Tuesday, April 04, 2006

Sherlock Bay Developments

Primer on my investment outlook

Mineralogy boost for Sherlock Bay

Michael Vaughan
Tuesday, April 04, 2006

SHARES in Sherlock Bay Nickel jumped by as much as 70% today after the company reminded the market about its deal with Clive Palmer's company Mineralogy, which recently signed a $US3.685 billion ($A5.17 billion) deal with Chinese interests to develop iron ore deposits in the Pilbara.

Last December, Sherlock Bay paid $A1 million for the right to conduct due diligence on Mineralogy's Cane River iron ore project with a view to submitting a proposal to acquire Cane River Mining ?a Mineralogy subsidiary that owns the project ?by May 30.

Importantly, Sherlock Bay's deal with Mineralogy includes a guaranteed 400 million tonne (71% iron) of magnetite ore from the Balmoral deposit, which comes under the CITIC Pacific deal.

Publicly available reports state Cane River has a non-JORC resource of 102MT grading 53.6% iron.

Sherlock Bay managing director Darren Hedley told MiningNews.net it was business as usual as far as his company was concerned because the CITIC Pacific deal did not directly affect Sherlock Bay's agreement with Mineralogy.

"The key issue for Sherlock Bay is infrastructure," Hedley said.

"[CITIC Pacific] have said they're going to produce product by 2009 ?and that includes [construction of] a port of which the company we're looking to purchase ?Cane River Mining ?has formal access."

Hedley said Sherlock Bay would have to contribute on a tonnage pro-rata basis towards the establishment and operation of a port that will likely be located near Cape Preston on the Pilbara coast.

Sherlock Bay is aiming to get a 20-year, 15.5Mtpa operation off the ground at Cane River.

Hedley paid homage to Palmer for securing the landmark deal and pointed out the deal with CITIC Pacific only covered "a drop in the ocean" (1%) of Mineralogy's prospective iron ore ground in the Pilbara.

"Clearly (Palmer) is a man of vision," Hedley said.

"He picked these leases up in 1985 with a view that a deposit of this size, location and quality has to be desired by many one day and it's testament to his foresight."

Mineralogy's deal with CITIC Pacific remains subject to Foreign Investment Review Board approval.

After reaching a high of 13.5c during the day's trade, shares in Sherlock Bay closed up 3.2c (41%) at 11c, a 52-week high for the company.


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