FRS - Ferraus Limited

[grace]

Just to take your mind off the share price smashing over the last few days...here is some analysis from Ocean Equities on iron ore juniors.

Additionally we believe Ferreus’s (“FRS”) deposits are very much dependant on gaining third party access to BHPB’s Jimblebar network to support development into production. FRS’s deposit is a typical example of a very attractive resource dependent on gaining appropriate infrastructure access to become economic and crystallise value, given the deposits remote location (at the end of BHPB’s railway line).

However, what we believe is in FRS’s favour is its premium product ore which could assist the Company agreeing some form of commercial agreement with BHPB.

Given the improved margins offered from high grade, low impurity lump deposits relative to fines and the likely development of an increased divergence in pricing, we would expect investors to increasingly focus on the characteristics of the deposits held by the juniors.

We believe Atlas Iron (“AGO”) and Ferraus (“FRS”) are best positioned to benefit relative to their peers based on known resources and estimated lump-to-fines product mix. FRS has commissioned mining and metallurgical studies which indicated a lump-to-fines ratio of 41:59, which is relatively high compared to other Marra Mamba deposits and a mining proposal and permitting for the Company’s flagship Robertson Range deposit are ongoing.

FRS has highlighted a number of substantial high grade resource targets and offers investors significant exploration blue-sky potential relative to a number of its junior peers, albeit with significant exploration risk as a number of these targets have been inferred on gravity survey data and neighbouring resource size/grades only.

A key element to the development of the iron ore projects is FRS gaining appropriate access to infrastructure given the significant distances its prospects from Port Hedland. Therefore agreeing access to BHPB’s Newman/Jimblebar rail infrastructure is critical (even FMG’s rail network is 200km+ away). A key element which we believe is in FRS favour is that metallurgical studies to date have supported a favourable lump-to-fines ratio of 41-59% at its Robertson Range Marra Mamba deposit which enjoys a Fe grade of 58.9%.

The Company is currently investigating the following alternatives to develop it projects: 1. MGS; 2. transportation through a co-operative cost and profit share agreement; or 3. seeking access under the WA Government rail access regime. FRS is a foundation member of the North West Iron Ore Alliance.

http://www.minesite.com/fileadmin/c...n_Ore_Sector_Update_July08_Ocean_Equities.pdf

 

[grace]

Up a nice 12.39% today, which is the highest on my iron ore watchlist, apart from MGX who had 12.39% as well

Could there be some news on the way?

 

[grace]

Top 20 as at 28 September 07 = 69.06% Lots of funds in there.

Top 20 shareholders per quartely just out at 71.63%. Have not really checked who has sold or bought, but it slowly gets higher and higher with some big holders in there (wish I was one of them).

 

[Spineli]

Ferraus Presentation released to market just after close today.

Management appear to have upgraded 'Potential resource estimates for both the prospects at Davidson Creek and Robertson Range.

Main points:
-- Potential for > 250-350Mt Fe -- (DSO Hematite) @ 57-60% Fe
-- Davidson Creek -- 130 to 180 Mt Hematite DSO
-- Robertson Range -- 120 to 170 Mt Hematite DSO
-- Planned Production: 10-15Mtpa DSO
-- Infrastructure Access heading in the right direction - FRS has secured access with other members of the NWIOA for an initial berth allocation of 50Mtpa
-- Low Capex / Opex production (low strip ratios)

Announcements coming up :
-- Resource Upgrades due in Sept '08 (Davidson Creek and Robertson Range)
-- New Discoveries (Results Pending) - potential estimates yet to be given for T51500E (Davidson Creek) and T55500E (Robertson Range)
-- Enachedong Tenement (Manganese RC Drilling results pending - Sept '08)

Development Options
-- Mine Gate or Rail Head Ore Sales - RIO / IOH precedent
-- JV Production and Sales
-- Rail Haulage for Independent Ore Sales

Project Cases/Timetables
-- Fast track (2 to 5 Mtpa mid/late '10)
-- Mid size (10 Mtpa via Jimbelar & NWIOA Port in '12)
-- Large scale (15 to 25 Mtpa in '14)

Concept Case being developed for 15 to 25Mtpa production -- Pilbara East Alliance Rail Link 'PEARL'

Cash Position -- Approx $30M post WMC placement and rights issue

Market Structure
ASX Listed Shares ~ 151.5m
Fully Diluted ~ 167.1m

 

[grace]

Are you still holding spineli? Has been quiet on the iron ore junior threads. I'm still holding, as I am still of the opinion that this one will get over the line to mining. Share price of juniors have sure been beat up lately!

