I think it may be because of the size of the existing planned operation - 1MT from March 08 then moving to 3MT. They have resources of 10.5MT and reserves of 4.4MT. With an operating marging of $10 to $18 a tonne predicted, this provides a healthy annual profit.
But the real story is in the potential additional hematite resources, could be an additional +20MT given the prospectivity of the tenements, and the + 1 billion tonne magnetite target which is being drilled. A resource estimate is due in June/July, which will be a major re-rating milestone (just look what happended to TRF on the back of a 44MT resource).
With additional hematite resources, they could look to increase production very rapidly to 3MT to 5MT per annum, which could generate up to $90m a year in operating margins. A large, good quality magnetite resource will attract Chinese interest (they already have the IMC Group on board).
With $20m in the bank, AGO is no doubt undertaking extensive exploration activity. They have a track record of getting things done very quickly. Big few months coming up.
AGO Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
