PDY's reasoning for buying Yilgarn's IT is below. Make of it...

PDY's reasoning for buying Yilgarn's IT is below. Make of it what you will. Maybe they are hoping for a tilt at the infrastructure tender should it become available in the future and think paying $2.25m is cheap as it cost Yilgarn around $45m to compile the info originally. Or maybe it is more about using the info to help fast-track the process once they get close to their estimated 3.5-5bt resource at Robinson Range, 100km east of Jack Hills.



"In January 2011, the Company announced that it had entered into an agreement with Yilgarn Infrastructure Limited (Yilgarn) to acquire all of the intellectual property of Yilgarn relating to its investor backed proposal to build an open access multi user network to service Western Australia's Mid-West region's mines which would see ore shipped through the existing port at Geraldton or a new port built at Oakajee. Padbury is exploiting its iron ore tenements in the Mid-West and is keen to ensure that it will have the necessary infrastructure in place to enable it to commence production in 2015 and has entered into an agreement to purchase Yilgarn's intellectual property as part of that exploitation strategy. The availability of rail and port infrastructure is paramount to Padbury's future success and has been identified by a number of potential investors as a key element for Padbury's future success."


Since Sino shelved Weld Range, PDY is promoting themselves as part of a Plan B. It's hard to see how a company as small as PDY can reasonably expect to develop such a large project when MMX and Mits are struggling. Obviously it could only happen with Sino as the major partner.


This whole scenario could play out in any number of ways.

Firstly, Sino may buy out MMX's share of JHEP and OPR, or they may team up with GBG and buy out Mitsubishi, then do a deal with MMX so all 3 own equal shares in OPR and Sino gets 2/3 of JHEP. Mits will probably be happy to get out of this and move on and MMX would also be happy to sell down to 1/3 of each project if it means they can secure their long term future.

Sino may play hardball and try to get MMX to sell them their half of one or both projects, or may even offer a t/o so they can get the JH dso also. It's hard to see FIRB knocking it back this time round.

Sino may put pressure on Barnett to take OPR off Mits/MMX and re-tender the project. Not many companies will be putting their hand up to spend the money needed to get it off the ground so Sino would get it without doubt. I remember reading that Barnett believes the Govt only has to pay $50m to Mits/MMX for all current info regardless what has been spent if Mits/MMX lose the project. It is designed to enable another company to take over the project with minimal time delays. MMX disputed this at the time.

Sino holds a large portion of Robinson Range and PDY/AGU has land adjoing it. The Telecom Hill area which PDY/AGU have drilled 4km of a 10km strike length, has a magnetite resource of 850mt and is expected to yield around 2bt. On the other side of Sino's land is PDY/AGU'S Mt Padbury tenements, which make up the rest their Peak Hill iron ore project with an estimated 3.5bt-5bt magnetite and some DSO. Sino may team with PDY to develop OPR and their Peak Hill projects, but imo this would be a long shot and only as a last resort if FIRB stopped them from holding 100% of the infrastructure. I think teaming up with more advanced projects held by MMX and GBG would make more sense as Sino could buy PDY/AGU's projects to combine with their own Peak Hill project once they have secured JHEP to bolster Weld Range. It would leave PDY/AGU without any berth capacity at OPR and probably force them into a cheaper sale down the track. I can't see Sino giving anyone an advantage unless it ultimately leads to their own benefit.

Whatever happens, Oakajee will go ahead because it is required to open up the Mid-west and of course there is the small fact Barnett has staked his reputation on it going ahead, so he will see it happen it one form or another.


Disclosure: Holder of PDY and AGU