target, page-4

"They intend to be in production by 2012 and they do have quite a bit of iron ore.However the downside is will iron ore be in such a demand in 4 years time."

Yes they have a lot of iron ore, yes they have a lot of coal. Further drilling is likely to substantially increase reserves of both.

Production in 4 years time, even if prices stay FLAT for 4 years, ie no increases, the iron ore component will still generate earnings of $1.3billion per annum. Check the market cap of AQA (only $2.7bill). I'd expect AQA to be multiples of todays price EVEN IF IRON ORE PRICES STAY FLAT, (in fact even if they fall). And then there's the ramp up of coal production. And no I havnt forgotten the Mangenese either.

I think funding of the capex ($4bill) will surprise. Vale have an option to purchase a JV'd coal asset from AQA at market prices following feasibility. This is expected to generate $600-$700 million in cash alone. What if AQA only require half of the Port capacity? Surely others such as RIO would chip in for the port cost to claim half of the capacity. Think about it, AQA is just getting started.