"Garimpeiro was asked during the week which upcoming exploration program by a junior company had the potential to excite in a major way.
He offered up the less-than-useful advice that they all did, depending on what was found.
But pressed for something specific, Garimpeiro eventually landed on a soon-to-start exploration program by Macro Metals (ASX:M4M).
It’s the Pilbara iron ore-focused junior that has the bustling Tolga Kumova as chairman and near 10% shareholder, and former Mineral Resources man Simon Rushton as managing director.
There was a puzzled look from Garimpeiro’s drinking buddy. “Iron ore?!’’
Yes, iron ore prices have retreated to around US$90 a tonne and some big name forecasters are saying it’s headed lower still to $US80-$US85/t.
Prices may well reach that level, but Garimpeiro is with BHP in thinking that would be deep enough in to the global cost curve to mean a bottom in prices had been reached.
determining if part or all of that volume potential is iron ore at the right sort of grade.
If the project location and the geophysical work was not already incentive enough to get cracking with a drill program, Macro geologists have more recently encountered high-grade hematite scree and float on the surface, as well as outcropping mineralisation.
It means the drilling program will be more targeted than it would have been based on the geophysical targeting alone.
Cards held close to chest – for now
Garimpeiro followed up his chat on explorations programs that could excite with a call to Rushton, asking him what the expectation was from the drilling program. He was suitably cautious and guarded.
“We know we have two large targets defined by close spatial magnetic and gravity surveys. We know we have extremely high grade hematite on the site.
“In just a few short weeks we will begin to gain a far better understanding of grade consistency and the potential scale of the mineralisation,’’ Rushton said.
He would not be drawn on likely economics if Goldsworthy East – all of 100km from Port Hedland – were to shape up as a development opportunity.
By Garimpeiro’s reckoning, a mining operation in that location so close to port could probably expect costs of about $A65/t including freight, before the state royalty.
The current Aussie dollar iron ore price is about A$135/t. Use a US$80/t iron ore price, the Aussie equivalent would be about A$118/t at the current exchange rate. So there would be fat margins to be had at either pricing level.
And if the orebody and port allocation allowed for up to a 5Mtpa production rate, the earnings capability would be very substantial to say the least. It is why the drilling program is potentially high impact stuff for Macro.
The stock was trading mid-week at 1.9c a share for a market cap of $68m (undiluted)."
For those that missed it..:
M4M Price at posting:
2.2¢ Sentiment: Buy Disclosure: Held