 

[Spineli]

Commodity prices have fallen recently. Iron ore and coking coal prices are the exception. Fundamentals remain strong. I happily hold and have accumulated at these levels.

The company is coming along nicely. Resources will need to be proven to JORC standard and infrastructure plans further developed for a mid-size operation of ~10-15mtpa from ~2012.

Some results will filter through this month, but I'll be closely following port discussions for access. I'm happy with the fact that industry and the government in WA have been supportive of the NWIOA.

 

[grace]

Nice announcement this week - upgrade to 123.4MT @58.8%Fe DSO.

Share price now 1/4 of what it was at the peak. eeek!

My guess is they will get to 1/2 billion tonne of nice grade ore. BHP is the closest major to FRS.

LARGE, NEW IRON ORE RESOURCE
at the DAVIDSON CREEK PROJECT
- supports development of mine, rail & port.

FerrAus Limited (ASX: ”FRS”) is pleased to report on continued exploration
success by announcing an initial resource for the Gwardar & Python prospects
at its Davidson Creek project in the East Pilbara region of Western Australia.
Gwardar & Python = 71.0 Million Tonnes @ 58.8% Fe
4.3% SiO2, 2.5% Al2O3, 0.08% P, 8.5% LOI and calcined Fe = 64.3%

Included in total resources for FerrAus’ East Pilbara Projects
= 123.4Mt @ 58.8% Fe

“This significant new resource more than doubles the resource base in our East Pilbara licence areas to over 120 million tonnes, confirming the potential for multiple, large deposits of high quality, direct shipping iron ore”.

“These resources provide the fundamental basis for project development of iron ore production at 10 Million tonnes per year and construction of transport infrastructure, both rail and port” said FerrAus Managing Director - David Turvey.

Highlights & Future Work:

- Initial resource estimate for the Gwardar & Python prospects (Inferred Resource = 71Mt @ 58.8% Fe) is based on results from RC and diamond drilling
conducted in March – July 2008 (refer Figures 1-4). It was completed by Coffey Mining Pty Ltd in accordance with the AusIMM JORC Code for Reporting of Exploration Results (refer attached resource statement).

- Including the Gwardar & Python resource, the total resource base for FerrAus’ licence areas in the East Pilbara has increased to 123.4 million tonnes grading 58.8% Fe (refer details in Table 1).

In addition, FerrAus estimates the exploration potential for iron mineralisation as extensions of current resources and at prospects and targets to be 250-350 million tonnes.

• Exploration during Q4 2008 is focussed on down dip extensions to current
resources at both Davidson Creek and Robertson Range (Figures 1 & 2).
Internal company targets are to increase the resource base to 150-180 million
tonnes during 2008 and 220-250 million tonnes by end 2009.

• Project development studies being conducted include: a) pre-feasibility study on 2-5Mtpy “fast track” production in 2010, b) scoping study on 10Mtpy production in 2012, and c) concept study on >20Mtpy production in 2014.

 

[grace]

Australian Enterprise Holdings just bought 5.78% of FRS at a price of 90cents. What do you know.....only trading at 24cents (announcement after market close).

Glad someone sees value in it! We might have a green day tomorrow seeing it is only trading at 26% of this recent transaction!

Becoming very very illiquid this one!

167.1 million shares @ 24cents = $40 million mc (25mill cash)

123.4 mill tonne @ 58.8 fe (and growing to 500 million tonne imo)

$15 mill for all of those projects. Glad it's tightly held so noone else can get their hands on it at these prices!

investor presentation......

http://imagesignal.comsec.com.au/asxdata/20081021/pdf/00892831.pdf

 

[grace]

Australian Enterprise Holdings just bought 5.78% of FRS at a price of 90cents. What do you know.....only trading at 24cents (announcement after market close).

Glad someone sees value in it! We might have a green day tomorrow seeing it is only trading at 26% of this recent transaction!

Becoming very very illiquid this one!

