ARH ripping along

Primer on my investment outlook

ARH is getting press coverage every few days nowadays. Looks like the stock might take off on a speculative blowoff..

AUSTRALASIAN Resources has expanded its exploration portfolio, adding hot commodity uranium into the mix following the approval of its first uranium tenements, and expectations are high that a second tenement is likely to be granted soon.

Australasian's new uranium tenements in Western Australia's Pilbara region

Known as Copper Bore Well, the first granted uranium exploration licence application is in Western Australia and cover some 10,130 hectares, which are prospective for uranium, copper and silver.

According to Australasian, the street credibility of the area comes from its location, which is 100km east of Paladin Resources' Manyingee uranium deposit, which has an inferred resource of 12,000 tonnes of uranium oxide at a grade of 0.08%.

Copper Bore Well was previously explored by Esso in the late 1970s, which conducted some shallow air track drilling in the area and returned hits including 2m at 1.43% copper, 4.5 grams per tonne silver and 62 parts per million uranium, and 3m at 2.5% copper, 9.3gpt silver and 120ppm uranium.

Meanwhile, Australasian expects that its second uranium exploration licence application covering the Mt Salt prospect will be granted to the company next month.

If granted, the exploration lease over Mt Salt will cover some 15,971ha and is immediately west of the company's flagship iron ore project, Balmoral South.

"Given the size of the Mt Salt radiometric anomaly, there is an excellent possibility that the postulated buried uranium mineralisation is a very large resource and of significant grade," the WA Mines Department said as reported by Australasian.

Australasian shares resumed trading on the Australian Securities Exchange early last week following a four-month hiatus.

Shares in the company closed up 3.5c at $1.66 yesterday on the back of the news and were steady in trading this morning.

Sherlock Bay story continues

Primer on my investment outlook

Amazing stuff this... I had written this company off but held on to their Conv Notes as it offered a high yield..

AUSTRALASIAN Resources plans to step up the evaluation of its long-held, low-grade Sherlock Bay nickel project in Western Australia following successful heap leach test work.

Australasian Resources managing director Darren Hedley

The Sherlock Bay nickel project near Karratha, Western Australia

Australasian, which prior to last year's move into magnetite shared its name with the Sherlock Bay project, said continued column recovery tests of ore from Sherlock Bay had returned recoveries of 85-95%.

Australasian managing director Darren Hedley told MiningNews.net the company was close to finalising an independent project team to focus on advancing the asset.

Hedley said the latest test work, coupled with the soaring nickel price and the financing secured as part of the company's diversification into magnetite, made now the perfect time to step up the valuation of Sherlock Bay.

Resources at Sherlock Bay currently stand at 25.4 million tonnes grading 0.4% nickel for 101,000 contained tonnes of nickel metal.

Earlier initiatives to advance the project were stifled by issues over the project's metallurgy.

The project had been earmarked to move into production in June 2004, but the company surprised the market shortly before that date when an internal review found Sherlock Bay needed significant additional work before development could begin.

The Sherlock Bay project began taking a back seat to uranium and iron ore assets in late 2005 as Australasian – then under its former moniker of Sherlock Bay Nickel – struck a partnership with Clive Palmer's private group Mineralogy.

That partnership has since seen Palmer vend the 547Mt Balmoral South magnetite project into Australasian, with Palmer now the dominant shareholder on Australasian's register.

On Monday, Australasian ended a four-month trading halt when it finalised funding agreements with Chinese steel giant Shougang for the development of Balmoral South.

Shougang entities will finance 100% of the project funding (estimated at $US2.1 billion or $A2.5 billion) through an interest-free project loan, and will also subscribe to up to $A108 million in Australasian shares and options.

Hedley said Australasian had been advancing the Sherlock Bay project continuously while the magnetite strategy evolved.

"There's no doubt we've been working hard on the iron ore, but work has always continued on Sherlock Bay and it never stopped," he said.

"It's a project that can have very low operating costs. It's sulphide, not laterite, and leaching of sulphides can be very cheap.

"The heap leach recoveries have gone up, the nickel price has gone up, so it's all come together very nicely."

Shares in Australasian – which almost doubled from $1.15 to $2.20 when it was readmitted this week – climbed 10c to $1.63 in early afternoon trade.

Another update on Australasian Resources

Primer on my investment outlook

Australasian shares, which have been locked in a trading halt since December 14, are set to resume trading on the Australian bourse after the company yesterday said Shougang entities would invest $A56 million into Australasian through a share and option subscription agreement, with attaching options to raise a further $42 million on exercise.

