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drbubb

Australian Resource stocks - Charts and Comments

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Australian Resource stocks - Charts and Comments

 

I will kick the thread off with these two

 

TWO 'Stral'n mining-related equities I have been looking at

 

(not a recommendation - just some charts to look at)

 

AGO / Atlas Iron Ore ... update

 

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RNS / Renaissance Minerals ... update : Has 3 mn oz. gold deposit in Cambodia

 

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Atlas is under-pressure because of the possible high capital expenditures

 

Atlas Iron Ltd (AGO)

Be careful what you wish for…

A rail deal would still commit AGO to a hefty capex bill
[

[A rail solution has long been regarded as the barrier for AGO’s Horizon 2 expansion. However, even should AGO get access to existing Pilbara rail and port infrastructure, its medium-term capital commitments will balloon. It’s also likely that this expansion will add relatively high cost tonnes to the seaborne market just as the majors add significant low-cost supply. We argue that AGO would be better off maintaining its opportunistic, lower-capex, mine-and-truck business model or perhaps adopting a smaller-scale BC Iron-like approach. We have made no changes to our earnings.

 

Capex: Some rules-of-thumb for iron ore operations

Recent Pilbara iron ore mine capex has averaged around $50/t of annual production. AGO adding 20-30Mtpa through Horizon 2 could therefore cost $1.0-1.5b. Rail spurs cost around $5m/km. The Horizon 2 mines would potentially require more than 170km (or $850m) worth of rail to be cost competitive. These are large capex numbers for a company with a market cap of $932m and net cash of $138m.

 

 

2 /

Investment Highlights

 

Atlas Iron’s (AGO) March Q report saw iron ore sales total 1.86Mt (PSL est. 2Mt) placing the Company on track to achieve FY13 sales guidance of 7.4-7.7Mt. Cash costs were in line at $46-50/t and the average price received for its standard and value fines product was $120/t. The portion of value fines sold (627kt of the 1.86Mt) increased significantly due to excessive rainfall and poor orebody reconciliation which hampered access to higher grade ore. We have pushed out ramp up milestones to 10Mtpa and 12Mtpa by 1Q respectively and the Company remains in discussions with a number of parties regarding rail solutions for its Horizon 2 assets.

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