Batavia Minings Roper Bar Iron Ore Project In Northern Territory Looks A Simple, But Lucrative, Proposition By Alastair Ford
Iron ore prices are once again on the rise. Contract buyers now look likely to settle for something in the order US$121 per tonne, as against US$61 last year, as the spot market price gains ever-increasing influence as a major benchmark. Its a remarkable switch-around in whats been a remarkable market over the past few years, as iron ore prices have soared in response to Chinese growth and the supercycle, and then crashed as a result of the credit crunch. Now prices are once more on the rise, and it looks as though the age-old standard price-setting mechanism, whereby contracts with all the major steel mills in the Far East are negotiated individually with all the major producers, is unravelling. Rio Tintos Tom Albanese has said the benchmark system must evolve or it will break, while BHP Billitons. Marius Kloppers has repeatedly called for moves towards market-relating pricing.
This comes after the Chinese held out for too big a reduction for too long last time round. In the end, the spot price recovered markedly, and because the Chinese hadnt locked in supply at the lower US$61 price that other buyers had settled for, it was they that took a lot of the pain. And, the flip side of that was that the majors booked more profit than they might otherwise have done. So, one in the eye for the Chinese. They are unlikely to be caught out again.
So, with the economic storm clouds now rapidly clearing, the iron ore space once again looks a happy place to be. The pain was short-lived, partly because, as one recent Aussie pundit recently put it, the mining boom never went away, it was simply disrupted by a crash in the banking sector. Things are starting to get done in the iron ore space. Sentiment is improving too. One clear indication of which is that junior iron ore companies are one again on the move.
Neil Biddles Batavia Mining is a case in point. Batavias share price has soared from an A$0.10 share price six months ago to the current A$0.17, an increase of 70 per cent. That gain was delivered after the company emerged, late in December, from what you might call a slow period. Into Batavia came the Roper Bar iron ore project in the Northern Territory, acquired under option for A$10 million in cash, plus a mixture of shares, options and a payment linked to any uplift in tonnage. Neil explains the attractions succinctly: Its a very large asset, with excellent logistics, and good access to rail and port facilities. He adds, for good measure, that once upon-a-time, before the bonanza discoveries elsewhere in Australia, Roper Bar was BHPs main iron ore project.
Thats not a bad jumping off point for a newly acquired asset, and Batavia now intends to whip it into shape and work towards a production decision, with a view to producing a direct shipping ore (DSO) by 2012. At the moment the project boasts half a billion tonnes of ore, including between 80 million and 150 million tonnes grading 55% iron. That 55% ore will be the basis of the DSO operation, which the company reckons on running at a rate of five million tonnes per year. Dig it up, upgrade it to 60%, truck it to port, and pocket the cash.
Not hard, when you think about it, but the key, as always in bulks, is logistics. The crucial element, says Neil, is the ability move the product from the mine to the port at a cost at which you can make a profit. To fine-tune that proposition the company needs initially to work up new JORC numbers, and to complete a scoping study. And that will be done, all other things being equal, by July.
At that stage Batavia will then go out and look for between A$40 million and A$50 million to take the project to the next level, sourcing a sizeable portion of that from London. To get that money into the kitty, the plan is to keep Batavia to the forefront of investors minds by presenting the company both at investment and at technical conferences over the coming months. Neils no stranger to mining, nor to European investors. Currently he sits on the boards of TNG and West Australian Metals, but his history stretches back such that he reckons hell be able to build strong support over the coming months both in the UK and in Germany. So, watch out for Batavia Mining, they could be coming soon to a conference near you.
BTV Price at posting:
17.5¢ Sentiment: Buy Disclosure: Not Held
