only done i beleive its a fairly simple proccess.

I do beleive that our biggest hurdle is obviously rail and port access, as far as rail there are reports of FMG wanting to sell 49% of its rail port access, so rite there is your access, the cost is $2.8 billion, im sure that a consortium of 5 or 6 juniors can pull this of, why cant BRM buy a percentage stake of FMGs rail port access.

The fact that FMG have expressed desire to sell a portion tells me their is plenty of access, whoever buys it will be knocking on BRMs door to ask us to put the IO on the train.

We are a way of getting anything finalised but i feel a very strong chance that BRM with its sheer size of project will get a green light.

Im just a beleiver of Wayne Richards and what he is doing with BRM, im in for the long haul.

You are certainly rite in your assesment BRM as all stocks do carry risk, the risk does lower as they progress, im happy to hold my BRM as they are free carry and im happy to just let them go about their business and see what they can do in the next couple of years.

Cheers UOI

15/03/08 06:24 (View) Back Post Reply
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Me too Snapper.
15/03/08 06:59 (View) Back Post Reply
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Most on this thread are putting the cart before the horse, it is no good any of the aforementioned juniors signing any binding shipping contracts with FMG or BHP just yet, none of them have any port or storage facilities for any "meaningfull" amount of ore, I do know however that 3 of the companies, as a group, met with the government in early February to arrange future access to the public facility, so things have progressed in that direction.
You can be sure that more "confidential" rail mou's have been signed with FMG subject to the port facilities being available, making those MOU public at this stage is inappropriate without the Port issues being finalised.
cheers
15/03/08 11:49 (View) Back Post Reply
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goldensnapper * Top 10 Poster for Last 30 Days
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I didnt have time to read everything on the thread because of the detailed and lengthy reponses from all posters, positive and inquisitive, this is really good stuff so lets get it all on the table shake it up and look at it.

I found the article that Gringo posted from last year really and eye opener, references to BHP beleived to be discussing with a number of companys as to haulage agreements, i certainly wasnt aware of this, how true it is could be anyones guess, RIO says it hasnt been aproached, FMG cleary state that hauling extra ore is just going to be a profit stream for FMG.

Also in Gringos article it cleary states that Atlas will only use FMGs load out until the new public berth is completed in 2009, i certainly wasnt aware of any new berth that was under construction, i thought that the government was planning with some juniors to construct a new berth in a couple of years time...

It seems to me that there is more alternatives than i thought available, BHP/RIO could always just be entertaining juniors to be seen as pro active in the governments eye, but unless there is a junior like BRM with several hundred million tonnes, im not sure if they will be looking at any of them as most juniors have well under 50 million tonnes, BHP/RIO deal in massive volume, only a 10 - 20 million tonne per annum operation for 15+ years would be considered, BRM will have this.

Again getting back to the Detrital ore as an investor in BRM i have already crossed the T and put it in the bag.

The 1st paragraph in the big release we just had we should all read again. The Detrtial has Ore ranging from 40% to 62% FE. Also paragraph 3 states that the project is CAPABLE of producing Benificiated ore at 59%+ FE. Key word in the statement is Capable, i think there is a huge difference between Capable and potential.

So lets take this 1 step futher back to the start of the announcement where it cleary states in bold writting "POTENTIAL FOR +550 MILLION TONNES OF FINAL PRODUCT GRADING 57.5% - 59.5% FE" Key word in this line is POTENTIAL.

So i can clearly see how people can look at the bold statement at the start and the word POTENTIAL is staring you rite in the face.

Whats the meaning of POTENTIAL in this statement??

It can mean 2 things, most people have concluded that the meaning of potential is related to the benfication process and thats a fair call, im of the opinion that the word POTENTIAL is cleary describing and relating to the masses of te ore and undrilled area of FE that is still to be found as Abalone, Rockhole Bore, the South Eastern corner and the rest of the high target gravity targets that need about another 30,000 meters of drilling to confirm the entire amount of FE on the lease.

What do you guys think about this??

For us that have held BRM for a while now, we are all of the opinion that WRs never ever put any hype in his releases, he hardly ever mentioned the word hematite, he had a release last year which was fantastic and was very poorly put to the market, at the end of the day WR has never ever had any hype in his releases, we thought that he was very reserved and cautious, this was one thing that we didnt like.

Last week all of us that have held for a while were just GOB SMACKED and i mean we were blown out of the water, becasue he dropped a bombshell to the market, we were all expecting to see about a resource of 150 MT aprox.

