West African Iron Ore Mining Weekly Coverage; Added Shares to Portfolio
October 10, 2012 by Gold Editor
SOURCE:[Growth Stocks Investor] - Editor’s comments: Below is an article from Mining Weekly that provides excellent perspective for those of us who have continued to position into the area’s development as an exceptional low-cost iron ore source.
West Africa has been emerging as a preferred region for iron ore producers, attracted by high margins based on lower operating costs. The region is “likely to become a meaningful source of supply over the next 10 years, with Guinea potentially the third-biggest provider of seaborne iron ore by 2016” according to a recent analyst report we discussed back in August.
WAI has been rapidly growing its iron ore resources in Guinea, West Africa. They have a very talented management group, clear business plan, and a savvy team of financial backers and strategists. Excellent existing infrastructure is being enhanced with Chinese-funded development, expected to exceed $25B over the next 5 years.
WAI holds a 1050Km2 prospecting permit seating on the Atlantic Ocean in the Republic of Guinea. Early production is targeted for H1 2015. The plan is to attract construction cost financing through an Off-Take Agreement, Off-Take for 50% of the production over 5 years at 95% of market price already negotiated with China International Fund. Initial annual production of ~4mt could grow to ~10mt annually in H1 2015.
Recent research provided an objective comparison of WAI to 10 other iron ore companies, comparing Enterprise Value ($mm) and Resource (Fe in MT) through their EV/Resource ratio. WAI’s resource ratio was $0.13 versus the average ratio of $0.52 per tonne, rating WAI undervalued and a buy, with a fair value estimate of $0.46 per share.
The company’s insiders control over 80 million shares, which represents almost half of the issued shares outstanding. This is a highly motivated and market-savvy group that has a history of creative wealth generation and value-accretive deal making.
The GSI Model Portfolio’s exposure to iron ore consists of 4 million shares of West African Iron Ore (WAI-TSXV) at an average cost of $0.1065/share, including 214,500 shares bought at $0.045 since our last update on Aug 31st. The company recently signed a binding LOI for a $30-million facility with China International Fund (CIF). WAI’s debut occurred in April 2011 as a Frank Giustra shell, completing a $12.6-million funding at $0.28.