With India today signifying it may become a net importer of iron ore because of new projects stalling and steel demand growing this is good news for iron ore developers such as Legacy.

The Inferred Resource is now 1.6 billion tonnes at 30.2% iron (25% iron cutoff), with Legacy Iron soon to start work on increasing the confidence categories of the resource.

Although classed as an Inferred Resource, drilling to date has shown the mineralised body to have exceptional continuity both along the 10 kilometre of strike and down dip.

Sharon Heng, managing director of Legacy, commented on the positive outcome:

“This significant JORC resource increase provides further confirmation of Mt Bevan as a genuinely premier magnetite orebody with outstanding potential for extremely attractive project financials which are further enhanced by NMDC’s confirmed support.

"We continue to move forwards to defining a commercially viable resource.”

Mt Bevan is a joint venture between Legacy and Hawthorn Resources (ASX: HAW) whereby Legacy will earn a 60% interest in the project by expending a minimum of $3.5 million to develop the project to a Pre-Feasibility status.


Confidence category boost drilling underway

Legacy Iron remains extremely active at the project and later in the month will commence the phase three 7000 metre drilling campaign, which is targeted at upgrading the resource to the Indicated category.

So far drilling at the project has been conservative to only 300 metres, with the mineralisation remaining open - providing the opportunity for extensions to the strike being made.


Davis Tube Recovery

To date, extensive Davis Tube Recovery testing of mineralisation from phase two has produced very similar results to that of previous drilling.

Using a relatively coarse grind size of P80/50 – 55 microns, testing shows achievable grades of 69% to 70% iron and with high weight recoveries of around 45%. Silica contents at this relatively coarse grind remain low, averaging 3% to 4% with very low sulphur and phosphorus.

The miner said it expects to get a premium price for the 49,656 wet metric tonnes of Marampa iron ore concentrate, which it added is now en route for Europe.

A second ship has been ordered for February destined for China while trading giant Glencore (LON:GLEN) has requested a third ship. Glencore has an offtake agreement with for output from the Sierra Leone-based iron ore mine.

London Mining said that the "Pride of Marampa" transhipment vessel is also expected in Freetown in March, which will enable it to load Panamax and Capesize vessels.

Marampa has produced 93,000dmt of concentrate since production commenced in December 2011, of which 75,000dmt was achieved in January 2012.

The miner said the ramp up of the plant continues with the average daily run rate of 2,500dmt/d (with a maximum rate of 3,800dmt/d) exceeding the target set for January.

The current production target of 1.5Mt in 2012 assumes an average daily production rate of 3,200dmt/d in February increasing to 4,100dmt/d in March.

In Colombia, London is focusing on completing the oven build out, ramping up production, optimising product specification and commencing transport of coke by road to Barranquilla where port capacity has been secured for 200ktpa of exports.

London has a target production run rate of 200ktpa by September from Colombia.

Graeme Hossie, chief executive, said: “January 2012 has been a landmark month for London Mining. We have commenced exports from our operation in Sierra Leone and production from our operation in Colombia.  We are focused on producing 1.5Mt at Marampa in 2012 and are encouraged by the Marampa product specification which allows us to capture a significant grade related pricing premium."

Today the company confirmed that over 99.9 per cent shareholders voted in favour of the proposed sale. The deal is now expected to close at the end of February.

"Today's overwhelming shareholder support for divesting Putu completes the restructuring of the company, which is now 100 per cent focussed on Cameroon and fully funded through to definitive feasibility study (DFS) at Nkout,” said chief executive Luis da Silva.

“This is an excellent position for the company and its shareholders and with the significantly strengthened balance sheet, we can now accelerate and leverage on our strategically well-placed assets and be a significant participant in a new producing iron ore region."

In December Afferro agreed to sell the stake to a subsidiary of Russian mining firm Severstal. 

The significant cash injection will be a boost for the future development of the firm’s wholly-owned assets. Specifically it gives Afferro the opportunity to accelerate the development of the Nkout mine development project. 