167.1 million shares @ 24cents = $40 million mc (25mill cash)

123.4 mill tonne @ 58.8 fe (and growing to 500 million tonne imo)

$15 mill for all of those projects. Glad it's tightly held so noone else can get their hands on it at these prices!

investor presentation......

http://imagesignal.comsec.com.au/asxdata/20081021/pdf/00892831.pdf

As the share price sinks, and it seems noone holds except me.....a nice announcement out after market close today.

150 mill tonne DSO at 58.7Fe (resource upgrade)

As I say, I think they'll make it to 1/2 billion tonne of DSO.

BHP's rail line is not that far away. FRS have a nice deposit. Let's see what happens now that the RIO deal is dead.

http://imagesignal.comsec.com.au/asxdata/20081204/pdf/00911038.pdf

Total resources for FerrAus’ East Pilbara Projects
150.1Mt @ 58.7% Fe
Gwardar & Python 85.7 Million Tonnes @ 58.7% Fe
Taipan 14.6 Million Tonnes @ 57.7% Fe
Robertson Range 40.0 Million Tonnes @ 58.8% Fe
South West Zone 10.1 Million Tonnes

“FerrAus is mindful of difficult conditions in the global financial markets and has taken appropriate measures to maintain our strong balance sheet. Our key shareholders, Penfold Limited and China Western Mining, provide FerrAus with a unique insight to markets and economic activity in the global iron and steel industry. We remain confident that high quality projects will attract investment partners and secure the necessary funding for project development.”

 

[happytown]

ann out this morning regarding an increase in direct shipping ore

...

The total iron ore resource inventory for FerrAus’ licence areas in the East Pilbara has increased to 166.6 million tonnes grading 58.6% Fe
Resources at the Davidson Creek project have increased to 114.4Mt @ 58.4% Fe including
Improved resource classification at the Taipan Resource to 9.3Mt Indicated (68%) and 4.4Mt Inferred Resources (32%)
Reconnaissance RC drilling is planned on new iron ore exploration targets at the Davidson Creek project during mid 2009.

...

potential to increase resource to 3-400M t

sp currently up approx 14% on above average volume

cheers

 

[grace]

ann out this morning regarding an increase in direct shipping ore

potential to increase resource to 3-400M t

sp currently up approx 14% on above average volume

cheers

Market cap $42mill fully diluted at 25c per share. 166.6mt of DSO. We've got about the same issued shares as tonne of DSO. So for every one share, you get 1 tonne of DSO. This is the only iron ore stock I have hung onto because I've always thought it is undervalued compared to other iron ore juniors. So your 27 cent share gets you 1 tonne of DSO in the ground. Would be interested to compare this to other juniors but it's something I haven't run the ruler over for a while.

 

[wallyscot]

Have a small interest in FRS, and noticed the jump in sp from 28.5c to the current 53.0c close over the past 10 days or so, and on what appears a not insignificant rise in volume of shares traded.

Being a "Sad Scotsman" , any local investors heard anything to warrant the rise ? Can the rise be expained solely by the 3rd June resources increase ?

wallyscot

 

[grace]

Have a small interest in FRS, and noticed the jump in sp from 28.5c to the current 53.0c close over the past 10 days or so, and on what appears a not insignificant rise in volume of shares traded.

Being a "Sad Scotsman" , any local investors heard anything to warrant the rise ? Can the rise be expained solely by the 3rd June resources increase ?

wallyscot

Hello Scotsman, I hope you are not feeling as sad today.
Well, like all iron ore juniors, this one has had a nice run over the last couple of weeks because of the rio/bhp jv and the thought of who the chinese will move on next.
However, this one has continued to have good volume today, when others' have dropped back. I'm a bit suspicous.... I don't know who is doing all of that buying - volume was very large.

 

[Sean K]

This looks to be the cheapest junior on my cheap junior scale coming in at a lowly 41c per tn DSO, followed by GWR on 46c, and then GIR at 66c. Then, it's daylight to the rest well over $1.00.

Why is this one so cheap? Under the radar? Not going to get the capex or access to infrastructure? Crap management?