Now for WRs to deliver what he did, for Wayne to come out swining about the Detrital, he knows what he has and he has just told it like it is, alot of people had NEVER even heard of BRM until last week and must have been thinking how could this be, how the hell did we miss this little FE baby, why wasnt it on the radar???????????????????

Well we have been posting for the last couple of months that a big upgrade was coming in the order of about 150 million Tonnes, it just turns out that BRM are sutting on the mother load of FE and a big portion is upgradeable.

It caught the market by surprise as well as us but WR has absolutely no hype about him, he has the biggest resource in the junior FE sector, the most important thing now for Wayne is rail and Port, he has just hired a new project manager with an impressive resume while i beleive he can just focus on sealing the deal

The writing is on the wall i beleive, for those that want to wait for clarification of the benification and wait for a rail deal, good luck, when you do finally decide to buy when these things are in place, you will be paying between $10 and $15 per share.

Its all about risk reward, $2 now or $15 maybe $20 with a rail deal in place.

Cheers

15/03/08 15:25 (View) Back Post Reply
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Bleasby
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Hi UIO,

Thanks for promoting what I think has been a very good discussion of issues relevant to BRM, but also any small iron ore player within the region. Your comments re risks/rewards associated with BRM�s testwork on upgrading their ore to acceptable grade/contaminant levels are noted and accepted as reasonable.

I do however wish to question your logic as to how FMG will determine access to its rail network. FMG have sought to have RIO and BHP lines declared via the NCC and have pursued the matter successfully so far in the courts. FMG have argued that the rail access should be open and non-discriminatory. Consistent with this, FMG has established its own rail line on open access and non-discriminatory principals.

In case this is in dispute and/or for the background benefit of others, an internet search will confirm that the FMG rail line was given Government sanction via the Railway and Port (The Pilbara Infrastructure Pty Ltd) Agreement Bill 2004. The purpose of this Bill was to �Ratify and authorise an Agreement (scheduled to the Bill) between the State, Fortescue Metals Group Ltd and The Pilbara Infrastructure Pty Ltd for the development of a �. multi-user railway and multi-user port facilities; and to give statutory backing to open access arrangements for the multi-user railway and put in place a process to establish open access arrangements for the port facilities.�

If it is accepted that FMG have established a rail line based on open access and non-discriminatory principals (as per government legislation), I do not understand how your logic for access can apply. I have included your initial three paragraphs for reference as follows.
______________________
1) If you can only ship XX MT of ore a year regardless of grade, shipping the best ore means your cost per tonne as a percentage of revenue is decreased.
______________________
Accepted.

______________________
2) If you have as much lower grade ore as you need for the foreseeable future (say, a couple of billion tonnes of reserves @ 57%) then in order to achieve point 1, you obtain high grade from ppl who need to use your infrastructure. You may also choose to blend this higher grade ore in order to obtain a better price on your lower grade ore.
______________________
This suggests access is not open and is in fact discriminatory (ie it is based on Fe grade)

______________________
3) Following on from points 1 and 2, there is no incentive to let someone else ship lower grade ore and pay you a margin of $10 hypothetically. Why do that when you can dig out and ship If you have to let third party ore onto your rail line, all things being equal you are bound to choose high grade high quality ore because you can demand a higher margin AND use it to blend.your own ore cheaper and make more than $10 on it?
______________________
The first part of point 3 suggests that FMG can discriminate against lower grade miners and retain the rail line primarily for its own use. My understanding is that 100MT of rail excess capacity was built into the line (as per Government requirements) for use by other economically viable mining hopefuls.

The last part "higher margin and use it to blend" implies an even less open access regime and even more discrimination than that applying under point 2 above (ie its based on Fe grade and access charge). FMG cannot use its monopoly track owner position to gauge profit from a miner that has high grade ore (via inflated track margins) or deny access simply because a company has lower grade ore which has little benefits to FMG�s downstream operations. If its an open access regime all access users should pay a price based upon tones moved and distance.

That is not to say that FMG may provide a downstream blending benefit payment to a miner with high grade ore. However, they will have to be careful to ensure this is done in a non-discriminatory way. I have not been able to look at the FMG releases that you mention that indicate their desire to seek a downstream blending outcome. However, I do not see that this would be inconsistent with open access and non-discrimination as long as it does not dominate access outcomes.

I suppose the next question is given that these are private and confidential contracts how will any access charge/access dispute be reconciled? My understanding is that a miner can threaten legal action under the Trade Practices Act (that FMG has used to great effect to gain access to BHP/RIO lines). In particular, Division 6A of the Act (Pricing principles for access disputes and access undertakings or codes) requires that access price structures should:

"(i) allow multi-part pricing and price discrimination when it aids efficiency; and
(ii) not allow a vertically integrated access provider to set terms and conditions that discriminate in favour of its downstream operations, except to the extent that the cost of providing access to other operators is higher."

