The following article appeared in The Age today.....for the record I am not a shareholder in YML but i have posted this article to show how much of a difference having someone with experience/reputation/dedication/drive/determination on the board can make. This is how it's done:
Brockman Resources WHILE the big end of town in the iron ore sector commanded much of the attention last week — first with the long-awaited BHP-Rio consolidation announcement, then with Fortescue's exquisitely timed billion-tonne "discovery" — there was plenty to talk about at the junior end. One that Garimpeiro has mentioned previously, Yilgarn Mining (BusinessDay, 9/7) was chief among them, due mainly to shareholders being able to get up close for the first time to new managing director and former BHP iron ore gun, Wayne Richards, at the group's annual meeting.
Richards was one of the year's recruiting coups and he has wasted no time developing an aggressive growth strategy based on Yilgarn's Pilbara Marillana project.
Yilgarn has since delivered an initial indicated resource of 43.5 million tonnes grading 57.6% for the north-west sector of the Marillana project — a major step towards Richards' target of 100 million tonnes. The company has also discovered iron mineralisation some two kilometres from the north-west sector at Rockhole Bore.
At the AGM last week in Perth, shareholders approved a change in name to Brockman Resources, one that better reflects the big-time iron ore ambitions of the company under Richards' stewardship.
Marillana is clearly a highly strategic asset in the current environment. It is surrounded on all sides by the majors, with BHP's Newman railway line running through it, and Fortescue's Cloud Break operation just to the north.
Richards told shareholders at the AGM that a scoping study was already under way on Marillana. The study is a precursor to a pre-feasibility on an initial 2 million tonne-a-year operation and an expanded 10 million tonne-a-year operation by the end of 2008. Also signalling the group's intent, a mining lease application is to be submitted soon over the Marillana tenement.
The key to the Yilgarn/Brockman story is the need to hitch a ride to the coast for its iron ore by securing an access agreement to either the BHP or Fortescue rail infrastructure.
With Fortescue gearing up to commence production next year and all eyes on the potentially positive implications of a BHP-Rio consolidation for the Pilbara's iron ore juniors, Richards thinks that the company is well placed to secure a deal.
While discussions have begun behind the scenes on potential rail, port and infrastructure options, Richards' game plan is to move as rapidly as possible to define a sizeable resource base to underpin a 10 million tonne-a-year iron ore business.
A mining operation of that scale would have sufficient critical mass to plug neatly into the business planning of the bigger groups that hold the controls for the Pilbara's train sets.
Yilgarn (Brockman becomes effective tomorrow and the code will be BRM) closed on Friday at $1.175 a share, more than double its price in July when Garimpeiro last had a look at the stock.
Perth broker Patersons now has a $1.81 valuation on the stock based on an initial 2 million tonne-a-year trucking operation, expanding to a 5 million tonne-a-year rail operation.
On a peer comparison using the enterprise value per tonne of in-situ resource method, the company is well short of being the most expensive around at an EV/tonne of $1.92/tonne. That compares with an EV/tonne range of $26/tonne to $45/tonne for some more established iron ore stocks such as Atlas Iron, Territory Resources, Gindalbie Metals and Murchison Metals.
While Richards has set an initial 100 million-tonne objective at Marillana, he has been adding other strings to the company's bow. The Mt Florance tenement was granted last week, and it has a further eight applications across the Pilbara. It also has been granted licences for Opthalmia, Hamersley West and one smaller tenement at Duck Creek. Exploration success at any of those would likely force a narrowing of the EV/tonne gap between the company and those with similar iron ore ambitions.
UMC Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
