IT'S been a big year for South Australian iron ore group Western Plains Resources.
And it could be about to get a lot bigger if the street talk is right that Michael Kiernan's acquisitive Northern Territory iron ore producer, Territory Resources, has snuck on to Western Plain's share registry in the past couple of weeks with an undisclosed holding of 4.6%.
Kiernan is the former Consolidated Minerals boss who, through Territory, made sure that ownership of his old firm did not go off as cheaply as Brian Gilbertson's Pallinghurst had planned.
While Territory missed out on ConsMin, Kiernan made clear last week at the group's annual meeting that he continues to think big.
He said the plan was to rely on exploration and the "pursuit of targeted merger and acquisition opportunities" to make Territory a $2.5 billion carbon-steel-supply business.
Territory is now a $320 million company, so Kiernan has got some work to do. It has just taken up a 15% stake in minerals explorer Northern Mining, as well 14% of mineral sands explorer Olympia Resources.
The group's Frances Creek iron project in the NT remains the key asset and is forecast to be producing at an annual rate of 3 million tonnes by the end of next year.
Whether Kiernan has takeover designs on Western Plains Resources remains to be seen. But there is no doubt that Territory would be a more compelling story with the consolidation.
This time last year Western Plains was trading below 20¢ a share and had a market capitalisation of $7 million.
By last Friday, the stock had scooted to $1.75, a gain of 14¢ on the day, for a market cap of $160 million (fully diluted).
The group's strong performance reflects growing interest in its Peculiar Knob project, 90 kilometres south of the opal town of Coober Pedy.
There are plenty of iron ore hopefuls out there looking to cash in on the almighty boom in demand for the key steel-making raw material.
But few are as advanced as Western Plains Resources. If all goes according to plan, its
$108 million Peculiar Knob project could make its first iron ore shipment in January 2009.
Beyond the initial mine life of seven years at an annual production rate of 2.7 million tonnes of premium product, Western Plains also has the direct shipping iron-ore potential of its Hawks Nest project to come. Hawks Nest straddles the Stuart Highway 115 kilometres south-east of Coober Pedy and comes with the longer-term potential of its 569-million-tonne magnetite (35% iron) deposit.
Western Plains has not been tilting at windmills either about getting Peculiar Knob to the starting stalls. A group of Chinese investors, traders and a steel mill owner likes the story and has agreed to fund up to $115 million to develop Peculiar Knob, in return for off-take rights.
Through Xin Sheng, funding will come from $9 million in ordinary equity at $1.68 a share by January 25, project debt facilities of $94.5 million and convertible note of $11.5 million.
So Western Plains Resources does not need Territory to make its iron ore plans a reality.
But if Kiernan wants to get Territory to $2.5 billion quick smart, Territory needs Western Plains.
TTY Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