Last month Afferro said it was aiming to complete a preliminary economic assessment of Nkout in the first quarter of 2012, and a pre-feasibility study is expected to follow later this year.

Nkout hosts an estimated 2 billion tonnes of iron ore, with a grade of 32 per cent and 18.5 million tonnes at 60.3 per cent with direct shipping ore (DSO) potential. 

As a result of the Putu deal all this work is now fully-funded. So Afferro doesn’t need to tap investors for any more cash in the foreseeable future.

However a farm-out deal may be sought to bring in a development partner at some point in the future.

Analysis

With this announcement, Legacy is looking beyond the development of Mt Bevan, itself a sizeable undertaking.  However, with the backing of India's NMDC, has propelled Legacy into a new league as well as value adding for Legacy holders.

It is acquiring two groups of tenements, known as Jotanooka and Dragon Rocks,  in Western Australia and it is also acquiring the Roper River and Hodgson tenements in the Northern Territory.

The firm already had an agreement in principle for the exploration rights on the properties as a result of the Ebony Iron acquisition last summer. But now it has secure full ownership of the tenements.

Strategic Minerals will issue 5 million shares to the current owner, Quadrio Resources, as well as a AU$20,000 cash payment. Quadrio retains the right to explore the properties for phosphate and other related fertiliser minerals.

"Outright ownership of these tenements significantly eases the longer term development path of these highly prospective exploration properties,” said chief executive David Weidemier.

“We see significant opportunities in consolidating iron ore assets in emerging regions of Australia and North America where we can bring the benefits of operational scale to both near term production ready stockpile assets and longer-term exploration assets."

The company says that all of the tenements are highly prospective for iron ore and they are in emerging provinces where significant infrastructure developments are underway. 

The deal is in line with the firm’s strategy of developing a portfolio of projects that provide near term production as well as projects with potential for longer term capital gains, it added.

Jotanooka is found in the mid west region of Western Australia, around 320 kilometres north of Perth. 

It is in a strategic location with existing rail and port infrastructure nearby and further port and rail upgrades are planned. The region already has substantial iron ore resources and, according to Strategic Minerals, this makes the area an attractive target for iron ore companies. 

Dragon Rocks is located around 300 kilometres south east of Perth. The exploration tenement is within 10 kilometres of existing rail infrastructure that provides potential access port access at Albany and Esperance. A number of mine developments are in the area.

The Roper and Hodgson tenements are found in an underexplored area. 

The company has hired Terra Search to review regional geophysics, geology and bore hole information to identify the extent of favourable rock types. This will provide targets that will form part of the 2012 exploration programme.

NMDC, which is the country’s largest iron ore producer, has a $4 billion war chest for acquisitions in bulk commodities.

NMDC is also pursuing acquisition of other mineral assets in Australia to secure future supplies of coking and thermal coal and rock phosphate for India's steel and fertiliser production.

Mt Bevan will be the initial target project of NMDC to expand its resource base.

An memorandum of understanding between NMDC and Minemakers (ASX: MAK) was executed in June 2011 and negotiations concerning a Joint Venture Agreement are in process.

In 2011, NMDC indicated it was likely to use Legacy Iron Ore as its investment vehicle to make acquisitions.

Chief executive Graham Hossie said it will be the first shipment of iron ore from Sierra Leone to Europe for over 30 years.

Production now totals 57,000 tonnes of concentrate at high grades. Some 5,782 tonnes has been loaded on to barges and moved to Port Loko channel before being shipped to Freetown Bay for onward shipping to Europe. The concentrate grades were high at 66.2% Fe.

The group lowered its production target for this year to 1.5Mt, but raised the forecast to 3.5Mt in 2013 and 4.6Mt in 2014. Eventually, production at Marampa could grow to 17Mtpa.

