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For those who weren’t lucky enough to be in on Monday’s 30 per cent share price rerating of Sundance Resources, it may be worthwhile to consider the prospects of Western Desert Resources.

Like Sundance, Western Desert is an emerging iron ore producer with near-term profitability, but carries less sovereign risk than its counterpart, given its operations are in the Northern Territory rather than Africa.

An earnings upgrades just released by Commonwealth Bank of Australia add further weight to Western Desert’s potential and near-term earnings visibility.

While Western Desert’s shares have traded solidly for the best part of the last 12 months, they are currently sitting at the mid-point of their trading range. CBA has an overweight recommendation on the stock with a 12 month price target of $1.05, representing a premium of nearly 50 per cent to yesterday’s closing price of 73.5 cents.

CBA analysts said they had just visited the Roper Bar iron ore project where management is working towards a first ship arrival date of November 24. They said ‘first production and cash flow should be a key positive catalyst for this undervalued and lightly covered stock’.

By 2014-15, production should be 3 million tonnes per annum, which CBA estimates will generate earnings before interest, tax, depreciation and amortisation of about $150 million. It said that initial grades will be around 60 per cent, making Roper Bar some of the highest grade ore being produced in Australia.

CBA forecasts a maiden profit of $32.6 million in 2013-14, and it has increased earnings per share forecasts for that period by 12 per cent from 6.8 cents to 7.6 cents. This places the company on a price-earnings multiple of about 10. However, there is a substantial kick in earnings in 2014-15 with forecast net profit of $90.3 million representing earnings per share of 18.3 cents. This indicates that the company is trading on a forward price-earnings multiple of 4.

In comparison with Sundance Resources, Western Desert Resources moves to profitability much quicker, earnings visibility is better, infrastructure is complete and the sovereign risk that comes with operating in the Republic of Cameroon and the neighbouring Republic of Congo is not an issue.