Chinese state-owned Shougang will also provide total funding for the Balmoral South project, estimated at $US2.1 billion ($A2.6 billion) and will purchase all of the iron ore products from the project.

Shougang will hold a 12.8% stake in Australasian after subscribing for 56 million Australasian shares at $1.

Australasian managing director Darren Hedley said the placement had been made as part of a strategic alliance between the Shougang group and Australasian.

"There is a clear business case why this match has every reason to be very lucrative for all parties," he said.

"When a company with the reputation, iron ore know-how and asset backing as Shougang has, injects $56 million into the company, including an option for a further $42 million at a premium price, it sends a clear message to the investing public that this asset and the company is going places."

Australasian's Balmoral South project comprises rights to mine 1 billion tonnes of magnetite iron ore from part of the Susan Palmer deposit within the larger Balmoral deposits.

The current proposed development plan involves the production and export of 5 million tonnes per annum of iron ore concentrate, 5Mtpa of iron ore pellets and approximately 1.5Mtpa of hot briquetted iron.

The company has already delineated a mineral resource at Balmoral in excess of 1.1Bt and announced a JORC-compliant 346Mt ore reserve estimate.

Shougang entities will also have the right to appoint two members to the board of Australasian's subsidiary International Minerals while Australasian will appoint four members to the board.

Shougang, through its entities, imports over 20Mt of iron ore into China for use in their steelmaking facilities.

The Chinese steelmaker is currently in the process of developing a substantial new integrated steelmaking facility on a site at Tangshan on the northern coast of China with production of 10Mt of steel a year commencing 2010.

Last year, Australasian announced a deal with Clive Palmer's Mineralogy over the Balmoral South magnetite project, which delivered Palmer around 80% of Australasia's issued capital.

MiningNews.net was unable to speak to a representative at Australasian prior to publication.

Update on Australasian Resources

Primer on my investment outlook

Iron ore hopeful Australasian Resources Ltd appears to have secured a major breakthrough on its plans to develop its giant Pilbara iron ore project after negotiating a funding deal with Chinese steel giant Shougang Corporation.

Shougang will invest $56 million into Australasian and has also agreed to fund the US$2.1 billion (A$2.6 billion) cost of its Balmoral South iron ore project by providing an interest-free loan.

Australasian said the interest-free loan will be repayable only out of set percentages of the project's free cash flow.

Shougang, which has a 19 per cent stake in Mid West iron ore producer Mount Gibson Iron, will emerge with a 12.8 per cent stake in Australasian after subscribing for 56 million shares at $1 each.

It will also receive 28 million free attaching options which, if exercised, would pump an additional $42 million into Australasian's coffers.

Queensland mining identity Clive Palmer emerged with a 77 per cent stake in Australasian last year after agreeing to sell the company the rights to mine part of his massive deposits.

The deal followed Mr Palmer's $US285 million transaction with Hong Kong group CITIC Pacific, which bought the rights to mine one billion tonnes of ore at nearby Balmoral.

CITIC is due to pay another $US200 million to earn the rights to mine another one billion tonnes in July.

Shares in Australasian, formerly Sherlock Bay Nickel, have been locked in a trading halt since December 14 pending a financing deal for the South Balmoral project.

Australasian revealed today that entities related to Shougang will have the right to appoint two members to the board of Australasian's wholly owned subsidiary International Minerals while Australasian will appoint four members to the board.

IM holds the interests in the iron ore project.

Australasian said that it would spend up to 15 months undertaking studies on the project, including developing a construction proposal.

A problem of liquidity

Primer on my investment outlook

Just something that I have thinking of for the past few days. Everywhere liquidity seems to be drying up. A stock I owned, just a small percent of my holdings is defaulting on its convertibles. Another mining company has been suspended from trading as it has no working capital recently. It looks like the risk aversion that characterized the last boom is going away. I am personally looking for an exit for most of my risky positions.
Lets see how this plays out. Just get the feeling that this crash will be sudden and unexpected.

