TP Comment: Please excuse any typo's as I have typed this article directly from the AFR newspaper. Although Jupiter does not get a mention in the article per se, I still consider the article to be very interesting reading for JMS holders. - Pie ___________________________________________________________________
Source: The Weekend Australian Financial Review [Pages 44-45]
There's more hematite in those hills, it just needs rail lines
Fortescue's boat has sailed, but is there promise in other Pilbara miners, asks Paul Garvey. ___________________________________________________________________
High rollers Potential iron ore champions
Giralia Resources: Market cap - $482m; 1 year return - 325%
FerrAus: Market cap - $263m; 1 year return - 163%
Jupiter Mines: Market cap - $51m; 1 year return - 86%
Polaris Metals: Market cap - $80m; 1 year return - 76%
Iron Ore Holdings: Market cap - $91m; 1 year return - 58%
Strike Resources: Market cap - $258m; 1 year return - 24%
Warwick Resources: Market cap - $46m; 1 year return - 6%
It's been a big week for Andrew Forrest. Not only has he been officially anointed by BRW magazine as Australia's richest man, but shares in his Fortescue Metals Group have reached yet another milestone.
During Friday trade, Fortescue went as high as $11.09, pushing the paper value of Forrest's controlling stake past $11 billion.
The phenomenal success of Fortescue, which this week officially welcomed the arrival of its first ore shipment to China, has made Australians aware of the riches that can be made from iron ore and has investors poring over iron ore juniors' ranks in hopes of unearthing the next Fortescue.
Sadly, it's a search that is almost certain to be fruitless.
Excepting Fortescue, BHP Billiton and Rio Tinto, only Aquila Resources - already a $3.5 billion company - has locked up substantial holdings in the iron ore-rich Pilbara region.
Those with Pilbara ground will require access to the rail and port infrastructure built by incumbents.
While Fortescue's arrival as a producer and its lobbying for access to BHP's and Rio's rail lines means open access is closer, there's yet to be an example of open rail access in the Pilbara.
Second-tier companies such as Mount Gibson Iron, Murchison Metals, Midwest and Atlas Iron have also attracted attention and market capitalisations of more than $1 billion.
So, assuming a healthy iron ore outlook and a breakthrough that will allow iron ore minnows access to the big boys' infrastructure, are there still opportunities out there?
In the search, The Weekend AFR has leaned towards companies working in the Pilbara, ignored lower-grade magnetite ore and concentrated on companies with little profile and minute market capitalisation.
Strike Resources has developed something of a name with its suite of iron ore assets in Peru and earlier this year announced it was in discussions over their potential sale of $US450 million ($469 million).
It entered into a trading halt last Thursday and the fate of the transaction may soon be known.
It is little known that Strike also has a couple of small Pilbara tenements that, while at the earliest stages, look promising.
While rock chip samples are unreliable, 55 samples from one of Strike's tenements average an eye-catching 64.7 per cent iron ore.
The company will soon do 3000 metres of drilling along the ridge, and will investigate the ground's potential to support a 1 million tonnes a year mine that could come on line as early as February next year.
FerrAus is far more advanced than Strike's Pilbara play, having identified a 40 million tonnes resource within its larger Robertson Range project in the east Pilbara that it hopes can support a 4-5 million tonnes a year iron ore mine.
It has also touted its recent Davidson Creek discovery as a potential 100 million tonnes-plus find, and is considering a 10 million tonnes a year operation.
On the downside, the deposits site to the east of the easternmost rail lines in the Pilbara.
Iron Ore Holdings' ground is sandwiched between the railheads of two separate rail networks. The company's prime position hasn't always translated into success, with the 46.8 million tonne Extension Project deposit grading a low 50 per cent iron.
But the latest rise in iron ore prices and the emergence of Kerry Stokes as the company's dominant shareholder has got Hogan and Partners analyst Tony Lofthouse excited.
The smaller but high grade Phil's Creek deposit (8.3 million tonnes at 58.1 per cent iron) could support a six-year, 1.5 million tonne per annum mine.
"IOH has not yet run with the recent iron ore resurgence, but perhaps its stars are at last aligned," he said.
Outside of the Pilbara, ground closer to the gold and nickel mining centre of Kalgoorlie is growing increasingly prominent.
Polaris Metals has defined a 30.4 million tonne resource grading 58.1 per cent on its tenements to the west of Kalgoorlie, and has set itself the target of identifying another 70-90 million tonnes after looking closely at historic data.
The resolution of a tenement dispute with iron ore miner Portman has removed a degree of uncertainty from the stock.
Ends.
Cheers, Pie :)
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