charlie aitken on gbg

Thought I'd share this excerpt from a C. Aitken, SC Equities, on Iron Ore.

Gindalbie Metals - Progressing on three fronts

At Gindalbie Metals we met with the Executive Chairman, George Jones and the CFO Darren Gordon. The GBG share price is currently suffering a hang-over from the failed merger of the Company with Sundance Resources, however, this has not slowed the company down operationally and they are driving toward the immediate development of the Karara Magnetite, Mungada Hematite and Lodestone Magnetite projects. The management team at GBG, (led by George Jones), is first class and brings together a wealth of iron ore industry experience that you simply will not find in the other emerging iron ore companies with the exception of FMG.

The GBG production story is expected to begin in early 2009 with 2mtpa of production from the Mungada Hematite Project, Then in 2010, the World-class, Karara Magnetite project, will come into production at 8mtpa, exporting high-grade concentrate to a jointly owned, (with AnSteel), pellet plant in China. At the same time hematite production is expected to be expanding, to achieve rates of 4mtpa. Between 2010 and 2013 we would expect to see further expansion of hematite production, expansion of production from the Karara Magnetite project and production from the Lodestone Magnetite project to come on stream, taking overall group production toward 35mtpa and GBG's equity share of production to between 20 and 25mtpa. Whichever way you cut the cheese this makes GBG look very cheap. Sure capital and time are required, but when you consider that a large amount of essential infrastructure is already in place and that GBG have one of the best partners imaginable in Ansteel, then those objectives are imminently achievable. The biggest hurdles in reality are likely to be environmental and other government approvals which we expect to be solved in the near term, particularly when you consider that both the Chinese President and the former Australian PM witnessed the signing of the key joint venture, development agreement in Sydney at the recent APEC conference in Sydney. We see Ansteel in part, as holding the key to GBG's success. Ansteel are in need of quality, long term pellet supply and GBG benefits from the pricing structure, technical and financial strength of Ansteel.

From a valuation perspective, Gindalbie is compelling value. Considering the costs, (both operating and capital) and pricing in the BFS we have an 11mtpa base case valuation of $2.00ps and an upside 22mtpa expansion case valuation of $3.50ps.