Everything falling into place for Brockman Resources (BRM)...

Everything falling into place for Brockman Resources (BRM)
CRITERION: Tim Blue From: The Australian March 19, 2010

IF imitation is the sincerest form of flattery, then Brockman's top brass should feel chuffed that iron ore minnow Dynasty Metals is crowing about a deposit "with the potential to match" Brockman's proposed Marillana project.

Shares in Dynasty (DMA) vaulted 50 per cent after the company announced a 476 million tonne inferred resource at its Prairie Downs project.

This investor reaction may have been a little over the top given the early-stage nature of the venture, but it's hard to be constrained when contracted iron ore prices are expected to rise by at least 50 per cent.

In contrast, Brockman is entering a pivotal development phase as it moves to a final investment decision on its 1.6 billion tonne Marillana resource, 2km from BHP's Mount Newman line. Management has been spruiking the company to global investors this week, which is well timed given the excitement created last week by fellow Pilbara developer Atlas Iron's move on Aurox.

While it's perilous to second-guess the investment decision, everything seems to be falling in place for Brockman so far.

Along with Ferraus and Atlas, Brockman is part of the North West Iron Ore Alliance that has been pushing for collective access to the three majors' rail lines.

Although an ACCC draft ruling has backed the alliance's pleadings, Burrell Stockbroking's Peter Wright believes Brockman can do a deal anyway. He adds that given the BHP and Rio iron ore joint-venture negotiations are at a sensitive regulatory stage, the majors won't want to look like iron ore hegemonists.

The alliance has also completed a feasibility study for a 50 million tonne multi-user port facility at South West Creek, at a cost of $2.1 billion.

There's concern that if Atlas buys Aurox, Atlas will be less dependent on South West Creek.

Brockman envisages producing at 17-20 million tonnes from 2013, which production-wise would rank it just behind Fortescue, the third-biggest producer which is doing about 40 million tonnes (annualised). Fortescue has a market cap of $15bn, while Brockman is valued at $528 million (including $87m of cash).

"It's a very interesting project," Wright says of Marillana.

"Commissioning processes are seldom without setbacks and they are taking part in both port and and mine development, and straddling rail as well. Having said that, I think they'll get there."

Brockman is a speculative buy.