could be a monster ore deposit ..., page-4

Western Desert Resources Limited (WDR)
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Event:
• Patersons attended a site visit to Western Desert Resources Ltd's (WDR) Roper Bar iron ore project last week.
Impact:
• The Roper Bar project has two hematite ores - direct shipping (DSO) and beneficiation (BFO). We came away from the trip with a better appreciation of the immense scale of the iron ore mineralisation which occurs over a 60km long strike and is as wide as 3.5km in places.
• The ore body is shallow giving a low potential strip ratio of 3 to 1 in high grade areas and less than 1 to 1 in low grade areas. Meaning mining costs will be low.
• The BFO is easily amenable to upgrade to 60% Fe with low impurities such as P, Al and Si via density separation techniques.
• The project is located in the Northern Territory, 30 km from the Gulf of Carpenteria which allows for relatively easy movement of product to export markets. From the mine ore will be transported to coast via a conveyor belt and subsequently transfer shipped to panamax vessels in anchored in deeper water around 20km from coast in the Gulf. Estimated pre-production capital expenditure is $300m which is very attractive when benchmarked against peer iron ore developers.
• The company's plan is to move to production in circa 2.5yrs initially shipping around 5mtpa DSO with a more substantial BFO operation to follow.
The project is owned in a JV with Itochu (who currently own 15%) a Japanese commodity trading company, which will allow for marketing of product to steel mills once operations commence.
• We are yet to a complete cash flow modelling, however initial thoughts are the project underpins a valuation of several times the current $0.54 share price ($4 to $5 range) and $56m market capitalisation. The gap between share price and valuation is set to close as development milestones are met.
• An initial resource is due in coming weeks which we believe will outline circa 70mt of BFO.
• Resources at the project will be updated periodically although given mineralisation dimensions should grow to 1bt+
• We will be publishing more detailed research next week although in the meantime note that WDR is gaining plenty of positive market attention as the quality of its project is recognised. BUY.
Disclaimer: Patersons Securities Limited acted as Lead Manager to a Placement of 13.4m ordinary fully paid shares at an issue price of $0.10 per share to raise $1.34m in July 2009. It received a fee for this service.