We recently met with the new Managing Director of FMS, Gary Sutherland, and were very impressed with his strategy for developing the company?s two significant iron ore projects. The 100% owned Pilbara Iron Ore Project has 658Mt at 55.4% Fe (24% Indicated, 76% Inferred) of JORC resources located 175km south of Dampier in WA. The company is currently completing a PFS on a two stage mining operation due for completion late 2010. A BFS is likely to commence in Q4 CY10. Stage 1 DSO operation: Targeted for production late 2012. Resource base lends itself to long life, low cost operations including the potential for significant DSO operations for early cash flows. Stage 2 Beneficiation operation: Given capital requirements and lead times, beneficiated ore production is not expected to commence production until 2013. The likely short term focus will be on the higher grade Delta deposit, located ~19kms from RIO?s Dampier-Paraburdoo railway line and also in the same corridor as FMG?s and the AQA/API proposed railway lines. The WA Government backed Anketell Port would be the most likely port option. The Stage 1 DSO operation is targeting production in late 2012, subject to infrastructure solutions. Exploration programme in 2010 to convert resources to indicated status and probable reserves in Q4 CY10. ? Resource upgrade at Blacksmith also expected late 2010 The company also has the Canegrass Magnetite Project in the Mid West which has recently commenced a drilling program. We also note that the register of FMS is open with no strategic/Chinese shareholders; one of the few small-mid cap iron ore companies without a current partner. With a market cap of $200m and over $50m in cash, FMS is trading on a EV/t Fe of just $0.40 compared with the peer group average of $1.97.
FMS Price at posting:
12.2¢ Sentiment: Buy Disclosure: Held
