most unappreciated fe stock on asx

  1. 153 Posts.

    Golden West Resources

    ~65% rise in iron ore prices

    share price has bottomed out at $1.20 significant buying support

    $32 million in the bank

    86mt @61% Fe resource

    market capital of $126 million

    which equates to $1.47 market capitalization per million tonnes of iron Ore

    significant upside potential with rumors of up to 1bt high grade hematite present at Wiluna West Projet

    Staving of a hostile bid by a much smaller Fairstar resources..... 3 directors have just resigned leaving board sympathetic to fairstar however share holders are about vote in a new board at an EGM which can rid Golden West of the Fairstar bid as well as Develop golden west into a major Fe producer of the mid west...

    Here is an old post..... something to think about as to why fairstar wants Golden West so bad, see my past posts under "some more information" if you want pictures.......

    So I though now that we all know what a joke this Fairstar offer is, after our discussions the past few months (refer to my past posts if you have missed out), I thought I would bring some interesting facts to every ones attention��.

    From what I have been able to gather from the basic reports that Golden West puts out the iron mineralisation is not contained only to the ridges. As I now know that Golden West has been carrying out drilling in between the ridges unbeknown to the general market (along with held back results results etc etc) with very good success. This has very wide reaching implications, as, if the iron ore continues in between the ridges this substantially increasing the possible tonnage at Wiluna West from the claimed 150 mt to potentially in my opinion up to a billion tone plus of iron ore.

    From my limited geological understanding of the site this iron deposit formed by the supergene enrichment of banded iron formations leading to a large sheet like hematite structure which has subsequently be twisted and turned and compressed etc. This was then eroded down over time leaving the present conditions at Wiluna West

    What are banded iron formations? Basically they form at the bottom of shallow lakes etc over many years by the deposition of iron and silica rich minerals, which where eroded away further upstream. BIF�s are a sedimentary rock made up of repeated thin layers of iron oxides of either magnetite or hematite, alternating with bands of iron-poor shale and chert. At this stage the deposit is almost flat covering a large area like a blanket on the floor of the lake

    These layers are then leached leaving behind a very rich hematite ore. Leaching is basically most of the silica and other materials dissolving away due to the correct geological conditions, over time leaving behind the iron which is not leached. This process leaves a very high grade hematite ore such as that found at Wiluna West. The deposits is still generally flat at this stage

    Now during the geological processes the general flat land form in which this sedimentary deposit occurred can buckle, twist, turn, flip etc under all the types of pressure it is under. However from the way the iron ridges are so exposed it is quite clear that this flat sheet of Hematite mentioned above was buckled kind of like when you push a sheet of paper from both sides except forming many ripples, these ripples are called synclines and anticlines, this is what I believe has basically occurred to most of the ore body, though some parts seem to have had more twisting and turning than others.

    Take one of the layers in the above diagrams to be iron ore, now where they reach the weathered away surface the iron ore outcrop units occur, as the iron ore is generally quite resistant to weathering.

    Now from one ridge to the next ridge at the tennament either a syncline or anticline occurs. So in between the ridges is most likely a sheet of hematite (syncline) or an area where the iron ore has be completely weathered away in between the ridges (anticline). And because of Golden Wests success in its secret drilling I�m guessing between units B and C, a syncline occurred. Meaning a lot of iron ore is in between these two ridges. Notice how the drilled out iron deposits marked up on Golden Wests Map are almost in a square�� Its because I believe they have the four corners of their pit and the rest is iron ore��.

    Now what does this prove if the iron is a continuous blanket between the major ridges at the Wiluna West tennaments? It proves there is a hell of a lot more iron ore than the management have been letting on��. while they tell us the common shareholder, how the mineralisation is confined to the ridges. From rough calculations on depths encountered so far and the length and distance between the ridges in my opinion, a conservative estimate for the Wiluna West iron ore deposit would have it easily contain in excess of a billion tonnes of high grade iron ore.

    This figure has not simply been pulled out of thin air as backed up by the following quotes from the Strachan report (june 07 , on Golden West Resources Web Site) here are some important quotes pay particular attention to the last quote!

    Golden West has yet to test ~70% of a combined
    125 kilometre zone of prospective mineralised unit
    (MU) strike length along 5 sub-parallel formations.

    Drilling has intersected some spectacular zones including 76 metres grading 64.6% Fe from
    the surface and 126 metres from the surface, grading 65% Fe which ended in mineralisation
    and contained 106 metres grading 67.9% Fe from 20 metres

    Strachan Corporate assesses that mapping, sampling and limited drilling to date give the
    permits an unconfirmed, target potential to hold at least 319 mt of high grade (>60% Fe)
    iron mineralisation on just the northern portions of Units B and C.

    Now how much is all this iron ore worth at $70 USD a tonne? and with an expected increase of 30% in the price of iron ore next year also on the board. One billion tonnes translates to an in ground value of $70+ billion USD.

    Now to considering mining costs I have done a very brief desktop study on the potential future development of the project giving very rough NPV figures which are entirely my own opinion for the project

    Using rough figures a 20 mt per annum operation will incur costs that are around $25 a tone (this $25 is made up of costs such as mining, ore preparation, port and rail transport as well as financing and possible contractor charges). While at 40 mt this will bring costs down to around $20 per tone (due to economies of scale) while these costs of $20 and $25 are much higher than the Pilbara standard it still leaves significant profit margin for each tonne of iron ore (The Pilbara gets up to around a cost of $16 a tonne to get the iron ore to the ship). I have also made the assumption that Golden West will need to spend the 3 billion alone to develop the project and associated infrastructure ( thought this will only happen if it chooses the Wiluna route, the Oakajee port route would mean shared costs with the other mid west iron ore producers, significantly reducing cost capex�s)

    With these two mining rates a constant price of $65 AUD a tonne for iron ore, a resource of 1bt iron ore, the cost of capital at 8% ( rough figure easy value to work with on my present value of an annuity table) and a cost capex of $3 billion for development this gives a very very rough NPV value at around $6.7 billion AUD for 20 million tonne per anum operation and $16 billion for the 40 million tonne per anum operation both which again are entirely my own opinion

    Though these figures are very very rough I�m sure you can see the potential this project has in becoming one of Australia�s largest high grade iron ore producing mines. However for such potential a current share price of $2.11 does seem a little bit low����

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