wpg in argonaut morning note 8 july

http://argonautlimited.com/files/MN%20080711.pdf

WPG Resources (WPG)
WPG Resources (WPG) has received two key approvals from the South Australian government today:

1. The Mining and Rehabilitation Program (MARP) for WPG?s 3.3Mtpa Peculiar Knob (PK) Project

2. The South Australian Development Assessment Commission (DAC) has recommended the approval of WPG?s DA application for the ~7Mtpa iron ore receival, storage and export facility to be built at Port Pirie The approvals mean that WPG can commence construction works at both mine and port.
Site works will begin before the end of July; all contracts have been awarded.

The approvals are also conditions precedent for the US$120 funding package provided by Deutsche Bank, which will now be available for draw down.

WPG is targeting first production by May 2012, ramping up to 3.3Mtpa. Ore mined from PK will be trucked 96km to the Wirrida siding, where it will be crushed,screened and hauled 635km by train to the ore storage facility at Port Pirie. The iron ore is them transferred to Capesize ships anchored in the Spencer Gulf using a smaller transshipment) vessel and exported to customers.

We believe WPG has got the key ingredients required for a successful bulk commodity business.
? Quality Product - Peculiar Knob is one of (if not) the highest grade (~63%Fe), undeveloped iron ore deposits in Australia.
? Logistics solution ? The Company has developed an integrated infrastructure solution from mine to port, involving rail and road haulage to Port Pirie, where it
will have capacity to export up to ~7Mtpa.
? Low capital intensity - As a low capital intensity producer (~$43/t), it has the ability to capitalise on buoyant pricing imminently.
? Value - WPG compares favourably against other iron ore peers - it represents value across a range of metrics.
The recent endorsement of the Hawke Report by the commonwealth to re-zone the Woomera Prohibited Area (WPA) is also very significant for WPG. Subject to Defence approval, this unlocks a potential 4-6 year mine life extension (13Mt in Reserves, 18Mt in Resources) on the DSO and paves the way for the Hawks Nest JV with Wuhan Iron and Steel Co (WISCO, China?s 3rd largest steel producer) to proceed.

Buy ? Valuation $1.40