London added recent drilling had also increased the total mineral resource including tailings to an estimated 1,078 Mt, of which 81% was classified as indicated reserves.

This included a 350% increase in highly weathered material from 21Mt to 75Mt and London said this ore meant installing a gravity circuit could increase Phase 1 production capacity by 25% to 5Mtpa.

Capex spending will rise from US$234 million to US$260 million to fund this increased production with up to a further US40-50 million to ease bottlenecks, but the operating costs for production at 5Mtpa will be lower due to better economies of scale. 

A first bankable feasibility study to assess the mine’s initial expansion is now expected at the end of the second quarter of 2012.

This will now consider a low cost expansion of Phase 1 to 9Mtpa. A second bankable feasibility study will consider further expansion to 17Mtpa.

Graeme Hossie, chief executive said: "The availability of a further 54Mt of highly weathered material along with testwork supporting the use of a gravity circuit represents a significant breakthrough in production potential at Marampa with full initial production from Phase 1 now expected to total up to 5Mtpa.” 

“The bankable feasibility study for Marampa will now consider an additional expansion of the reconfigured Phase 1 plant to 9Mtpa utilising existing infrastructure with the addition of new crushing, grinding and gravity separation circuits to the processing plant."

Broker Fairfax said that London Mining's revised production schedule – reducing their output by 0.5Mtpa –will impact cash flows early on but as the company is planning to increase capacity by 2014 it should not materially affect the net present value.

The Canadian mining firm revealed that 1.2 million tonnes of iron ore was mined and trucked to the port ahead of processing and shipping, during the period ending December 31 2011.

In June LIM began producing iron ore from the James mine, which forms part of the Schefferville group of mines in northern Canada. The operation is currently considered to be in a pre-production stage comprising start-up and testing operations, it said.

In total, 440,000 tonnes of direct railing ore was produced, at an average grade of 64.9 per cent iron, during the period. Of that, 340,000 tonnes were railed directly to the port of Sept-Iles without further processing.

Around 572,000 tonnes of ore was fed to the Silver Yards plant. This yielded around 232,000 tonnes of lump and sinter fine products.

LIM said that the grade of ore mined in 2011 was higher than the average resource grade.

Furthermore it revealed that nearly 412,000 tonnes were sold, via its agreement with Rio Tinto’s Iron Ore Company of Canada (IOC), into Asian markets.

The iron was sold in three separate shipments – with gross sales prices of US$176, US$121 and US$137 respectively. Each of the shipments was sold in the spot market. And LIM received the gross price less IOC’s charges for handling, loading, shipping and sales costs.

LIM said it continues to review options for marketing iron ore during 2012 and in subsequent years.

It says that it is evaluating the optimum route to achieve these sales, while still maintaining maximum flexibility and independence.

“Marketing discussions are continuing with potential customers, both in Europe and in Asia. The company is also continuing discussions with a number of internationally recognized commodity traders with specialist knowledge of the iron and steel industry,” LIM said 

“The company has not yet concluded any agreements for the sale of any iron ore beyond 2011, but expects to conclude shipping and sale arrangements prior to the start-up of operations (following the winter break) in the spring.”

It also told investors that detailed planning is now underway for the coming year. It expects to mine between 2.5 and 3 million tonnes of iron ore, producing around 2 million tonnes of saleable product – including a 187,000 tonne stockpile that’s already at the port.

Meanwhile it says the Phase 3 expansion of the processing plant is currently under way. Civil construction work is on schedule, with steel erection and commissioning expected by June.

It also continues work on Stage 2 of the Houston project, in which it aims to prepare the deposits for production next year.

Anglesey Mining shares gained 1p, or 3.5 per cent, to trade at 29.5p on the London Stock Exchange this afternoon.

The Ukraine-based group produced 2.6Mtpa or 3.3% more iron pellets in the three months to December. The broker had expected lower output due to the tough winter conditions.

The rate of production was the highest of any quarter over the year, which meant annual pellet production from its own raw materials rose by 0.3% to 9.06 million tonnes.

