cheap as chips

Why big global fund managers want a piece of the small FerrAus action
PURE SPECULATION
Robin Bromby
May 12, 2007

IT'S very unusual for the crowd at BlackRock, the New York-based fund which handles investments totalling $US1.1 trillion ($1.3 trillion), to get out of bed for any deal under $US10 million. The same could be said of Ospraie Management or Red Kite Equities (the London fund reported to have been hit badly by copper's fall in January).

So why have they bothered to share - along with the clients of four local brokers - in the small, $12 million placement announced this week by FerrAus?

The reason might be the link with Joe Singer, the founder of the Shanghai-based metals commodity trader Penfold. Singer is one of the bigger shareholders in FerrAus; Penfold is the largest stakeholder; and FerrAus non-executive chairman John Nyvlt's day job is business development at Penfold.

Penfold, which works for Teck Cominco and Zinifex, also advises several US fund managers on China trade assets. One China trade asset class is iron ore mines.

FerrAus also this week announced an upgrade of its Robertson Range project in the East Pilbara to 23.4 million tonnes, with large tracts yet to be drilled.

Some investors have held off buying into FerrAus because of the project location - well inland and a long way from Port Hedland. They want to see whether the company can do a deal to gain access to the BHP Billiton railway that ends at the Jimblebar mine, 65km from the FerrAus ground.

It's a calculated risk, because the entry level will jump if the BHP deal is done.