A 3 MONTH trading halt - unbelievable

Primer on my investment outlook

Australasian calls for patience

Tuesday, 20 February 2007 Paul Garvey WITH the trading halt of magnetite hopeful Australasian Resources now entering its third month, the company's managing director has called on his shareholders to remain patient as the company looks to secure financing. Australasian Resources managing director Darren Hedley Australasian Resources managing director Darren Hedley overseeing drilling at the Balmoral Southern Block magnetite deposit in the Pilbara Drilling at Australasian Resources Blamoral Southern Block magnetite deposit in the Pilbara Australasian, which last year announced a deal with Clive Palmer's private group Mineralogy over the Balmoral South magnetite project in the Pilbara region of Western Australia, has been in a trading halt since mid-December. As the deal delivers Palmer around 80% of Australasian's issued capital, the transaction is effectively a reverse takeover and the company is required to have at least 12 months worth of working capital before it can be re-admitted to trading on the Australian Stock Exchange. However, Australasian is hoping to secure sufficient capital that will help fund the long-term development of the project. Australasian managing director Darren Hedley told MiningNews.net that among the options being negotiated were deals that would cover the construction and development of the project by a third party, similar to the deal secured by Palmer over the George Palmer deposit. Hong Kong-listed, Chinese-backed CITIC Pacific paid Palmer $290 million for the right to mine 1 billion tonnes of ore from George Palmer, with CITIC currently pressing ahead with the development of the deposit. In addition, Hedley said Australasian was discussing a number of short-term financing options that would see the company raise sufficient working capital to allow the company's shares to resume trading. Hedley said he understood why some shareholders would be frustrated by the trading halt, but the company was committed to getting the long-term financing deal right. "This is a 25-year, multi-billion dollar project, so taking a few extra weeks at this early stage to ensure we get it right is sensible," he said. Yesterday, Australasian announced it had taken the resource base at Balmoral South well past the 1Bt mark, with the 1.1Bt of magnetite ore split roughly 50:50 between the indicated and inferred categories. Previously, the resource at the project totalled 958t magnetite ore. Hedley said the company had been converting the inferred resources to indicated status at around a 90% conversion rate, with the current indicated resources alone sufficient to justify a 15-year mine life. "We're pretty close to having all the ore we need to find," Hedley said. Click here to read the rest of today's news stories.

Latest Update

Primer on my investment outlook

Well. I've pretty much got the same constituents from a few months ago, and am waiting for an opportunity to exit most of my positions. The US housing market seems to be collapsing, and I think it will set off a chain reaction. US consumers will retrench causing a reduction in demand. Chinese factories satiating US demand will do bankrupt and the bull market in commodities will, at least temporarily collapse.
SHN (Sherlock Bay Nickel) changed its name to ARH (Australasian Resources). A year ago, this company was flirting with banruptcy. Here is an excerpt from a recent article..


PERTH-based Australasian Resources has received the preliminary backing of China Metallurgical Construction Corp (MCC) to develop its Balmoral South iron ore project in the Pilbara region of Western Australia.

Australasian Resources managing director Darren Hedley and MCC president Shen Heting signing the MOU in Beijing this week

Managing director Darren Hedley inked the deal in Beijing earlier this week where he was joined by Mineralogy chairman Professor Clive Palmer, whose company has signed a deal with Chinese group CITIC Pacific for the sale of up to 6 billion tonnes of magnetite ore adjacent to the Balmoral South deposit.

Under the terms of the non-binding memorandum of understanding, which is subject to board approval within 30 days, MCC will play a pivotal role in financing and offtake agreements for the project.

MCC, China's leading state-owned construction company with assets of $US4.35 billion ($A5.79 billion), will provide a commercial proposal for the construction of the project where Promet Engineers have previously completed an engineering study. The study indicated a cost of $2.1 billion for a 12 million tonne per annum magnetite concentrator, a 7Mtpa pellet plant and 1.45Mtpa Mindrex hot briquetted iron/direct reduced iron (HBI/DRI) plant.

MCC has also agreed to take an equity investment in Australasian, with the financial details yet to be agreed.

Reading Material on Commodities

Primer on my investment outlook

Karan, a longtime reader, inquired about reading material for investors. There are a number of free resources I use.
www.mcdep.com - a newsletter for energy investors :-) always bullish, but interesting
www.fullermoney.com - Free daily commentary from the UK
- Insightful commentary from John Hussman
http://abnormalreturns.wordpress.com - A forecast free blog that compiles news
http://calculatedrisk.blogspot.com
http://globaleconomicanalysis.blogspot.com
- convertibles notes on the ASX.
- Jyske Bank Intl Bond analysis - especially of emerging markets and interesting markets like Iceland.