extract from broker report from co web site

4 May 2010
Accent Resources NL
KPM PTY LTD
ABN 28 120 278 837
AFS Licence: 334039
Page 3 | 16 KPM Pty Ltd | P.O. Box 312, Lenah Valley, TAS 7008 | Ph: 613 407 849 078
Investment case
ACS appears significantly undervalued
Under all valuation measures we have investigated, ACS appears significantly undervalued based on our valuation of $0.72 per share. This price to valuation discount is a reflection of the markets inability to measure the probability of ACS getting the project up and running and given the myriad of iron ore projects currently coming to market. However, we believe as ACS moves down the development timeline and produces a project feasibility study, this valuation discount should narrow. This view is reinforced by the following observations, all of which support a strong investment case for ACS:
DEMAND FOR IRON ORE ON THE RISE
In ABAREs March quarter 2010 Australian Commodities review, global steel consumption was forecast to reach 1.3Bt in 2010, growth of 8%. Further, steel consumption is projected to rise by an average of 6% each year to reach 1.8B tonnes by 2015.
Major iron ore exporters achieved price increases of almost 100% in April 2010
The main driver of demand continues to be China, which has returned to long-term trends for iron ore imports, production and inventory levels. Against a background of high demand, major iron ore exporters achieved price increases of almost 100% in April 2010. While such rises are unsustainable, we believe the outlook for iron ore prices will remain positive for the near to medium term and underpinning the economic viability of the Magnetite Range project.
ORES AINT ORES
Magnetite concentrate is particularly attractive as a feedstock for steelmakers
Australias supply of high-grade direct shipping hematite ore is declining and high-grade magnetite concentrate is viewed as the next major source of iron ore. Magnetite concentrate is particularly attractive as a feedstock for steelmakers and enjoys a premium price from steelmakers compared to hematite products, which offsets the extra processing cost. The attraction is twofold:
1. Magnetite concentrate has very high iron content with very low impurities and deleterious elements; and
2. The mineral magnetite requires significantly less energy to convert into steel than does the mineral hematite. This affords it superior smelting characteristics.
LOCATION, LOCATION, LOCATION
ACSs tenements are close to existing and expanding infrastructure corridors
The mid-west of Western Australia (WA) is set to become the hub for magnetite exports with two projects, Karara and Extension Hill, poised to pave the way for a number of smaller projects. ACSs tenements are close to existing and expanding infrastructure corridors and the areas development is being actively encouraged and supported by the WA State Government.
GOOD METALLURGY
Magnetite Range can produce high-quality concentrate
We believe Magnetite Range can produce high-quality concentrate with iron content > 68% and with low sulphfur, phosphorous and aluminum. This should ensure a price premium when sold into the world market.
SIMPLE GEOLOGY
The magnetite can be accessed from approximately 40m
The banded iron formation (or geological structures containing the iron ore) is relatively shallow and long extending (14km) which lends itself to relatively cost efficient open-pit mining with low strip ratios. The magnetite can be accessed from approximately 40m vertical depth and the mineralised sequence remains open beyond 200m.
NO EXTRANEOUS HURDLES
Extension Hill has received almost all its relevant project approvals
Neighbouring Extension Hill has received almost all its relevant project approvals, including environmental and indigenous agreements. We would expect Magnetite Range to be able to follow a similar regulatory path.
ACS HAS DONE ITS HOMEWORK
Considerable effort has been undertaken to ensure that the metallurgy is well-defined and in advance of spending money on drilling. Consequently it has a well characterised deposit that should assist the reliability of the project feasibility study. The thorough analysis of the deposit should prove attractive for any potential purchaser.
4 May