ASX investigates Sherlock's 36% rise By Jamie Freed January 13, 2006
THE stock exchange yesterday queried Sherlock Bay Nickel about its recent share price gains, after the stock rose 36 per cent in the past week.
The company attributed the heightened trading to interest in a large iron ore project it could soon purchase from the controversial Queensland entre-preneur Clive Palmer.
Sherlock, chaired by former Sydney Gas chairman Domenic Martino, picked up an option over the project owned by Mr Palmer's private company, Mineralogy, for $1 million last month.
Sherlock is conducting due diligence on the Cane River project, which would blend lower grade pisolite ore with high grade magnetite concentrate to produce an export product. Sherlock expects the deposit, located in Western Australia's Pilbara region, would cost less than $1 billion to develop and could produce 15.5 million tonnes a year.
If Sherlock exercises its option over the project by the May deadline, Mineralogy would likely receive a mix of cash and equity in return, Sherlock's managing director, Darren Hedley, said.
Mineralogy's executive chairman, Mr Palmer, is best known in NSW as the man behind the Austeel consortium's $2.5 billion Newcastle steelworks project. The development was scrapped in 2004 after receiving $21 million in NSW government handouts.
Mineralogy is developing a separate $US2.5 billion ($3.3 billion) iron ore project with financing help from its key customer, China's Wuhan Iron & Steel, which has a memorandum of understanding to purchase $20 billion of iron ore.
Mr Palmer said Wuhan had already arranged project financing with the Industrial Bank of China. That is welcome news to Sherlock, as it hopes to lower costs by sharing some infrastructure with Mineralogy.
Sherlock is drilling at Cane River to confirm the grades are high enough to be economic.
But yesterday the company seemed confident it would exercise its option over the project.
"It's just a matter of timing and making sure a couple of things we are relying on have a little more confidence than we've got," Mr Hedley said.
Sherlock shares traded as high as 5.7c before closing 0.1c higher at 5.3c yesterday.
SHN Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
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