From the IOH website, Fosters morning report top pick. Does...

From the IOH website, Fosters morning report top pick.

Does mention Mardie for a trucking and barging operation for a Q4 CY 2012 start which doesnt make any sense given there has been no drilling nor approvals in place from recollection.


Iron Ore Holdings Ltd (IOH.ASX, $0.90/sh, Mkt Cap ~$150m) – Oversold with $0.70/sh cash backing and potential
royalty stream from 2014
? IOH share price has been oversold since the start May, down ~30% in value from $1.30/sh to $0.90/sh. We feel the
selling is function of sentiment and tax-loss selling and NOT a function of project or company specific news.
? Given the successful commercialisation of the Central Pilbara assets in over the past 6-12mths, the company has a
very healthy $115m in cash, representing $0.70/sh cash backing. With minimal expenditure requirements at Iron
Valley and circa $15-20m budgeted for the balance of 2012, IOH will not be coming back to the market for some time.
? We remain confident FMG will exercise the option on Iron Valley given the technical and commercial benefits the Iron
Valley deposit delivers. With final environmental approvals expected Q4, Iron Valley will be production ready by year end leading to a decision by FMG to take up the option and start with an operation of trucking dry tonnes before the end of 2013. The royalty rates for IOH are between 2-5%. We estimate annual EBITDA could range
between $20m 35m using $85 and 100/t LT respectively and applying a royalty rate of 2.5%.
? Our NPV modelling assumptions value the Iron Valley royalty at $150m or $0.90/sh (pre-tax). This assumes a ramp
up from 5-12Mt from 2014, US$85/t LT iron price and AUDUSD $0.80 LT.
? Therefore if you exclude the West Pilbara assets the base case valuation on the cash and royalty alone is $1.60/sh providing ~80% upside to the share price.
? We continue to see value in the Bungaroo South hematite project (~250Mt) to support a proposed 12-15Mt operation.
IOH have commenced working on a PFS to define the economic and technical options for this project, with the results
due Q4CY12. However this scale of project remains dependent on a infrastructure solution for the region as proposed by the API JV for a new rail line to Anketell Port. The API JV have again delayed the final DFS document to Q4CY12. IOH will also assess a low tonnage operation via trucking and barging at their Mardie coastal tenement. This will be a positive catalyst for stock Q4 CY12.
? We continue to rate IOH a BUY and PT $3.00/sh.