Convincing Mal Randall to join the board of recent Australian Stock Exchange-entrant Iron Ore Holdings (IOH) was not a difficult task.
Not because Randall was desperately looking for something to do at that time; with directorships of five companies, including Consolidated Minerals, Titan Resources and Thundelarra Exploration, he had plenty on his plate.
Instead, the veteran of 25 years with Rio Tinto, the majority being with Hamersley Iron, was simply captured by the quality of ground being offered to him.
"I read the draft prospectus coordinated through Hogan and Partners to raise $6 million and I was honestly taken aback by what [IOH technical director] Derek Ammon had pegged. I thought it was an opportunity too good to walk away from. Given my iron ore background, I knew these sorts of opportunities did not come up often."
That opportunity was a collection of tenements surrounding the major Pilbara iron ore mines of Yandi and Yandicoogina, and the key attractions of the company were simple.
"We're in the right commodity, at the right location, at the right time," is Randall's basic summation.
The three-way combination also obviously pushed the right buttons of the Australian investment community, which pumped the company's 20c IPO shares to a value of 40c by the close of its first trading day in early-May.
Pulling in a double-bagger performance in a day was enough to grab the attention of the mainstream press, and the company awoke on day two of its public life to find itself in headlines throughout the nation's business pages.
It was, to say the least, a fairly eye-catching manner in which to make its public debut. But take a closer look behind those three principles - right commodity, right location, right time - and it is easy to see how such interest was generated.
Anyone who has kept an eye on the resources industry of late will know iron ore has been running hot.
The world's major iron ore miners recently won an unprecedented 71.5% price increase in their iron ore supply negotiations with Japanese steel mills, and China's seemingly ever-expanding demand for steel feed has sparked a wave of project proposals and iron ore IPOs.
For Randall, the strength of the iron ore story lies in the forecast that world demand for seaborne iron is set to grow from 580 million tonnes in 2004 to some 820Mt by 2010, with the bulk of that increased demand coming out of China.
Even allowing for the successful introduction of bolstered supply from expanding BHP Billiton and Rio Tinto operations, not to mention potential new feed from the presently undeveloped Hope Downs and Fortescue Metals Group projects, Randall says there will be sufficient supply shortfall to sustain strong iron ore prices for years to come. Hence now is the right time to launch a company like IOH.
Which brings us to location. There is arguably no better address in the world iron ore game than the Pilbara of Western Australia, home to the great money-printing mines of BHP Billiton and Rio Tinto.
Randall describes IOH's land position - sandwiched about 100km north-west of Newman and a similar distance east of Tom Price in the heart of arguably the world's greatest iron ore province - as "the Pilbara equivalent of St Georges Terrace", Perth's main commercial thoroughfare.
IOH's five iron ore projects - namely Lamb Creek, Yandicoogina Creek, North Marillana, East Marillana and South Marillana - abut the tenements home to BHP Billiton's Yandi mine and Rio Tinto's Yandicoogina operation.
Given the robustness of the iron ore industry, it is hard to fathom how a small company like IOH could gain access to projects so close to not one but two existing operations. According to Randall, the tenements were picked up by Ammon at a time when the iron ore majors believed they had sufficient reserves to feed world demand for the foreseeable future.
The proximity of IOH's tenements comes not only with great prospectivity, but also potentially great infrastructure options.
The rail links of both BHP Billiton and Rio Tinto run directly through IOH's tenements, and the proposed Hope Downs rail will pass just by IOH's easternmost tenement boundary.
Third party access to iron ore rail infrastructure, both existing and proposed, has been a topic of debate and even legal hearings in recent years, despite the WA State Government mandating that such infrastructure must be shared with new operators in the region. Randall is confident the situation will have cleared up by the time IOH makes its push towards production.
Additionally, the fully paved Great Northern Highway runs past the IOH tenements all the way to the Pilbara shipping town of Port Hedland, providing a fourth potential transportation option.
Truck-based transporting of iron ore may not yet be a reality in the Pilbara, but iron hopeful Murchison Metals is planning to truck its produce over 500km to the port of Geraldton. In comparison, IOH is 300km from Port Hedland.
Randall, however, is careful not to delve too deeply into hypothesising over potential methods of transport. Not yet, anyway.
The tenements host numerous outcrops of pisolite, the dominant type of iron ore shipped from the Pilbara, and numerous grab samples from surface have returned high iron ore grades also low in impurities such as phosphorous. Furthermore, independent geologists have hypothesised the possible presence of extensive iron palaeo-drainages in the leases.
But for now, priority number one is establishing sufficient resources and reserves within IOH's tenements.
It sounds an imposing task, but Randall assured RESOURCESTOCKS it wasn't a question of if the projects host iron, but how much.
Randall draws on an analogy he picked up during his numerous business trips into China during his 25-year career with Rio Tinto to illustrate the situation facing his company.
"It's a bit like when the young chef asked Confucius about the best recipe for cooking Peking Duck. Confucius turned around to him and said, 'First my son, get the duck'. I know that with Iron Ore Holdings we have the duck; it's really now a matter of determining how big it is, and how juicy it is," Randall said.
As a result of this philosophy, IOH has so far abstained from entering into any memoranda of understanding, off-take agreements or "binding contracts" over any future developments, instead preferring to concentrate on plumping the duck before determining the best recipe for cooking.
It is a difficult ask not to look beyond that task, particularly when the pisolite ore within IOH's domain is also capable of being directly shipped. Referred to in the industry as DSO, or direct shipping ore, the ore must simply be dug up and crushed before it can be shipped, a far less complicated - and substantially cheaper - process than the concentrating and pelletisation of other ore types such as magnetite.
Most notable surface grab samples from two of the highest priority tenements, Lamb Creek and South Marillana, assayed an iron content as high as 60.81% (South Marillana) and a phosphorous content of 0.031% (Lamb Creek).
Furthermore, recent scrub fires brought into stark relief several other outcrops previously obscured by vegetation.
According to Randall, the projects already have visible ready-to-drill targets, but IOH has, nevertheless, secured contract geologists to work to generate further targets through remote sensing, aerial photography and on-ground geological mapping.
Following mapping and target identification, IOH plans to commence drilling as soon as possible with a view to announce an initial resource soon thereafter.
Randall pointed out that IOH's market cap of just over $26 million is comparatively smaller than many of the other iron ore hopefuls in the region.
"It wasn't that long ago that some other iron ore exploration companies were a 35c stock but are now valued in the order of half a billion dollars," he said.
IOH boasts a particularly tight share register, with only 47% of the company's 70 million shares tradeable. Adding weight to the register is the presence of Sumisho Iron, a subsidiary of major iron ore importer Sumitomo Corp of Japan.
IOH Price at posting:
0.0¢ Sentiment: Hold Disclosure: Held