Ferrexpo makes the pellets used by steel mills. Its resource base is one of the largest iron ore deposits in the world at Poltava in the Ukraine producing approximately 10 million tonnes of iron ore pellets in 2010.

Mine output rose by 5.9% qoq and run–of-mine iron ore in the latest quarter was a record at 7.942Mt indicating improving mining capacity in the operations, the broker said.

The mix between higher and lower grade pellets improved marginally to 47% of 65% grade and 53% of 62% grade and all signs indicate a stable process with steadily optimising capacity. 

“This bodes well in our view for the ramp-up of mine production from next year and the upgrading to the process plant,” said DB.

The higher than expected production has prompted Deutsche to raise its earnings forecast by 1% to US$578m for 2011, with underlying operating profits or EBITDA forecast at US$789m.

Its target price for Ferrexpo shares is 537p, though it added the risks remain the company’s sensitivity to iron ore prices, local currency and inflation.

Cost performance is also a key variable that could impact the earnings performance of the company and specifically for Ferrexpo, the iron ore pricing outcome could lead to significant earnings and valuation changes.

At 298p,the shares trade well below its target price and Deutsche Bank’s investment stance remains “buy”.

Managing director Jim White told Proactive Investors today in real terms it is a relatively small addition, but accumulatively it adds to the total amount of Resources that are now part of the Eyre Peninsula Joint Venture.

The high concentrate grade results were achieved at a relatively coarse grind size of 75μm.

The Greenpatch prospect is located approximately 10 kilometres northwest of Port Lincoln on South Australia’s Eyre Peninsula.

The resource evaluations are being completed by Eyre Iron, the management company of the Eyre Peninsula Joint Venture of which Centrex holds a 40% interest and Wuhan Iron and Steel Co (WISCO) holds the remaining 60%.

Further additions to the total Eyre Iron Resources are expected as exploration targets are drilled out.

White said the 454.4 million tonne Fusion magnetite project remained the joint venture's main focus.

"Our focus is to develop the Fusion area and to keep adding to our Resource base for the total project by drilling out further exploration targets,” he said.


Centrex Deemed Undervalued by Broker

Significant resource upgrades and project advancement since May 2011, a strong board and management, and the ownership of a potential port site have attracted a speculative buy rating for Centrex from a broker.

Centrex, with an EV of A$22 million or $0.06/tonne on an EV/tonne of contained iron basis, is significantly undervalued compared to its peers. The weighted average EV/tonne for explorer/developer peers of Centrex is $0.11/tonne.


Fusion

Significantly, resources at the Fusion project are now close to the critical mass required to support a 5 million tonne per annum magnetite operation.

In early November, Centrex and joint venture partner WISCO selected the Fusion project just west of Tumby Bay as its preferred mining project for first development.

Fusion is among a suite of advanced exploration assets under drilling and assessment by the joint venture partners across southern Eyre Peninsula.

Importantly, the project is located just 40 kilometres from the proposed Port Spencer deep water export facility that Centrex is also developing, with transport from mine to port to occur via a low impact slurry pipeline.

In particular, the three adjacent magnetite prospects of Koppio, Brennand and Kapperna have been selected as the priority location for assessment and are seen as capable of supporting a large-scale, long-life magnetite concentrate operation, as well as the necessary infrastructure.

The fourth deposit, Iron Mount, located on the eastern edge of the Fusion area, could provide ore feed for the project in the longer term.

The joint venture partners are confident of proving up a large enough resource base at Koppio, Brennand and Kapperna to underpin the initial 20 year mine life.

The firm hopes to identify near surface areas of a target called the engine zone.

The wholly owned Parys Mountain project is located on the island of Anglesey. The copper-zinc-lead project has over 7 million tonnes, at over 9% combined metal, in historic resources.