In addition, a miner being rejected access can seek to have the FMG line declared by the NCC (typically completed within 4 months of application) and then have an economic regulator investigate whether the denied access is discriminatory or not.

Will FMG tie access users up in long drawn out legal battles. I don�t think so. Firstly, its early days and FMG will want to get track/port utilization up to profitable levels. Secondly, FMG would be contradicting their own arguments put up against BHP/RIO. They would be easy targets in this regard. Finally, FMG have a declared �open access� track/port. This is not the case with BHP/RIO who have understandably sought to delay access as long as they can.

In summary, I am less concerned about rail access and more concerned regarding upgrade risks re ore quality/contaminants.

Sorry about the length of reply, but UIO has raised some good points that are worthy of discussion. As backround, I only just learnt to spell "iron ore" last month and have been reading up to learn as much as possible. Thus, I may have possibly misread the situation. I am an economist and my partner is an regulatory manager dealing with access issues in a non-rail industry. I have run my thoughts past her before posting.

Needless to say, if I'm wrong - its her fault.

Cheers

Bleasby.




15/03/08 16:24 (View) Back Post Reply
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electron99
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Thank you, Bleasby (and your other half!),

You've put a fair bit of rigour into the issue of possible cherry picking of rail access by FMG on the basis of Fe grades. It certainly gives some reassurance that it's a very viable option. I wonder if there are any equivalent rail systems elsewhere in Australia that have a bit of history to show how it works when things open up?

I certainly appreciate the input of UIO to the overall debate. My view is that the market will get the price of BRM right as and when all the bits of the equation fall into place. Hopefully the scoping study will give more insight into the detrital upgrading process.

15/03/08 16:52 (View) Back Post Reply
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Hi guys,

Some very interesting thoughts here and as mentioned I am unsure of how this whole rail access thing will play out. VERY interesting indeed to see someone who may have some practical insight into the issue comment.

My thoughts on open access are predicated on a lack of significant excess capacity RELATIVE to supply ramp ups that will inevitably occur at any time a commodity price is significantly above long term averages for a period of time.

Obviously if there was enough spare capacity to accomodate every iron ore player out there (and within this I would also include spare port capacity) then there should be no problem. With all the FMG rhetoric around open rail access they would have no justification to not allow everyone to use the excess capacity.

However should there be limited capacity, who does FMG allow on their lines? My answer above takes a strictly commercial view and not one that accounts for any legalities - which I will say right now I have little to zero understanding of.

From a commercial perspective for any given capacity constrained third party access, FMG would benefit most from allowing ore which provides them the greatest economic return.

If there is for simplistic purposes 10 MT spare capacity, Company A wants to rail 10MT and Company B wants to rail 10MT. How then does FMG decide who rails what amount? Half and half? What if there are 10 players all wanting to ship 10MT to make their operations economic? You can't make them all ship 1MT as this may not be economically viable. This is a real question on my part and would love to know if the legislation is prescriptive or definitive on this point.

The cynical point of view would contemplate that FMG builds the line and paid for it. Third party access can be a very broad definition and you simply cannot allow anyone and everyone to access it randomly. FMG will still continue to control the scheduling and I'm sure will play a huge part on who gets access. My guess on the higher grade ore is purely based on the economics of the situation whereas in reality there may also be preexisting relationships coming into play, political considerations, etc etc.

Rio and BHP have argued that open rail access will result in overall lower throughput as intuitively 5 players trying to schedule different trains will mean much less efficiency compared to 1 player controlling all scheduling. Gate sales would be the logical conclusion to this long running issue where the rail owner will pay a discounted rate for ore at the junior's mine gate and then rail it when it suits their schedule.

Gate sales again would imply that majors will buy high grade. Is this discriminatory from a legislative perspective? I'm not sure. The key here is we know for sure that there will be more demand than supply for rail capacity and you cannot have each company shipping an uneconomic amount just so everyone can have access. Some will be excluded and my best guess is this will be the marginal players that do not provide a value add to the major's.

Another interesting point brought up by a colleague is that BHP/RIO/FMG shareholders are essentially subsidising other company shareholders allowed access to their rail. They've taken on the cost of building it, the risk involved, etc etc but these juniors will then get to use it without taking any of that on. Would be a different story if the government had chosen to build the infrastructure.

Good to see some very interesting points of view coming up. I will watch this thread with interest.

