fosters report post concept study release

More of the same, but always good to read. Fosters released this today. Very glad I ignored the CR & bought on market over the past few days.

Iron Ore Holdings Ltd (IOH.ASX, $1.48/sh, Mkt Cap $206m) ? Bungaroo South concept study numbers show very robust project. Initial thoughts. BUY (PT $3.85)

Event:
? The company released a concept study on the Bungaroo South project in the West Pilbara, indicating a very robust project.

Key Details:
? Concept study completed by SRK to support investment case for the next stage of pre-feasibility study.
? No material issues identified to prevent an economic mining operation being developed.
? Mine plan of 15mtpa to support a 15 year mine life, with production possible by 2015.
? Low operating costs achieved with a 1.2:1 LOM strip ratio and a simple crush & screen process.
? Significant technical and financial synergies identified for both IOH and the API JV [Aquila Resources (AQA.ASX) & AMCI] should the deposit be co-developed with adjoining API deposit.

Analysis:
? In summary, SRK evaluated the mineral resource inventory, all key mine design concepts, surface water management, long lead time development activities and provided mine financial parameters.
? SRK did not identify any material issues that prevent an economic mining operation being developed at Bungaroo South and have recommended next stage pre-feasibility be undertaken.
? We have conducted a preliminary valuation on Bungaroo South and using a conservative base case set of parameters our valuation has yielded attractive results.
? The study did not define suitable transport options (or capex estimates) to link with existing or proposed infrastructure, however IOH management have advised the study presents compelling financial and technical synergies for IOH and API (the JV between Aquila and API) to commence discussions on the co-development of a single Bungaroo South deposit, given the likelihood of a +500mt deposit available in a single ore body.
? We believe IOH can attract the attention of API in a bid for shared development of the deposit. We have previously flagged that the iron ore body is contiguous along the tenements of both companies and shared development is not only logical, but beneficial to all parties involved. The project is only 50km from the proposed API railway to Anketell Point.
? Further to our preliminary valuation of Bungaroo South we have applied similar parameters to Iron Valley, which have yielded equally attractive results, supporting our current in-situ risked valuation of A$530m ($3.85/sh).
? Bungaroo South, with 241mt, has quickly become a viable stand-alone project for IOH?s Western Pilbara operations. Iron Valley, in the Central Pilbara, has very similar characteristics and could be developed in a similar fashion with a Pre-Feasibility Study already underway.
? Management reiterate they are actively engaged in discussions with all regional stakeholders, most notably API at their Bungaroo South Project and FMG at Iron Valley. We should also not rule out the Iron Valley deposit coming into the mix of a consolidated Brockman Resources (BRM) & Ferraus (FRS) via Wah Nam?s takeover bid. Iron Valley is much larger than the FRS deposit and ~15kms from BRM?s Marillana project, adding another 15mtpa for 15yrs to support Wah Nam?s vision of building the next major Pilbara iron ore producer.
? Discussion continue with the state government and the Dampier Port Authority on the procurement of export capacity at the port at Anketell Point.

Recommendation:
? These preliminary scoping results are very positive for the company. IOH are trying to show demonstrable value in their projects, in an effort to secure access to infrastructure that will realise this value. Shared development of infrastructure will ultimately decrease costs and increase values at neighbouring projects as well. As a stand-alone project, Bungaroo South?s potential 15mtpa production profile for 15yrs will support IOH?s submission for capacity at Anketell when the expansion proponents are confirmed.
? Shared infrastructure development is in all parties? best interests and a logical step for development of both the West and Central Pilbara Hubs.
? We continue to closely follow IOH, whose tenement holdings in the Pilbara are one of the largest in terms of contained Fe amongst the juniors, while trading below $0.60/t contained Fe.

Recommendation: BUY IOH, PT $3.85.