reality check

Prior to the current proposed transaction with Palmer, ARH had an interest in some leases that may/may not host a uranium deposit capable of being mined in a state that does not presently allow it to be mined.
Further it has a nickel deposit but it has yet to be proven if this ore can be economically extracted.
The company also had/has little cash in the bank and a veritable truckload of issued shares on the market.
Subject to shareholder ratification it now has the following:

1. A 100% interest in a 958 million tonne and growing magnetite deposit.

2. Potential access to billions of tonnes of ore in a province estimated to hold 60 to 80 billion tonnes of ore, the vast majority of which will be controlled by its major shareholder. CITIC only currently has the right to potentially mine 6 billion tonne of the total resource.

3. Potential access to enormous deposits for which no railway will be required.

4. CITIC, of which the largest shareholder is the Chinese Govt, will develop the port and associated essential infrastructure and offer it to ARH on a shared cost basis. It would be difficult to believe CITIC AFTER ALREADY PAYING PALMER THE FIRST TRANCHE OF 215 MILLION $US WILL NOT PROCEED WITH THE CONSTRUCTION OF THESE FACILITIES ASAP.

5. Given Palmer's control of ARH and his relationship with CITIC it is highly likely that finance could be obtained from China to develop the pellet plant and DR plant and fund its share of the infrastructure costs.
It will be in CITIC's interest to ensure this as it will increase the total scale of the project and proportionally reduce their share of the capital and on-goiung operating costs of the shared infrastructure. It will also further cement their relationship with PP.

6.The Chinese govt is extremely keen to break the effective stranglehold on supply currently held by the three big players namely BHP, Rio and the Brazilians.

7. There is the obvious potential for PP to pare down his ARH stake in the future to Chinese interests.

8. Common sense would suggest that PP would assign the right to mine in excess of the first billion tonnes on the southern block to ARH on a royalty basis.

9. Potential to exploit further deposits in conjunction with CITIC reaping further economies of scale. A number of proposed iron ore projects will only be viable at current/near current prices. The King report advises that ARH PRODUCTION COSTS WILL BE IN THE LOWEST QUARTILE. Joint arrangements with CITIC could increase the size and scale of the processing plants further reducing per unit production costs.

10.In the event of an inevitable world market downturn for iron ore the lowest quartile cost profile for ARH products and its anticipated close relationship with CITIC will enable it to remain profitable and a preferred supplier.


Whilst the market clearly does not like the Palmer deal on face value , Palmer was fully justified in obtaining the deal he is about to consumate. Unlike CITIC ARH HAD NO CASH TO PUT ON THE TABLE. As this deal progresses i believe the market will warm to it, particularly if Palmer assigns ARH the right to extract further ore on a royalty only basis.
ARH needed Palmer not the other way round.Without Palmer ARH potentially had fcuk all.