ferrets stock to watch: sphere investments ltd

Ferrets Stock to Watch: SPHERE INVESTMENTS LTD
08:41, Thursday, July 19, 2007

A WA COMPANY CARVING A NICHE IN GULF STATES AND AFRICA

Sydney - Thursday - July 19: (RWE Aust Business News)
*****************************************************

OVERVIEW
********

It's not often that an Australian listed company decides to join
the stock market in Dubai.

Sphere Investments Ltd (ASX:SPH) listed on the Dubai
International Financial Exchange (DIFX) yesterday - the first company in
the iron ore sector to list on the new international stock exchange in
the Gulf region.

The listing creates a regional base for Sphere as it plans
development of the $US1.5 billion Guelb el Aouj iron ore direct
reduction (DR) pellet project, in joint venture (JV) with Societe
Nationale Industrielle et Miniere (SNIM) in Mauritania.

"The DIFX is a natural fit in that our shares can now be traded
in the financial centre that is parallel with our regional focus,
together with our partners in Mauritania and the Gulf," Sphere's
managing director, Alexander Burns, said from Dubai yesterday.

Chief executive of DIFX, Per Larsson, said the dual listing of
an Australian company with operations in Mauritania, West Africa, and
business partners in Saudi Arabia and Qatar, underlined the role of the
DIFX as a gateway linking its region with the rest of the world.

Shareholders can trade shares in Sphere - which is the fourth
mining company on the Exchange - on both the DIFX from today, and the
ASX as before.

"The DIFX is an ideal listing platform for both international
and regional issuers, as it provides strong links to international and
regional investors," Mr Larsson declared.

In March of this year, Sphere and SNIM signed a Memorandum of
Understanding (MOU) with Saudi Basic Industries Corporation (SABIC) and
Qatar Steel Company to jointly develop the Guelb el Aouj project for
supply of seven million tonnes per annum of direct reduction (DR)
pellets.

Under the terms of the MOU, SABIC and Qatar Steel - which
collectively own 18.4 per cent of Sphere - are to acquire 34.9 per cent
and 15 per cent respectively of the shares in a new company being
established in Mauritania to develop the project following the
completion of the bankable feasibility study due by year end.

In addition to the three Guelb el Aouj deposits, the JV Area
contains Tintekrate and Bou Derga, two magnetite deposits estimated to
contain in excess of one billion tonnes of high quality material, which
the JV partners will study for future expansion options.

Outside the JV, Sphere also owns the estimated one billion-plus
tonne Lebtheinia project in Mauritania.

The company has been approached by several major European,
Indian and Japanese steel and trading companies interested in
participating in the assessment and development of the project for
export of blast furnace quality iron ore pellets.

About Sphere's project partners: SNIM currently supplies about
12 million tonnes a year of iron ore, primarily to the European steel
producers.

The Guelb el Aouj project will be the first iron ore project
based in Mauritania targeting steel producers in North Africa and the
Middle East.

SABIC is the largest and most profitable non-oil company in the
Middle East and one of the top 10 global petrochemical companies in the
world.

Hadeed, its steel arm, is the largest producer in the Gulf
region.

Qatar Steel was the first steel producer in the Gulf and,
together with Hadeed, has very aggressive steel production expansion
plans.

SHARE PRICE MOVEMENTS
*********************

Shares of Sphere yesterday finished steady at $3.71. Rolling
high for the year is $4.02 and low 90.5c. In June the company was
queried by the ASX when the shares jumped from $1.85 at the beginning of
May to $3.20 by early June. In between there was a company
reconstruction and more shares circulating in the market. The company
now has 128.2 million shares on issue with a market cap of $475.9
million.

Sphere's major partners emerged in March which could partly
explain the current support for the company's shares - SABIC and Qatar
Steel Company - which signed the MOU in Mauritania with the company and
SNIM at an official signing ceremony attended by the four partners and
other official guests.

SNIM and Sphere are joint owners of the Guelb el Aouj iron ore
project, which is planned to initially produce 7Mt/a of DR pellets for a
period of over 30 years from the high quality Guelb el Aouj East
deposit.

SABIC and Qatar Steel are major steel producers in the Gulf
region.

Both have significant steel capacity expansion plans that will
require increased consumption of DR pellets as the primary raw material
feed for their steel making process.

Their entry into the Guelb el Aouj project represents a
strategic shift in their raw material purchasing strategy, away from
total reliance on third party suppliers to direct equity investment in
raw material supply.

Given the project's resource base, supplemented by the other
Guelbs in the joint venture area, the project can underpin a sizeable
portion of their long-term raw material supply requirements.

The involvement of SABIC and Qatar Steel is expected to
underwrite the project's success.

Under the terms of the MOU, a new jointly owned Mauritanian
company (Newco) will be established to develop the project and enter
into off-take and other service agreements.

SNIM and Sphere will collectively hold 50.1 per cent of Newco
through a 50/50 holding company, with SABIC holding 34.9 per cent of
Newco and Qatar Steel holding the balance of 15 per cent.

The establishment of Newco is subject to a number of conditions
precedent being satisfied, including the finalisation of the commercial
terms of SABIC and Qatar Steel's entry into the project at fair market
value.

These terms have been negotiated and almost finalised.

During the quarter, Sphere completed a preliminary drill program
of 20 boreholes totalling 4,646 metres on the Bou Derga deposit located
in the southeastern part of the JV area.

The samples are currently being analysed but initial
indications, based on the first five boreholes, suggest that DR pellet
grade material can be produced from the deposit.

The average grade of the first five boreholes is Fe Total = 37.1
per cent Fe, mass recovery = 45.9 per cent and concentrate grade = 70.5
per cent Fe.

These grades are slightly better than those confirmed for the
Guelb el Aouj East deposit.

BACKGROUND
**********

Sphere Investments Ltd is a West African-focused iron ore
company which is listed on the Australian and Dubai Stock Exchanges.

The company's flagship project is the Guelb el Aouj iron ore
(magnetite) project in Mauritania, West Africa.

Sphere is developing the Guelb el Aouj project in partnership
with SNIM, Mauritania's existing iron ore producer.

SNIM is the world's seventh largest supplier to the seaborne
traded market in iron ore and currently exports 12 Mtpa of iron ore to
markets in Europe and North Africa.

The Guelb el Aouj project will include an open cut mine,
beneficiation and pelletising plants to produce high-grade DR pellets
for export, utilising joint venture partner SNIM's existing iron ore
railway and port infrastructure.

Sphere has a 50 per cent stake in the Guelb el Aouj project for
funding a Bankable Feasibility Study (BFS) due for completion in
October.

Following the global consolidation of the iron ore industry in
mid-2000 and before the rapid increase in consumption driven primarily
by China's growth in imports, Sphere's directors established an
investment and development strategy of acquiring rights to high-quality,
large-scale iron ore magnetite deposits in Mauritania.

Mauritania was targeted because of its strong reputation as a
reliable source of supply of high-quality products into the European
steel industry.

It also has competitive freight to those and other strategic
markets, established iron ore port and rail infrastructure, massive
undeveloped provinces of magnetite deposits located close to the
railway.

Mauritania, has welcomed foreign investment in all sectors of
the economy and particularly in the resources sector.

ENDS

Copyright © 2007 RWE Australian Business News. All rights reserved.