Ferret's Stock to Watch: CAPE LAMBERT IRON ORE LTD
Find a highly prospective iron ore explorer, cum producer down the track and link it with a Chinese buyer and you have stock that is hard to go past. The word buyer is on two counts, one in buying into the company and the other being the source of buying its production. This is a company that will take time to come to fruition, but shareholders have the prospect to prosper if everything goes according to plan.
On Friday Cape Lambert Iron Ore Ltd (ASX:CFE) reported to the ASX that a Chinese investor, Mr Ding Liguo, had entered into a contract to acquire 40 million Cape Lambert options from a third party. The purchase of these options by Mr Ding follows the news earlier this month that Best Decade Holdings had entered a binding conditional agreement with Cape Lambert to acquire 70 per cent of its namesake iron more project in Western Australia for $250 million.
The options to be acquired are due to expire on October 31, 2010, with an exercise price of 37.7c, but Mr Ding has formally indicated that he intends to convert the options to ordinary shares in the near future, which would generate $15.08 million for Cape Lambert. On the conversion of the options Mr Ding would hold 13.7 per cent of the issued capital in Cape Lambert and become one of the company's top five shareholders.
In addition to the acquisition of the options, the company has accepted a request from Best Decade that the purchaser of the 70 per cent interest in the Cape Lambert project will be Mr Ding, the sole beneficiary and a director of Best Decade Holdings. Cape Lambert director Tony Sage said: "We believe that Mr Ding's acquisition of these options and confirmation to us that he intends to convert them into a significant equity position in the company proves how highly he regards our management and technical teams, and most importantly our plans moving forward." However, the half-year result didn't augur that well after Cape reported a consolidated entity tax loss of $3.2 million, although it was much better than the comparable 2005 period which saw $15.5 million wiped off the books.
The last large loss for the six months was largely due to the impairment of exploration assets in relation to the Romanian SACU Project resulting in an additional expense of $2.1 million. Meanwhile work on the Cape Lambert Iron Ore project continued during the half year toward the preparation of a bankable feasibility study and commenced in respect to environmental permits for the Cape Lambert Iron Ore project. Resource definition drilling at the project began last July within the central target area and continued up to December 15 when drilling ceased for the Christmas/New Year period.
The company had completed 69 reverse circulation (RC) drill holes for a total advance of 18,052 metres. The company is scheduling the recommencement of RC drilling in early April, once the RC rig is available and all outstanding DTR results have been received and interpreted. Priority drill targets will be immediately to the north of the central target area and along strike and down-dip of drill holes MA209 and MA210, which returned thick DTR intercepts of 164 and 202 metres respectively with high Fe concentrate grades and low deleterious elements.
The mineralisation in this area is open along strike and down-dip. Work also commenced during the quarter on consolidating Robe's drilling data along with new drill data into a single digital database in anticipation of preparing a resource concentrate model for preliminary open pit mining studies. This necessitated the installation of a new server and appropriate database software.