improving, page-29

A number of stocks within the portfolio have had a great month and I'm sure that a lot of people are waiting for the NTA to be published at the end of the week. Some will look intently at what the manager has bought, sold and reduced and possibly buy or investigate any new stock that will enter the top 20.

I have followed some of their early purchases turn into wonderful companies ie. Galaxy, Ammtec, Northern Energy and I would just like to highlight a company to the (Hot Copper - CTN holders) that may enter this list for the first time and after some further investigation could actually go much higher.

CTN started buying this stock back in Dec 06. They have sold a couple of small parcels back in April 2007 for the amount of $60k. They continued to hold and buy through the GFC and their latest purchase was in May this year. They are holding 17,263,234 for holders valued at $2.93m as at 31st Oct. This would take it to the 17th-18th largest holding from the last monthly NTA.

The company will be the only miner of the mineral sand Chromite in the U.S. (Oregon), most worldwide supplies are from S.Africa and they are having quality issues. There are other minerals that will be processed with the chromite - zircon, garnet and high iron (think Iluka). The particular area near Coos Bay - Oregon was first mined for the war effort in 1943-44. The grade of Chromite they will produce will be high quality and will be used for castings within foundrys. It will also be used as an additive or substitute for Zircon.

The project was first picked up by Resource Finance Corporation in 1988 and first drilled in 1989. It stalled in the 90's, but then picked up by the IDM team with the help of RFC. The guy who headed this project up in 1989 for RFC is now the CEO of IDM and owns 12%. Much of the management team are former Iluka staff.

Macquarie Bank with Sentinel Group are the financial backers and they came up with the $44m for the plant and are now the biggest shareholders. The project uses proven and robust technology and does not use any chemicals. Its free dig (no blasting) and its nearly at surface. They will separate the resource via a wet mill and a gravity electrostatic separator and all the residual sand is returned to the tenement. A pilot plant was built in 2005 and they've derived all their flow sheet design from this. The project has a current life of 8 years, but a resource upgrade is pending and the company believes it will push this out to 20-30 years, (there are further leases available from the county). Revenue numbers published early this year for Year 1 have it at $43m with an EBITDA of $30m. The company will own the plant and industrial land and some of the initial land tenements. Their is no forward hedging or pricing in place, just firm agreements to purchase the minerals when the project comes online. Most of the resource will be sent to U.S. factories, so the shipping cost savings for customers will be enormous.

Unemployment in the area of Coos Bay is 14.5% and locals seem incredibly positive of the project, all they've had is timber mills shutting down. The employment numbers for the plant will be between 75-100 and the trucking from the tenement is via a contractor. There has been some backlash from a local group and six local residents residing near the tenements, they are worried about the dust and noise. These have been dispelled by local authorities but the group are taking the authority to court (not IDM).

These are the authorities have given the project the green light. Coos County Land Use, Oregon Department of Geology and Mineral Industries (DOGAMI), Oregon Water Resources, Oregon Division of Environmental Quality, Oregon Department of Fish and Wildlife, Oregon Division of State Lands, United States Army Corps of Engineers, National Marine Fisheries Service, Oregon Department of Energy, MSHA (Mine Safety). Only one permit is outstanding, that's a noise related one at the plant (not the tenement) and cannot be signed off until the plant is operational. (Their sifting sand via gravity and water, not crushing rocks).

Here's a couple of interesting points.

Extract from the Iluka quarterly report out last week.
"Iluka achieved a third zircon price increase for 2010, effective from 1 October. Following this increase, Iluka's average received zircon price across the Group in the fourth quarter will be above US$1,000/tonne FOB and approximately 30 per cent higher than zircon prices at the end of 2009."

"Zircon demand from customers has remained in excess of the company's ability to supply, a situation which has led to rationing of volumes across customers and which is expected to continue throughout the fourth quarter"

Rationing to customers? you dont hear that too often. Iluka hit a 5 year last week and has doubled in the last 12 months. 6% of IDM's annual mineral sand production will be Zircon, but its a byproduct to this project. The two biggest near-term Chromite projects in the world are owned by Chromex (S.Africa) and Spider Resources (Canada). Both companies received and accepted takeovers in the last 4 months.

My main point is this:
The project was flagged 22 years ago and its now 11 weeks from full production. We own nearly $3m worth of stock and have held it from 2006 thru the GFC to now. If commissioning tracks well and production has no hiccups, is it unreasonable for this stock to double? First year production only has a PE of 2.8. If it did double it would rocket to number one on this list and by a good margin.

You can see pictures of the Oregon project on the website, the latest picture is on the front of the annual report and the information that you will need to know about Chromite is there too. www.industrialmineralscorp.com.au

Please DYOR.....but if you buy into IDM and it doubles, I will expect a nice bottle of red, plus delivery to Perth.

If you are just happy to hold via CTN, well that's great. But if it does rocket to number 1 we may all need to consign the David Stevens "Voodo Doll's" to the bin.

Pep :)