May dip today on this negative news , good time to buy some more.
WE have been reporting for some time on the progress of Magnetic Resources (MAU) and its strategy of identifying iron ore deposits close to existing grain railway lines in Western Australia. It seemed a top-notch idea. Last week the junior announced a new target just 13km north of the Quairading railway.
The only fly in the ointment is that this particular line, along with two others that Magnetic was counting on, now seem likely to be closed in the near future.
A report prepared by the Freight and Logistics Council of WA for the Strategic Grain Network Committee recommends closing Quairading, along with two narrow gauge lines running south from Merredin, including the one through Corrigin which is close to Magnetic's Jubuk project, now being drilled.
These tracks use lightweight lines and are unballasted, limiting movements to wagons with a maximum 16-tonne axle weight and running at slow speed. One rail expert tells us that the closures are a foregone conclusion -- the rail operator has been wanting to do just that.
Magnetic's other projects are not affected, so the rail strategy remains in place with those.
The company, which was apparently unaware of these recommendations before we made contact on Friday, is now scrambling to find answers. We don't know if the rails will be lifted; if not, then it gives Magnetic the option to reopen the tracks later.
But our expert tells us that the lines would have to be upgraded to make them suitable for iron ore traffic, although Magnetic will be looking at only part-filling wagons if the lines remain in their present condition. They also have the option of road-hauling to the main Perth-Kalgoorlie line or the main Northam-Albany corridor.
Not a deal stopper, but unhelpful news, especially for a company that seems to have been counting its chickens before you know what.
We've still got to see the high hopes backed up by drill results.
MAU Price at posting:
46.0¢ Sentiment: LT Buy Disclosure: Held
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