a very insightful and well researched post from another poster on another forum site:
post by aksier
Aurora Minerals (ARM): With such a large zone of high grade surface manganese, Aurora Minerals could well be the outstanding resource stock of 2010.
They will commence drilling during the first quarter of 2010 and only need to replicate a small portion of their high grade surface expression into drill core results to define a substantial resource (on a global scale). There are few stocks which one can honestly say have the potential for returns of Fortescue type multiples, but ARM is certainly one such company. Sandfire Resources discovered high grade copper from drilling in 2009 to the north of Auroras discovery, from a finite 8km anomaly, and their shares rose from 10c to a high of $4.39 with the current price still at $3.70. SFR have a defined area with somewhat limited potential to broaden their discovery whereas Aurora has only tested a small area of their overall target zone.
So far ARM have discovered over 50kms of strike of high grade manganese in the bedrock Ullawarra formation and, in addition, have also identified over 70km² of accompanied laterite manganese. Dont be surprised if this laterite discovery is increased substantially, plus they also have a further 36kms to test of the main bedrock formation. The key to the laterite discovery is that it is likely to be a high grade near surface deposit which should ultimately lead to lowest quartile mining costs. Future demand for manganese is likely to be strong as the Chinese, Indian and other South East Asian economies continue on their growth paths, with flow on effects for global steel markets.
I believe the recent price action leading to the continuation of the strong uptrend combined with an increased appetite for the stock in the lead up to drilling from late February into March will see Aurora test $1.00 or even higher quite quickly in 2010.
The Company has a conservative target tonnage of 10 million tonnes of manganese but that was before further discoveries at 5 fingers plus the large laterite zone of manganese. Looking at the market capitalisation of OM Holdings (Bootu Creek Discovery) and the sale price of the Woodie Woodie deposit (privatisation of Consolidated Minerals), you see roughly about $300 to $400 million of market cap upside per 10 million tonnes of manganese. So for every 10m tonnes discovered could represent up to $2.50 to $3.40 per Aurora share on a fully diluted basis. Capricorn Southeast could potentially host hundreds of millions of tonnes of manganese which would be more than enough to place the company under the watchful eye of the majors as the scale of the discovery becomes clearer. Using these figures you can start to understand why I have drawn comparisons between Aurora Minerals and Fortescue Metals Group in terms of the upside potential of ARMs shares.
Large amounts of manganese in a big system can be a geological footprint that may also lead to significant base metal discoveries. So there could be further upside in the share price from the identification of substantial base metals deposits particularly as they test the Talga Fault north of the manganese discovery. This area has geological similarities to the Mount Isa region in Queensland which has yielded deposits worth tens of billions of dollars. Significantly ARMs tenements cover the entire Talga Fault.
Finally, there is some added exposure to the uranium sector via the companys 50% interest in listed explorer, Desert Energy.