iron ore gold rush continues

Iron ore gold rush continues
Petmin (South Africa) and Australasian Resources are the latest names to join the biggest sensation in the modern commodities and metals supercycle.

Barry Sergeant
Wed Nov 07 16:04:00 SAST 2007

JOHANNESBURG – - On Wednesday, Petmin (JSE: PET, R3.97 a share, also quoted on AIM), traded at record levels, while Australasian Resources (ARH.AX, A$2.05) shot up 15%, both on a common denominator: iron ore. The commodity has quietly become the sensation of the current commodities and metals supercycle, taking mankind back to one of its basic building blocks, and at the same time, building up to account for a considerable percentage of the value of resources stocks listed around the world.

As a group, now comprising at least 35 listed stocks (some of which are of course diversified beyond iron ore), iron ore stocks are currently performing among the best in the world, in line with oil stocks. The best performing resources group, the diversified sector, includes the world’s biggest resources stocks, of which three dominated global iron ore trade: CVRD (NYSE: RIO, $37.75), Rio Tinto (RIO.L, £43.34) and BHP Billiton (BLT.L, £17.75).

Wednesday’s surge in the stock price quote for Australasian Resources was based on the announcement that it has made an in-principle decision to focus on the development of iron ore projects. Australasian has commenced negotiations to acquire additional iron ore assets adjacent to its current Balmoral South Project (in the increasingly famous Pilbara region, western Australia). So compelling is the iron ore story, it seems, that Australasian now proposes to spin-off its nickel and other assets into a separate listed entity.

At Petmin, the iron ore news is of a definitive agreement with a subsidiary of the unlisted Kermas Group, for Petmin’s joint acquisition of Veremo Holdings (Petmin 25%, Kermas Group 75%). Kermas Group, an investment holding company with undisclosed shareholders, holds a variety of investments in the resources sector in South Africa, including a substantial indirect shareholding in Samancor Chrome, the second largest producer of ferrochrome in the world.

Petmin and the Kermas Group will develop and commission the Veremo project, a large iron ore deposit on the Eastern Bushveld at Stoffberg in Mpumalanga Province, South Africa. The Veremo project is projected to start production within four years from April 2008. Kermas Group will fund and manage the construction and commissioning of an integrated plant to produce 700 000 tons a year of pig iron and titanium-bearing slag. The orebody is estimated to have a life of mine in excess of 50 years. The deal extends Petmin’s domain; the group is currently the largest producer of anthracite and silica in South-Africa, with a broader focus on multi-commodity minerals businesses, with a particular emphasis on industrial minerals, bulk commodities and base metals.

While 700 000 tons a year of pig iron and titanium-bearing slag is considerably higher in grade than iron ore, to put the Veremo project into some kind of perspective, consider that CVRD this year anticipates production of 300 million tons of iron ore, and 18 million tons of value-added pellets.

But regardless of size, existing and rising iron ore diggers appear to have little doubt about the future. Australasian MD Andrew Caruso, puts it like this: “With iron ore prices tipped to rise by up to 50% for the coming year, a focus on the development of our Balmoral South Project and the potential acquisition of new iron ore assets makes sense."

http://www.moneyweb.co.za/mw/view/mw/en/page1329?oid=169666&sn=Detail