Font Size: Decrease Increase Print Page: Print Kevin Andrusiak | May 29, 2008
SOMETIMES, and it doesn't happen very often when it comes to iron ore, it pays to have the right help.
At the moment, Sundance Resources is flying, but it took the market more than a week to cotton on to the good news about its Mbalam project in Cameroon.
Don't call it a mosquito-infested swamp, it's a 190 million tonne, direct-ship project that could make a lot of people, including investors, very rich.
Sundance revealed the maiden resource for the project on May 19 and the market barely batted an eye.
That was bizarre, to say the least, given that it mentioned direct ship, hematite and iron ore all in the same sentence.
If you want to see what the mere mention of the phrase “iron ore” can do to a share price, have a look at Black Fire Energy.
But back to Sundance. Just yesterday, company managing director Don Lewis had what is called an “open briefing”. These are heavily prepared interviews, but they usually do provide good, sanitised detail about what is going on in a company.
Lewis said the board believed Sundance was “significantly undervalued” and that “significant growth” was expected. He also said the resource was attracting “significant supply interest” from major iron ore customers.
Don't get us wrong, there's probably no one in the world who has written the word “significant” more often than Daily Assay.
And aside from that, 190 million tonnes of hematite ore - with moderate grades of silica and alumina and low levels of phosphorous - are not to be sniffed at. The world needs it and Sundance has got it.
What Lewis didn't say is just how much it will cost Sundance, but expect the final capital cost to be upwards of $US3.5 billion ($3.64 billion). Lewis did say that operating cashflow from 35 million tonnes of annual production would be $US1 billion a year.
On the day of the briefing, Sundance shares shot up a whopping 37 per cent, while the market went in the opposite direction. About 9 per cent of the company's capital was traded, while the guys at Concord Capital were probably found crying into their beer, lamenting the fact they had sold out in early April.
That is, assuming they weren't piling back in on May 28.
Actually, about 30 per cent of the company's share register has turned over in the last week, according to chairman George Jones.
Jones put the run-up in Sundance shares on May 28 down to the fact that the market had a better understanding of the company’s potential, through the open briefing, and that Sundance was attracting a lot of attention overseas.
His other interest, Gindalbie Metals, isn't doing too badly either, doubling its market capitalisation in May.
In fact, Sundance shares are still a long way from the recent highs of last September/October.
But Daily Assay would forgive you if you had a nagging feeling that something bigger was going on at Sundance. And no, Jones isn't proposing again that Gindalbie and Sundance become one.
Maybe it’s the Chinese - they are in the region and spending up big on iron ore projects.
Lewis did mention the “significant” supply interest from iron ore customers in Asia and Europe.
Sometimes you do have to highlight the positive.
andrusiakk@theaustralian.com.au
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