ABN review last Oct:

Investment view
FRS’s tenements contain a high-quality iron ore resource. We anticipate access to rail
infrastructure can be resolved commercially, but the terms, structure and timing of an agreement
remain uncertain and will prove critical to the realisation of value. As part of the North West Iron
Ore Alliance FRS has an option to secure access to multi-user port capacity, and will need to meet
the progress payments scheduled by the Port Hedland Port Authority. With the potential for a
further major increase in the resource base, FRS is now evaluating options for a stand-alone iron
ore mine with its own rail line. With the scale of operations and the funding structure uncertain, we
retain our valuation of A$2.68 per share based on naïve modelling.

 

[grace]

This looks to be the cheapest junior on my cheap junior scale coming in at a lowly 41c per tn DSO, followed by GWR on 46c, and then GIR at 66c. Then, it's daylight to the rest well over $1.00.

Why is this one so cheap? Under the radar? Not going to get the capex or access to infrastructure? Crap management?


ABN review last Oct:

Investment view
FRS’s tenements contain a high-quality iron ore resource. We anticipate access to rail
infrastructure can be resolved commercially, but the terms, structure and timing of an agreement
remain uncertain and will prove critical to the realisation of value. As part of the North West Iron
Ore Alliance FRS has an option to secure access to multi-user port capacity, and will need to meet
the progress payments scheduled by the Port Hedland Port Authority. With the potential for a
further major increase in the resource base, FRS is now evaluating options for a stand-alone iron
ore mine with its own rail line. With the scale of operations and the funding structure uncertain, we
retain our valuation of A$2.68 per share based on naïve modelling.

I don't know why it trades at a discount to the rest. Mgt seem to have good connections with the iron ore alliance. At least those juniors are working on some infrastructure. FRS have never dissapointed the market to date. The share registry is fairly tightly held, so a bit of volume can lead to volatility (especially when everyone is selling at the same time). Their drilling has been of nice consistency. A rail line would do wonders for the share price of cause. I usually chat to myself here because it is so illiquid.

 

[pops11]

grace your not alone i too like this Co find that brkers have it at a buy strongly so its interesting to say the least why it is so cheap???

 

[Sean K]

FRS in the OZ.

Comes in 3rd on my price per mt DSO basic analysis.


FerrAus joins junior miner merger hunt
Sarah-Jane Tasker | June 25, 2009

EMERGING East Pilbara iron ore hopeful FerrAus has added its name to the growing list of juniors targeting consolidation in the sector to unlock infrastructure and provide an alternative source for China.

The South Australian-based explorer announced yesterday it was restarting iron ore exploration, adding that its objective was to promote the consolidation of the junior sector in the Eastern Pilbara.

Its shares received a boost on the back of the news, jumping 4.44 per cent to 47c.

The announcement by FerrAus comes less than a week after neighbouring juniors Warwick Resources and Hannans Reward merged their iron ore tenements.

Warwick, which is 20.88 per cent owned by Atlas Iron, purchased Hannans Reward's East Pilbara iron ore tenements for $5.25 million in a move tipped to extend Atlas's reach across the sector.

Both Warwick and Hannans said further consolidation in the region was expected because most juniors would struggle to access infrastructure without adding tonnages to their projected output.

FerrAus chairman John Nvylt agreed further consolidation in the sector was needed to create a sufficient resource base to underwrite the construction of connecting infrastructure.

 

[Sean K]

And while looking cheap to the peers, is in a pretty good set up here. On a break up, the technical target is the length of the pole. Just a probability of course.

 

[Sean K]

And while looking cheap to the peers, is in a pretty good set up here. On a break up, the technical target is the length of the pole. Just a probability of course.

Keep an eye on this formation. Can't see it making the target as the fundamentals would probably be well overextended by then, but nice formation at the moment. Overall market sentiment probably won't help it's chances.

 

[Amor_Fati]

I have nothing to offer on the technicals but fundamentally the big news today was the appointment of Mike Amundsen who worked for BHP for 28 years including roles as vice-president of business development in iron ore. The statement they put out today reiterated the sense that consolidation makes for some of these juniors. I think his experience could be helpful in making the deals FRS needs. Particularly with access to BHPs railway line, I think he would know a few people.

I bought in today as I've been looking at it for a while. I knew it had the resource and is well placed financially and I think this could be a catalyst for future action.

Kennas, thanks for that IO junior thread. I found it very helpful to start from. I now own a few BRM as well, I think the size of their resource and chinese accumulation bodes well for the future.