values and considerations for price rise, page-6

Cash & QUR helpful to underpin HAW (seems from the quarterly that there may be an ownership dispute at perhaps the most prospective gold location) but agree with Christophe that Mt.Bevan is the key-so what`s it worth?

Only comparable seems to be the grant by IRM of an option over E29/571 (Mt.Richardson) and E77/1267 (Winderling E) to Portman just under a year ago.This resource was not 'oven-ready' either and a mere 'conceptual target' of 18-22m tons at 56-59% grade FE ore was the basis of valuation.While we hope that Mt.Bevan has a greater resource than this the same sentiments can even now just as well be applied to Mt.Richardson.

The price was an initial payment of $3m with further staged payments of a total of $10m to be made over the next two years.IRM would then receive a 2% royalty on the FOB price of the ore and an additional 50c per tonne on tonnages in excess of 10m tonnes of confirmed JORC indicated or measured resource.

Using IRM`s own ore price basis of $50 per tonne FOB (this seems-and perhaps should-be conservative) and assuming a 5 year project at a straight 4.4m tonnes p.a. with production commencing in 4 years` time and using a discount rate of 5% (unfortunately there have to be a lot of assumptions-hope none seem too crazy!) I make the NPV of this deal to IMR at $25.63m being $3m already received,$6.51m as the $7m to be received over the next 2 years $15.67m for the NPV of the royalties and $450,000 for the 50 cents on 10m+ production.This is equivalent to a current $1.165 for every assumed tonne of ore in the ground.

Whatever the scale of HAW`s in-ground resource it must be hoped that their Board would insist upon a higher royalty percentage than that agreed to by IMR as it is this percentage,far and above the prevailing FOB ore price,that would dictate the value of any such deal for the Company .It will still take some drilling by HAW to establish whether we are in the same ball park but it is interesting to note the somewhat defensive posture of IMR`s Board in their Annual Report Statement following their deal (see below) despite the validity of the points that they make.


Following the extremely positive reaction to the initial chip
sampling results from Mt Richardson, the company embarked
on two drilling programs to further test the Mt Richardson
area. The results indicated that the area was prospective
for Iron Ore. Further work was, however, put on hold while
environmental studies were undertaken to determine the
impacts that further work will have on the area and to allow
work on other projects to proceed. In addition the company
received several unsolicited offers from both listed and unlisted
entities interested in acquiring rights to the lease. The most
comprehensive offer was received after the end of the financial
year from Portman Mining and Iron Mountain subsequently
accepted the offer.
While it took place after the end of the financial year there has
been quite an amount of comment on the company’s decision
to sell the Mt Richardson lease and some clarification may be
helpful to shareholders. There is a view that the company has
sold the only project on which it has announced drill results
and which has a resource target outlined, so devaluing the
company’s asset base. The reality is a bit more complex.
The reasoning behind the decision to sell was that
1) The company was likely to need additional funds to
advance both its Blythe and Miaree projects.
2)The current economic climate does not lend itself to
the raising of speculative funds for exploration.
3) The project at Mt Richardson, while very promising
and having the potential to host a resource of between
20 and 25 million tonnes of Fe at between 55% -
60% Fe would not, at that size, be able to support the
construction of the 130 Km of infrastructure needed to
move any ore to the railhead at Menzies.
4) On its own the company did not have the skills
needed to manage some of the potential environmental
and planning issues associated with the project.
The offer from Portman was attractive because it enabled each
of the above issues to be addressed. We expect the injection
of an initial $ 3,000,000 in October of this year followed by
subsequent payments to a total of $ 10,000,000 over the
next couple of years if, as we expect, the option is exercised.
Subsequent to that, if the deposit is mined, assuming it
contains 20,000,000 tonnes of Iron Ore which sells at an FOB
price of $ 50 per tonne, the company will receive a further
$25,000,000 in royalties and bonus payments. The FOB
price of $50 per tonne is significantly lower than the prices
currently prevailing so is a conservative figure. While the bonus
payment, included in the agreement, is a payment of $ 0.50
per tonne of indicated or measured JORC resource in excess of
10,000,000 tonnes.