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article: iron ore rising and no end in sight

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    Iron ore rising and no end in sight
    Robin Bromby
    1,401 words
    25 February 2008
    The Australian
    6 - NSW Country
    Copyright 2008 News Ltd. All Rights Reserved

    Japanese, South Korean and Chinese buyers have signed contracts for price rises of 65 per cent

    WHEN iron ore contract prices increased 71.5 per cent in 2005, the view was that it was a one-off.

    That idea was well and truly buried last week, when the Japanese and South Koreans signed off on a 65 per cent increase, and then China's Baosteel went to water on Friday night and agreed to a similar increase with Brazil's Vale.

    Don't expect this year's rise to be the last. India's steel ministry is now asking the Government in New Delhi to impose a much steeper export duty on iron ore, a move aimed at conserving the country's resources.

    Last year India imposed a 300 rupee (about $8) duty and the Chinese buyers -- who take 85 per cent of India's exports -- kicked up a huge fuss.

    The Indian move underlines that iron ore availability is going to be a crucial factor in coming years. Just keep in mind that steel consumption is now running at more than 200kg for every person in the world.

    One local iron ore CEO has just done a count of listed companies with some (however minor) iron ore interest. Total: 191. Of those, about 90 have iron ore as a primary activity, he estimates.

    This is fewer than the count for uranium players but still at a level that suggests an overcrowded field. How many of them are in a position to say they will be able to get some ore aboard ship within the next two years?

    Then strip out those that have not yet resolved their infrastructure challenges. It is one thing to say you're within cooee of a BHP Billiton railway line, and quite another to get access to that line. Our volunteer statistician also came up with this number: over the past 12 months there have been 933 ASX ``geological'' announcements that mention iron ore, two-thirds of those being in the past six months.

    Frenzy time?

    AS Flinders Diamonds showed last week, a bit of ``nearology'' does no harm. The company drew attention to the fact that its Hamersley project in the Pilbara was less than 10km from the 875 million tonne resource at Caliwingina North, owned by Rio Tinto.

    Day traders duly obliged and sent the stock up on large volumes.

    United Minerals Corp also was not hiding its Pilbara light under a bushel. It reported that visual inspection of a drill core near its Railway prospect indicated a 40m intersection of Marra Mamba iron ore, making the directors confident they could have 100 million tonnes on their hands. UMC went very dark on Pure Speculation when we suggested its announcements were getting a little ahead of themselves, so we'll refrain from any comments -- for now.

    Turning to more advanced projects, we should note that Strike Resources says it has signed a preliminary agreement with Peru Rail to move 2million tonnes a year to Matarani, a port on that country's southern coast. Strike, while aiming to mine up to 40 million tonnes a year, is planning to get a smaller operation going at its Cuzco project so it gets cash flowing.

    Back home, Western Plains Resources has increased its resource estimate by 46 per cent at the Buzzard deposit near Coober Pedy. The company said it had 13.3 million tonnes of direct-ship iron ore at an average grade of 62 per cent.

    We're expecting within the next few weeks to see the first resource statement from BC Iron. There are hopes of something approaching 30 million tonnes at 55-58 per cent. The company has signed an agreement with Fortescue Metals Group. BC Iron plans to truck its ore to FMG's Cloud Break mine, then send it down the FMG rail line and on-board ship at FMG's wharf at Port Hedland.

    Floats going down

    WE would understand if there was a touch of apprehension at Adelaide Resources. The company is about to launch its initial public offering for spin-off Iron Road, which holds the parent's iron ore interests on the Eyre Peninsula. Iron Road will be seeking $5 million (with Adelaide retaining a 40 per cent stake) in hopes of listing in April.

    The upcoming floats list on the ASX website has shrunk dramatically in recent weeks, with a number citing ``to be advised'' where a listing date would appear in more bullish times.

    That things are tight out there was confirmed in a late Friday announcement from Polaris Metals. Its $10 million spin-off of its non-iron ore assets into an IPO called Southern Cross Goldfields (ticker SXG) has already had its closing date extended from February 15 to February 29. Polaris is obviously anxious even about that, as now it has decided to subscribe for 13 million shares ``so SXG can complete its listing''.

    So, we have Polaris selling off part of the assets its shareholders thought they already owned, and then spending $2.6 million of shareholder funds to clinch the deal.

    At least Emu Nickel managed to fall over the line, although having to settle for half the $20 million it asked for. This spin-off from Image Resources will list this month. The way some new listings have fared on their opening days, it might pay the Emu boys to have something restorative in a hip flask to hand as they watch early trading.

    There must have been exclamations along the line of ``phew!'' at White Canyon Uranium, which -- finally -- made it to the minimum subscription of $17.5 million. Its next moment of truth comes on the market debut scheduled for February 29.

    And what can we say about Mallee Gold Corp? It seems to be finding it devilishly hard to get a modest $5 million raised. First it extended the IPO from December 10 to early February, then mid-March and now it's March 31.

    Another extendee is Argent Minerals. It is within about $200,000 of its $4 million minimum but wants to get closer to its $5 million original target so it can pay for all the planned drilling. The offer, which was to have closed on February 15, will now run until March 7. Argent is farming into three NSW properties held by Golden Cross Resources, with the main focus being the Kempfield project near Blayney, with a Joint Ore Reserves Committee resource of 11.3 million ounces of silver grading an average 93 grams/tonne.

    Ganke reaches out

    YOU never know what Poseidon-era survivor Boris Ganke will come up with next. He has decided his listed share and property investment vehicle Chapmans will get into the resources game alongside his three companies already involved in that sector.

    The company is considering taking a 20 per cent stake in a zircon mining venture in Indonesia.

    Another Ganke company, Southern Cross Exploration, is now plunging into uranium. Southern Cross has announced that it has won two prospecting licences in Burkina Faso.

    These companies, along with Ganke's Longreach Oil, have share prices securely in the sub-10c category. Is his most recent float, AusTex Oil, heading in the same direction?

    Its shares were issued at 40c but have now hit 19c notwithstanding the undoubted star power of board members Peter Power (former boss of Ampolex) and former journalist scourge of the junior sector Trevor Sykes.

    AusTex's ticker is AOK, by the way.


    * SPECIALITY metals continue to shine. Cobalt has broken through the $US50/lb barrier. The $US52 paid last week was the highest since 1978. Antimony has hit $US6000/tonne, its best level since 1994, on signs that China -- which supplies 80 per cent of the world's needs -- may not be able to meet all orders for the metal.

    * ADMINISTRATORS have been called in by the only listed company based in Albany, SuperSorb Environmental. It started life as Talon Resources and built itself up to be Australia's largest supplier of kitty litter. SuperSorb is hoping to recapitalise and get to work on its tin and molybdenum prospects in Queensland.

    The Australian implies no recommendations regarding any of the stocks mentioned. The author owns shares in Rio Tinto.

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    Document AUSTLN0020080224e42p0006j

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