WPG Resources (WPG):Multiple Bulk Commodity Projects under...

WPG Resources (WPG):
Multiple Bulk Commodity Projects under development in South Australia:

DSO Deposits
* Total Resources Estimate 37.4 mt @ 62.6%
* Peculiar Knob 19.0 mt @ 63.7% ETA 2nd half 2011
* Hawks Nest 18.4 mt @ 61.6%

Magnetite-Hematite BIF
* Magnetite resource estimate 570 mt @ 36% Fe
* Hematite resource estimate 102 mt @ 37.4% Fe
* Additional Magnetite exploration target 790-890 mt @
32-37% Fe
* Additional Hematite exploration target 1,400-1,680 mt @
22-43% Fe

Coal
* Early stages of resource drilling
* JORC compliant resource 270mt
* Current exploration program additional target 100 mt
Scope >600 mt


Why I believe WPG Resources represents outstanding value:

Peculiar Knob Direct Shipping Iron Ore (DSO) - Key Points
* Arguably one of the highest grade, lowest impurity undeveloped deposits in Australia.
* Decision to commit to project development expected by the
end of 2010.
* Deutsche Bank mandated to provide US$120m finance package.
* Exports expected to commence in the second half of 2011.
* MOU's for the sale of some 9 million tonnes of iron ore
fines over a 5 year period in place.
* 30 year port access agreement to export iron ore and coal
from Port Pirie in place.
* Exports expected be within the range of 3-4 million tonnes per annum of iron ore.
* Port capacity of 7-8 million tonnes per annum provides capacity for growth. Excess capacity can be made available to other users.
* Potential to expand the deposit with further drilling
below the pit floor (the deposit is open at depth).

Peculiar Knob (Based on the first 16.5 million tonnes of DSO iron ore
* Veritas Securities Limited NPV Valuation $1.82 per share
* Austock Research Report NPV Valuation $190 million
* Aksier's NPV Valuation based on 71% project debt
financing $2.03 per share

Deutsche Bank have been mandated to provide US$120m finance package (71% of capital required).

(Note that there is potential to expand the Peculiar Knob resource by approximately 40% if drilling extends the depth of the deposit by 60 metres).


Plus Growth Opportunities
* Further expansion of DSO operations at Hawks Nest
(Buzzard & Tui).
* Large tonnage Magnetite BIF Project.
* Hematite at Buzzard and Tui footwall deposits.
* Coal at the company's Penrhyn Project plus 3 pending EL's.

Conceptual Valuation of Hawkes Nest DSO Deposit
An interim report from the Hawke review of the WPA which is examining how the military and mining industries can co-exist within the Woomera Prohibited Area (WPA) is due out in November. The final report with recommendations is due out before the end of the year. In anticipation of a favourable outcome which is satisfactory to both the military and mining industries I have prepared a discounted cash flow model for the development of the Hawkes Nest (Buzzard and Tui) deposits.

The net present value of this development is $1.66 per share based on the following assumptions:

* Capital Cost $35m primarily to fund the cost of a haul
road.
* Peculiar Knob infrastructure to be re-deployed to reduce
capital costs significantly.
* Iron ore prices of $130 per tonne.
* Cash operating expenses FOB of $70 per tonne.
* Resource base of 18.4m tones based on measured, indicated
and inferred resources.
* 6 year operation producing at 3.5m tones per annum
commencing in 2016.
* Discount rate applied of 10% per annum.

The total valuation of the Peculiar Knob and Hawkes Nest DSO projects alone is in the vicinity of $3.70 per share fully diluted versus the current price of $0.92 per share. This does not take into account any valuation for the other growth projects listed above.

Please note that all of the information provided in this post is based on my own research. Please make sure you conduct your own research before investing in this stock.