good research from minesite.com

http://www.minesite.com/nc/minews/singlenews/article/batavia-mining-should-selling-iron-ore-from-its-roper-river-project-to-a-strong-japanese-offtake-par/1.html

April 29, 2010

By 2012 Batavia Mining Should Be Selling Iron Ore From Its Roper River Project In Northern Territory To A Japanese Offtake Partner
By Charles Wyatt



There is nothing better than a junior mining company with a straightforward project in a sector with rising demand and prices. Well, there is one. That would be a junior mining company with more than one such project, but you have to start somewhere, and ASX-listed Batavia Mining is starting with an option to acquire a large iron ore tenement package in Northern Territory containing deposits identified by BHP in the 1950s and 60s. The only reason it was not developed, according to Our Man in Oz, was because BHP discovered the giant Mt Whaleback iron ore deposit at Mt Newman in Western Australia at about the same time. So the Roper River iron ore project stayed relatively dormant until Batavia took an option on it from North Australian Iron Ore, a company headed by Jerry Ren, an Australian of Chinese descent who will end up with a big swag of Batavia shares if the option is exercised. Not much chance of that not happening, according to Greg Bittar, Batavias interim chief executive, who was in London this week to introduce the company.
Greg spent a number of years with Morgan Stanley, but it is clear that he appreciates the opportunity to get his hands dirty, and his enthusiasm for the Roper River project is obvious. Once it is owned by Batavia, with completion due in July, he will drop the interim off his title. He has every reason to be enthusiastic, as the licences are contiguous, covering 3,444 square kilometres on the Roper River iron ore field about 475 kilometres south east of Darwin. To the east the tenements are adjoined by the Roper Bar Iron Ore project, which is a joint venture between Western Desert Resources and Itochu, the major Japanese group which has recently thrown a large spanner in Rio Tintos plans at the Rossing South uranium project in Namibia. To the north of the tenements is the WDR Mountain Creek project. This is a popular iron ore field. Subsequent to BHP Billitons work the Northern Territory Geological Survey took a look at the ground in the 1990s, and in the last couple of years the WDR-Itochu joint venture identified significant iron ore mineralisation which appears to extend onto Batavias land.

No good having the biggest iron ore project in the world if it is not easy to mine, has no access to an efficient transportation system, and offtake agreements arent in place. But Batavia is busy surmounting all those challenges. Mining should be easy enough, according to Greg, as the host lithology is relatively continuous Sherwin Ironstone. Its a soft ore that gently dips from surface and has few impurities. Bulk samples have averaged 55.1% iron, and the ore upgrades easily to 60% with crushing and gravity treatment. On that basis it can be sold direct to Asian smelters. In fact Jingyin Huaxi Steel, part of a major Chinese steel group, has agreed to take a placement of shares in Batavia, plus offtake. The actual deal involved Jingyin Huaxi injecting A$4.8 million for shares at A19 cents and options at A10 cents, as against the present price of A26 cents. The Chinese should therefore be happy, and happier still, once the offtake for up to one million tonnes per year for five years is formalised.

Greg sees no great problem with transportation either. An access road will have to be built from the mine to the Roper Highway which runs through the project, but then it is about 100 kilometres on a sealed road to the Darwin-Adelaide railway line. A spur connection to this and Batavia is off the races as this rail system is open for business, unlike the company-controlled ones in Western Australia. On to Darwin, where the port is being expanded. So there we have it, an iron ore project where there is a buyer already moving into position, even before Batavias option is fully exercised, and transport looks relatively easy.

What the company has to do now is analyse its resources and devise a mining plan. The exploration target is 400 million to 500 million tonnes of iron ore grading an average of better than 40% iron over the whole project, but this includes 80 million to 150 million tonnes of ore grading between 50% and 60% iron at the T and W deposits. Thats enough to keep the company going for several years even at its top, top rate of 25 million tonnes per year, but this would depend on the Port of Darwin being upgraded in a major way.

In addition, of course, there is the potential for large tonnage extensions from the Western Desert/Itochu ground to the east. The programme from now on therefore involves an initial JORC resource estimate which should be finished by the third quarter of this year, and a scoping study which will be carried out virtually simultaneously. This study will focus on the W deposit which should contain between two and five million tonnes of ore of a sufficiently high grade to warrant direct shipping. Power for the mining fleet and plant would be from diesel generators in the early stages, but later it might be worth tapping into the Mataranka gas pipeline 80 kilometres away to feed an independent power station.

Nothing is ever easy in mining, but Batavia seems to be taking the first high hurdles transport, offtake and mining in its stride. Still, there is plenty of work left to do if Greg is to achieve his target of initial production of direct shipping ore from the W deposit at a rate of two million tonnes per year by 2012, and using existing infrastructure. The plan thereafter is to ramp up to five million tonnes per year, so it is as well that Batavia is well funded for metallurgical test work, initial resource estimate and scoping study, with cash, receivables and investments amounting to A$23.6 million, or A19 cents per share. The company still has to pay for its option, and will also owe the vendors a modest tonnage payment, but the conclusion has to be that Greg Bittar has been dealt a pretty strong hand. It is up to him how he plays it.