this time will be different!, page-55

July 01, 2010

Territory Resources Returns From The Dead, Official Ceremony Sometime Friday
By Our Man in Oz



If, at any time over the past three years, your friendly stockbroker had suggested investing in a small Australian iron ore producer called Territory Resources you would have had every right to sack him, or at the very least recommend he seek psychiatric assistance.
Few companies fell as far as Territory did in the period between late 2007 and today. The drop from A$1.64 to A8 cents represented a 95 per cent loss for some unlucky souls, though a five month period last year when the company was suspended was probably even more painful, because you couldn?t even get your A8 cents.

It?s too soon for Minesite?s Man in Oz to talk about worms turning, or to suggest that Territory should reclaim a place on your radar screen, and yet chatter from the ?top end? of Australia?s Northern Territory is now flagging up a potential resurrection that will rival anything performed in, say, the last 2,000 years.

Shipments of iron ore by Territory out of Darwin have been running like clockwork over the past 12 months without the company really saying much. The policy has been to maintain a healthy silence until there is something significant to report. That time could be as soon as tomorrow (Friday 2nd July, Australian time) because Territory has just completed its fourth quarter sales, and the word on the street is that they have been damned good.

How good? Well, if some of the numbers reaching the ears of Minesite?s Man Down Under are correct, then Territory has quietly hit its target of two million tonnes, which would be an increase of more than 25 per cent on a year earlier. On top of that the price received has been in the stratosphere, given the high quality of the ore being mined at Territory?s Frances Creek mine.

A hint of the average price achieved for the financial year just ended was contained in Territory?s March quarter report, when US$100 a tonne was mentioned, followed by a reference to the price rising to US$130 a tonne, which is more than double the price of 12 months earlier.

What this means for a company heavily sold-off for under-performance is that analysts will be forced to re-assess their views of Territory. Not only has it survived the great downturn, it is now generating large dollops of cash and, if the talk is right, has made huge inroads into repaying a generous US$90 million plus loan that it received from the Hong Kong trading house Noble Group that allowed it to stay afloat.

Few financial details can be expected from Territory until the company?s management has processed the tonnage numbers, but very soon the company will tell the ASX that it has been delivering on its promises, and then some. Not only will the two million tonne target be confirmed, but there might even be a few words on other matters, such as plans to extend the life of the Frances Creek mine, and to acquire a few years of additional resource from nearby tenements. The company may even have something to say about going onto the front foot after two years ducking bouncers.

Minesite, which has always had a soft spot for Territory, will be delighted if the company that almost everyone had forgotten has done more than merely survive. One major shareholder who did not forget was Noble, which has maintained its strong position on the Territory share register, behaved impeccably as a de-facto banker, and might even now be planning a future role for the company as its preferred iron ore project developer, in Australia and elsewhere.

Watch this space!