io post by hangjan38

Not my post but I thought it had relevance to this stock. Not a holder yet.... looking to invest into AGO as a mid cap pure IO play.

Well, there is nothing wrong with sticking to a steady-as-you-go stock paying regular dividend but won't have much of an impact on your longer term net worth or life-style compared to owning stocks that may do just that.

In a similar vein, many are now kicking themselves wondering why they didn't invest heavily in mid-small caps mining stocks back in March (or late 2008) ??

Simple answer: Fortune favours the brave.

In case some of you don't already know, BHP and RIO make most of their profits from IO. In the case of RIO, IO accounts for almost 80% of profits.

Therefore, for maximum bang for the buck, safety and potential for very signifiantly capital gain (due to their energetic and visonary management, significant expansion capacity and agressive growth), anyone heavily invested in the big miners should looks at 2 pure iron ore plays in particular. FMG and AGO (with infrastructure JV relationships and more to follow). Their valuations are very discounted now (but not for much longer the longer we get towards the next commodity supercycle). Once the brokers start upgrading these 2, their SP will runaway beyond reach.

You saw this happening to little "explorers" like IOH (up 1000% since March). The next phase of the boom will benefit the mid-tier companies that can produce and ship (rather than simply boasting about drilling data).

BTW, ask yourself the honest question, do you feel more inspired and enthused by Twiggy and Dave Flanagan or by someone like Klopper ? I had been to the BHP AGM many a times and fell asleep. I sold all my BHP shares (smart move in retrospect) but kept some of my RIO.

AGO has no debt, plenty of cash for it's size and is on the verge of having more after selling a massive magnetite project called Ridley. The newly merged entity (with Warwick Resources) now give's AGO the proven rich IO grounds next door to BHP's Newman.

Surely, FMG has some long term debt that they will pay off with future earnings over time. This is one IO company in the world the Chinese will do anything to ensure will grow and challenge the Big 3.

Many speculate that in time (probably won't happen feasibly for another 3 years), China will significantly reduce it's purchase from RIO/BHP and relegate them as 2nd tier providers once it has bought the bulk from non-Australian miners and Australian miners with Chinese interests (that's about every IO miner other than BHP/RIO).

With land holdings bigger than RIO and BHP combined, FMG in a 2-3 years will have expanded production on the scale of the big boys. Chichester is being expanded to 100 MTA and Soloman could yet house the biggest single mine in the Pilbara for a total 200MTA + output. Think about it, FMG in its 2nd year of operation already shipped almost 50MTA. BHP has been in the Pilbara since the 1960s and is barely shipping 200MTA.

AGO has land holdings of $15,000km2 (about the size of RIO) and it conservatively aims to ship 26MTA by 2014. This is extremely conservative (partly due to rail solutions to be resolved) because it has just embarked on an agressive drilling program. AGO is the dynamo of IO companies. This fledging producer has won numerous industry awards and is the envy of it's peers.

With 3rd party rail access ruling given the green light, the SP of these companies could probably double overnight (the same applies to other juniors like FRS, BRM).

It is widely understood that the WA Barnett government will not allow for the BHP/RIO IO JV to go ahead unless rail access is opended up to 3rd parties (regardless of the high court ruling due out in a few months - which is expected to be a YES in any case).