Cheers
UIO

15/03/08 17:58 (View) Back Post Reply
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Excellent post


- if there was spare capacity the big 3 would presumably in their ideal world sell rail capacity to the highest bidder prepared to use public shipping. Without of course impacting their own own sales

- worst for them would be subsidising competitor ore at low cost/ong term commericial contracts, cannibalising their own sales with product displacement and lost rail efficiency

My take is the endpoint will be FMG providing third party access to try to prise open RIOs lines for their large undeveloped tenements, while high grade deposits such as UMC will be snapped up either on market on with minegate sales by BHP/RIO.
15/03/08 19:30 (View) Back Post Reply
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Hi guys, there's been some great posts in this thread.

The way I see it, the movement of ore via the open access railway needs to considered from a railway transportation perspective rather than a mining perspective. To this end,
the Pilbara Infrastructure Pty Ltd, a wholly owned subsidiary of FMG was set up to house the logistics business of moving the iron ore by rail from mine to port, and establish modern export load-out facilities at Port Hedland. Initial capacity is 60Mtpa for first ore on ship in March 2008. Stage 1 expansion is planned to increase capacity to 100Mtpa with Stage 2 expansion to boost it to 200+Mtpa. As at December 2007 port was 90% and rail was 83% complete.

Therefore, Pilbara Infrastructure P/l is running a transportation business that moves cargo for a fee irrespective of the nature of that cargo. Its role is to move over 200MT pa of cargo (iron ore in this case) in the most efficient manner. Its business decisions should be based on the transportation issues, not decisions that most benefit FMG's iron ore mining operations and which are detrimental/unrelated to the transportation business.

Pilbara Infrastructure will need to look at transportation issues that include timetables, stop off points, haulage distances, etc. Once they have figured out these things, they can start determining haulage rates to charge each mining operation. This is where things will get interesting, because if there is spare capacity no doubt pricing will be reasonable and will make it affordable for many mining companies. However, once capacity has been reached, no doubt the haulage rates will be increased which will make it uneconomic for the more marginal mines. Pilbara Infrastructure may offer better rates to mines that enter into long term contracts or those that will have higher annual haulage requirements.

I daresay that Pilbara Infrastructure will need to provide transparent business practices that clearly separate it from FMG's mining operations. There should not be any conflict of interest that gives preferential treatment to FMG's iron ore business based on issues irrelevant to the transportation issues.

Ultimately, mining operations that have higher profit margins will be the ones that can afford higher haulage costs as capacity is reached (assumption that Pilbara Infrastructure will be allowed to raise charges in this circumstance).
15/03/08 20:02 (View) Back Post Reply
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The utlimate goal for FMG is to have the RIO and BHP lines opened up. This can only be done as pointed out in earlier threads if it practices what it preaches. That is why I feel BRM will be a winner in this high stakes poker game being played out. Management has the credentials to make it happen.

As far as ore is concerned, high grade ore > 60% Fe is not a pre-requisite for the Chinese in their quest for offtake agreements. Ore > 55% is acceptable given that LOI will get it over 60% once sintered. In addition, I hear the mills also blend ore from different sources, hence borerline ore from an impurity point of view can be mixed with lower impurity ore.

The fact that BRM has 2 deeds of confidentiality signed with Chinese parties to me means their current DSO ore has all the necessary ticks.

Now who could this NY based fund buying into BRM be? Is it just a co-incidence that FMG has a NY based fund on its register? Cant wait to see any substantial shareholder notices in the future. Westcott's post reads:



15/03/08 21:50 (View) Back Post Reply
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Hi All.
Can any of you make any thing of this information as to use of FMG rail line.

UMC ON 28/02/08 Announced 110kl proposed rail spur to access The FMG Multi-user Railway and Associated Port Facilities.

The proposed rail spur splits two of ROY Tenement then moving North goes within 6kls of more ROY-IOH and API Management tenements.
UMC Rail spur will follow the Great Northern Highway for most of the way to the FMG rail line link up.
Roy Hill Road runs through Marillana and joins the Great Northern Highway which is about 30kl from Marillana.
The Southern end of IOH tenements is about 4kl from Marillana, the other end of IOH tenements is as above about 6 kl from UMC rail line and Great Northern Highway.

Thundallara Minerals holds 21.84% of UMC.
Royal or ROY is a spin off of Thundallara.

Thundallara Management. Mal Randell is also non exec Director of UMC and Chairman of IOH.

Brian Richardson is also Director of ROY.

Frank Demarte Director of ROY.

Phil Crabb is UMC and ROY Chairman.
Regards
Westcott.


Reads like a Tasmanian family tree!