FYI - This from my broker today just reinforces my belief in things to come.
Flinders Mines ( FMS ) is a speculative investment opportunity
Flinders is presently spending $8 million on a drilling program for iron ore in the Pilbara ( Tenement E47/882 )
Consultant Dr Richard Russell has advised Flinders that the tenement could contain 340-390 million tonnes averaging 56% iron
On 7th February 2008, Rio Tinto announced a discovery of a new inferred iron ore resource of 875 million tonnes at Caliwingina North which is less than 10km to the north of tenement E47/882
Prior to this Fortecue announced that it had identified a 1.7 billion tonne resource at Serenity on the adjoining tenements to E47/882 ( east and south of ) . These tenements which were originally held by Flinders were the subject of a commodity rights swap in March 2005. Fortescue became entitled to the iron ore rights ( Flinders keeping the diamond rights ) and Flinders became entitled to the diamond rights on a number of Fortescue tenements. In relation to one of the tenements E47/1306 Flinders is entitled to a mining royalty capped at 8 million tonnes of iron ore. No royalty agreements exist for the other tenements.
On 1 July 2008, Flinders announced the acquisition of E47/1560 from Cazaly Resources ( CAZ ) . This tenement is 15km to the west of E47/882 and 44 sq km in area and has high potential for iron ore. The acquisition was for $750,000 plus $750,000 worth of Flinders shares. Consultant Dr Richard Russell has advised Flinders that the tenement could contain 120-175 million tonnes with a grading of 45%-60% iron.
The current share price is 10 cents with a high of 25.5 cents on 03/06/08.
Drilling Results to date
- Area D intersections to date average 17.3 metres thick which is more than double the initial Exploration Target estimated by Consultant Dr Richard Russell. ( 7 Holes drilled to date )
- Area E intersections to date average 14.3 metres thick compared to an Exploration target estimate of 8 metres from Consultant Dr Richard Russell. ( 34 Holes drilled to date )
- Interpreted area of Channel Iron Deposit (CID) mineralisation in Area E now stands at 4.7 sq km as compared to 4.05 sq km in the original estimate of Consultant Dr Richard Russell.
- Observed thicknesses and areas of CID in Area E to date suggest initial Exploration Targets are likely to be considerably exceeded.
- More assay results are due shortly.
Comparison with other iron ore companies
On the basis of a 500 million tonne resource ( yet to be proven but drilling results to date have been very encouraging ) Flinders is currently trading at 22 cents market capitalisation per iron ore resource. Fortescue Metals is presently valued at $2.30 market capitalisation per iron ore resource ( was $4.64 market cap per resource on 25/06/08 ). Atlas Iron is presently valued at $3.60 market capitalisation per iron ore resource ( was $9.09 market cap per resource on 06/05/08 ).
Thus if Flinders proves up a 500 million tonne resource it has the potential to be repriced to around $1.05 when compared to Fortescue at present or to around $1.64 when compared to Atlas at present'
Share Prices in Iron Ore companies have been falling of late due to weakening iron ore/steel/scrap spot prices.
Despite the iron ore spot price recently slipping from $US190 a tonne to between $US130 and $US135 a tonne, Gindalbie Metals chairman George Jones said yesterday that strong demand for the bulk commodity would continue until about 2013 to 2015 amid tight supply, driven by an increasingly urbanised China. However he expected the large benchmark price rises recently achieved would not continue and would rise by a more modest 15% a year for the next 4 to 5 years.
Goldman Sachs JBWere said on September 17 Goldman Sachs JBWere are predicting an 18 per cent plus price rise for Australian iron ore "fines" in the Japanese financial year starting April 1, 2009, after annual contract talks are concluded.
Demand for the steel making commodity continues to be driven by the rapid urbanisation of China and other developing nations, including India.
"Can iron ore contract prices rise at a time when spot iron ore/steel/scrap prices are all falling and global steel production growth is losing momentum?," Goldman Sachs asked in a client note.
"Our answer is "yes" - it has happened before and can happen again."
The Flinders Forward Program Milestones
- Q4 2008 - Estimate and Report drill Inferred Resource
- Q1 2009 - Scoping Study/additional drill program approvals
(20min delay)