With this current exploration push Anglesey Mining plans to reassess the project. The findings will contribute to a review of the mining and production options available for the White Rock and Engine Zone parts of the project.  

Anglesey Mining is aiming to complete this review in the second quarter of this year.

Last month an induced polarisation (IP) survey was carried out as well as a deep overburden (DOB) survey. The results have now been received and analysed. Anglesey says that this has provided good guidance for the location of holes for the drill programme.

Work is now focused on the first of four holes in the initial stage of drilling. Anglesey Mining says that drilling is progressing satisfactorily. The first hole will be drilled to a target depth of 220-250 metres.

The drill programme is expected last for five to six weeks. A further 8 holes may be drilled after that depending on results.

Previous drilling traced the engine zone upwards to a depth of about 200 metres.

Anglesey says that the engine zone could enhance a potential mining operation at the White Rock, a nearby area of the Parys Mountain project. However it must prove that the engine zone is in these shallower depths in sufficient size.

It added that planning permissions for such a mining operation are still in place.

IronClad has the potential to attract further investment as the company becomes the second smaller mining company to move into production in South Australia.

Commenting on the placement, executive chairman Ian Finch said, “The successful conclusion of this share placement marks another significant milestone in what will be a defining year for the company and its shareholders, and in the development of our Wilcherry Hill asset.”

The share placement follows close on back of the South Australian Government’s recent formal approval for IronClad’s Program for Environmental Protection and Rehabilitation – the final statutory hurdle for the project.

IronClad is close to formalising another offtake agreement for production from the Wilcherry Hill project on South Australia’s Eyre Peninsula.

Finch said negotiations for the additional offtake agreement are expected to be finalised later this week and will involve 50% of all iron ore produced by the IronClad-Trafford Resources joint venture in the first four years of operations.


Iron Ore Production

Maiden production from the mine is due to begin in the current March quarter, with the first shipment of iron ore on track to be exported to Chinese customers in the June quarter.

The first two years of production from Stage One of the Wilcherry Hill project has already been sold to the Chinese steel mills under a comprehensive sales contract and marketing agreement.

First year of production involves 1 million tonnes per annum of direct shipping ore for export to Asia, increasing up to 2 million tonnes per in the second year.

A Feasibility Study for Stage One of the project established that, with an average iron ore price of $140 per tonne free on board (net of freight charges) into China and initial operating costs of around $85 per tonne, the project would provide IronClad with margins of $50 per tonne and an operating cash flow of around $80 million per year at full production during the first stage.

Stage Two involves an increase in production to 5 million tonnes of iron ore concentrate per annum

Broker RBC has started coverage of iron ore producer London Mining (LON:LOND) with an outperform rating and 400p price target. 

The company is currently in the ramp-up of Phase 1 production at the 100%-owned Marampa iron ore mine in Sierra Leone with the first shipment scheduled for January 2012, Initial Phase 1 production should reach nearly 4mt by 2013.

The broker has also included the late 2014E Phase 2a production in its calculations as it says low capex requirements ($659 million) and incremental production of 8mtpa should be nearly self-funding.

The Phase 2a development at Marampa should take London Mining's iron ore production to close to 12mt of iron ore by 2015.

On RBC forecasts, London Mining should be able to start construction on Phase 2a largely using its own cash, with a possible $20 million shortfall met by an offtake agreement. 

RBC’s price target gives potential upside of about 33% from the current share price though longer-term the broker believes London could offer even greater upside if it can achieve stronger pricing realisations than anticipated.

Management being successful in further growing the company via Phase 2b and Phase 2c of Marampa, or even via the Isua and Wadi Sawawin iron ore projects would also lift the value.

Isua in Greenland and Wadi Sawawin in Saudi Arabia are both at much earlier stages of development than Marampa, which accounts for 89% of its estimate for London Mining’s operational asset value.

The firm is also in the process of constructing 60 coke ovens with 200ktpa capacity in the Boyaca region of Colombia, an area with existing coking coal and coke production.