SOURCE: [Metal Investment News] Prices of iron ore forward swaps advanced to $146 this week as investors anticipate Chinese steel mills replenishing stockpiles after the Lunar New Year break.
The markets are pricing in a China restocking boom. Morgan Stanley estimates Chinese infrastructure spending for 2012 to be around $1 trillion. By 2017 it will be $1.8 trillion – an 80% increase.
Sixty percent of total Chinese iron ore consumption is imported, with the bulk of it coming from Australia. The average wage of an Australian miner is $109,000. West African miners typically make less than $4,000.
BHP Billiton (BHP-NYSE), Rio Tinto (RIO-NYSE) and Xstrata (XTA-L) produce most of the world’s iron ore and all have active projects in West Africa.
But the Chinese do not want to be dependent on the “Big Three”. They are currentlyscouring the world for high grade low-cost-assets.
One West African iron ore company that is drilling aggressively, hitting high grade holes, and is only 40 kilometers from a deep sea port is West African Iron Ore (WAI-TSX.V).
WAI has a world-class iron ore asset in Guinea, West Africa with significant growth potential.
Canaccord Genuity Corp has been assisting WAI in identifying a strategic partner in China. The company is in talks with a number of iron ore producers, consumers and investment funds in China.
“Keen interest has been expressed by all of the potential strategic partners,” states CEO Guy Duport, who speaks Chinese, “We are confident that our future financing plans are achievable without imposing undue burden or dilution upon our balance sheet and shareholders.”
January 20, 2012drill results confirm substantial intersections of high grade iron ore near surface and sub-surface mineralisation. The 19 reverse circulation (RC) results exhibited consistency. 18 of the 19 holes had grades between 25.02% and 26.30% Fe203. The 19thhole was 28.52%.
A high recovery beneficiation process can produce a product with a grade of at least 64% Fe from feed with an iron content of 25% Fe2O3.
Transportation costs are deal killers for iron ore projects. Fortesque Metals is spending $2.5 billion to construct a 280 kilometer rail line from its Cloud Break Mine to the nearest port.
WAI’s Sambalama project is located just 40km from the proposed deep-sea port recently announced by the Guinean government.
On January 26, 2012 WAI reported that geological mapping over the northern portion of the Forecariah property has revealed two highly prospective new target areas.
The Company has initiated a more intensive exploration program based on these discoveries.
The new prospects were outlined by geological crews conducting detailed mapping.
The Wondima target is an extensive iron bearing layered prospect, consisting of several zones in excess of 50km2– an area about the size of Manhattan.
Based on results obtained in the field on grab samples, the company has initiated further exploration work on Wondima, including systematic mapping and pit sampling. A follow-up gravity survey is being planned to generate initial drill targets.
The 2nd new target is a magnetite quartzite anomaly which appears to have a strike length of approximately 2km and a width of at least 500m. It is currently being mapped.
WAI’s asset is close enough to build a conveyor belt to the deep sea port. In fact there is a planned railroad going through both WAI’S properties.
The Chinese currently spend $80 billion a year importing iron ore. Guy Duport, the CEO of WAI has a long history of deal making in China.
West Africa is a stable country with new president, Alpha Conde, elected in December 2010. Conde is a business pragmatist committed to economic development.
WAI highlights:
- Iron ore resource potential for the Forécariah permit estimated by SRK Consulting between2.9 to 5.1 billion tonnes @ an average of 36% Fe, for Fe contents ≥ to 25% a concentrate grading >70% Fe can be achieve at Sambalama
- Potential for Direct Shipping Ore (DSO) on the Sambalama prospect
- Early enriched oxides iron cap production possible Q2 2013
- Construction cost to be financed with an Off-Take Agreement with China
- An early production will finance exploration efforts to secure billion tonnes iron ore deposits
- Potential for excellent infrastructure
- Well positioned tenement, less than 40km to the deep sea port of Matakang
- Planned rail road and roads will go through the properties
- First resource report, expected between Q2 2012 and Q4 2012
- CAD$6 million in the bank
- Experienced and veteran management team and board with proven China and Africa track records.
Some analysts predict the Chinese will invest $25 billion in the next five years - and most of that in Africa. With a Chinese speaking CEO and a rapidly expanding resource in West Africa, WAI is a company worth looking at.