Sydney - Wednesday - October 29: (RWE Aust Business News)...

Sydney - Wednesday - October 29: (RWE Aust Business News)
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OVERVIEW
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On Monday Strike Resources Ltd (ASX:SRK) outlined to shareholders
the turmoil and volatility in world financial markets which is causing
significant negative effects on the local market value of most resource
companies.
Strike has not been immune from these events - the company's
current market capitalisation of $48 million (being a closing share price
on October 24 of 37c per share with 130,034,268 shares on issue) has
fallen well below the company's cash position of about $72 million.
The Ferret pointed this out in his Around the Traps column and
the shares responded by rising 8.5c to as high as 50c yesterday.
Meanwhile, directors reassured shareholders that the company
remains in a sound financial position, with excellent projects and
experienced management.
Over the last year the company has made considerable progress
towards its goal of developing a number of income-producing mining
projects, including:
* Completing two capital raisings totalling $82 million to
institutional investors;
* Completing a pre-feasibility study for the Apurimac iron ore
project in Peru;
* Completing 14,733 metres of drilling (151 drill holes) in Peru;
* Securing additional exploration concessions in the Apurimac
district in Peru;
* Increasing its controlling, economic interest in Apurimac
Ferrum SA, (the Peruvian company that holds the Apurimac and Cuzco
projects) to 68.15 per cent;
* Completing the acquisition of 100 per cent of the Berau coal
project in Indonesia and the Paulsens East iron ore project in the
Pilbara, Western Australia;
* Establishing local offices in Jakarta and Berau (Indonesia) to
progress development of the Berau coal project; and
* Recruiting experienced industry professionals to lead dedicated
teams for the Peru iron ore and Berau coal projects.
In light of the extremely tight credit and capital markets, the
company intends to progress the development of its various mining
projects in a manner consistent with achieving the greatest value from
its existing cash reserves.
In the short term, the principal focus of the company is to bring
its Berau coal project into production, which is expected to generate
significant recurring cash flow for the company.
With regard to its operations in Peru, the company will focus its
efforts on advancing the short-term cash flow opportunities afforded by
the Cuzco Lump project and to reduce its other expenditure in Peru until
the dispute with its local partner is resolved and/or credit and capital
markets show clear signs of recovery.
In summary, whilst the company is disappointed with the recent
decline in its share price, in particular to a value below its cash
position per share, the fundamentals of the company remain sound.
The company holds significant cash reserves and an excellent mix
of projects.
These projects hold the prospect of generating significant cash
flow for the company in the near term, which may be used to support the
advancement of its Peruvian iron ore assets, once market conditions
improve.
Yesterday, Strike Resources upgraded the JORC inferred resource
estimate at its Berau thermal coal project from 4.6m tonnes to 8m tonnes
of thermal coal, following a review of drilling and geological data.
The coal has an average calorific value of 5,800 kcal/kg with low
ash (5.6pc), low sulphur (0.64pc) and low inherent moisture content of
14pc.
The calorific value of this coal, together with its relatively
low levels of ash and sulphur, means that it is ideally suited for use
as a fuel for power utilities in both domestic (Indonesia) and
international markets.
Coal of this quality is currently selling for $US80 to $US90 per
tonne FOB barge Berau.
The current JORC inferred resource of 8m tonnes of thermal
coal, along a 2.5km strike length, is located within a 200-hectare area
forming part of the total concession area of 5,000 hectares.
Outcropping coal seams have been mapped intermittently by the
company along a further strike length of 4km southeast of the current
JORC inferred resource.
These outcrops appear to be extensions of coal seams comprising
the current JORC resource.
This possible extension of the resource along strike affords the
potential to increase the JORC inferred resource by a further 5m to 10m
tonnes to a total of 13m to 18m tonnes.
Strike therefore recently commenced a 5,000m drilling campaign,
which is expected to be completed by the end of the year.

SHARE PRICE MOVEMENTS
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Shares of Strike Resources yesterday edged up 2.5c to 44c.
Rolling high for the year is $3.10 and low 33c. The company has 130
million shares in issue with a market cap of $61 million. Strike is not
going ahead with its buyback due to uncertainty on international capital
markets.
The company's major shareholder, Gallagher Holdings, has advised
the company that, due to the significant down turn in international
capital and credit markets, it will not proceed with a further investment
into the company, to replace the tranche 2 $53.4 million share placement
which Gallagher had withdrawn on September 23.
Gallagher remains the largest shareholder of Strike with 14 per
cent of the company's total issued share capital and has advised the
company that it is a strategic long-term shareholder and can assist
Strike with sharing its technical expertise as a part of a large mining
and metals group.
Strike continues to focus on commencing production from Berau
coal project by mid 2009 to generate early cash flow.

BACKGROUND
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Strike Resources is an Australian-based mineral exploration and
development company with a diversified asset portfolio including hematite
and magnetite iron ore projects in Peru, hematite and minerals sands
projects in Australia and a thermal coal project in Indonesia (East
Kalimantan).
Strike is rapidly accelerating the development of its Peruvian
iron ore assets to take advantage of skyrocketing demand from steel mills
around the world and is set to join the ranks of the world's iron ore
producers in 2009 when production commence at its Cuzco project in Peru.
The company has reported on the results of recently conducted
drilling within its Apurimac project, focused on its Coriminas V
concession which is located within the Apurimac project area where the
company has previously outlined a JORC Inferred Resource of 172 million
tonnes grading 62.28 per cent Fe.
STAGE 1:
Two million tonnes per annum lump ore production from the Cuzco
project - 2009.
STAGE 2:
An expansion to 22 million tonnes per annum through an additional
20 million tonnes of concentrate production from the Apurimac project -
2012.
STAGE 3:
An expansion to 42 million tonnes per annum through an additional
20 million tonnes of concentrate production from the Cuzco project -
2015.
On July 23 Strike announced the results of the pre-feasibility
study on its flagship Apurimac iron ore project, which focuses on the
development of a 20 million tonnes per annum mining operation with iron
ore concentrate transported by slurry pipeline to the coast.
Strike is now aggressively targeting the following key
milestones:
* Expanding resource inventory in Apurimac to +300Mt (December
2008);
* Completion of railway scoping study;
* Completion of bankable feasibility study (June 2009); and
* First Production from Apurimac (first half of 2012).