September 30, 2009Giralia Runs Scoping Studies On Two Iron Ore...

September 30, 2009

Giralia Runs Scoping Studies On Two Iron Ore Projects With A View To Fast Tracking Production.

Charles Wyatt / www.minesite.com

ASX listed Giralia Resources has that indefinable air about it of an efficient, well managed and intelligent operation. The fact that its share price is back where it was a year ago tells you that Mike Joyce and his co-directors did not cower away during the bad times, like some, but kept the profile and the level of activity up and running Admittedly they always had money in the bank as exemplified by the fact that at the beginning of this July there was A$67 million in the kitty. The interesting thing, however, is that brokers have failed to keep up with progress at the company despite a background of deals and good news in the iron ore industry. When Bell Potter wrote about the company in May of this year the share price was A57 cents and analyst Stephen Thomas put up a target price of A67 cents which was a reduction from the previous A$1.02/share.

His caution was based on the fact that no scoping or feasibility studies had been carried out on any of Giralia’s projects and they therefore remained high risk. Fair enough, but when cash accounts for around 34 per cent of current market capitalisation, and when the sale of any one of Giralia’s haematite projects could bring in all that cash, and more, at any time, it looks like Mr Thomas must have still been feeling a little bruised at the time. The point is that Giralia manages its money well, always seeking new sources of revenue; it also chooses its projects with care; and it knows a lot about exploration. In fact its getting close to being the full monty as its chosen product is haematite which is the higher grade form of iron ore. With bulk mineral such as iron ore there are two crucial judgements to be made. First, is the ore of such a consistently high grade that it can be direct shipped to customers, or does it need to be concentrated? Second, as transport is so vital to the profitability of bulk minerals, is it near road or rail?

Let’s start with the finance. Mike Joyce, the chief executive, explains that there was A$67 million in the kitty at the beginning of July, plus the value of the investments where Giralia has significant holdings as a result of spin-offs, and the average burn rate is only around A$1 million per quarter. It has a 10.4 per cent holding in PacMag Metals, a copper company, a 12 per cent stke in Zinc Co Australia, 10.4 per cent in Carpentaria Exploration and 5 per cent in Hazlewood Resources. OK. they all added up to only A$5 million at that time, but they should be worth more now and any of them could come good at a stroke. They certainly put a little sex into Giralia, but the main excitement is clearly in the iron ore projects. Beebyn-Weld Range, for instance, adjoins and is along strike from a major portion of the 149 million tonne JORC resource at Sinosteel Midwest and Sinosteel paid A$1.36 billion for Midwest not that long ago.

Mike Joyce reckons that this works out at a price of around A$9/tonne, but points out that the deal was done when the market was at a high. Even so if we take a price of A$6/tonne for the current JORC resource of 7.2 million tonnes at 57.2% iron Beebyn alone would be worth A$43 million and Mike reckons that the resource can be jacked up to nearer 20 million tonnes. In addition to this there is the nearby Beebynganna Hill project where 7 new zones of haematite outcrop have been discovered in an 11 km strip of banded iron formation. The latest news is that some RC drilling was carried out there recently and the best intersection was 28 metres at 59.1 per cent iron, but more importantly resource extensions were confirmed on the Weld Range. Earlier this year the Western Australian government executed a State Development Agreement for the Oakajee port and rail infrastructure which should take a railway to Beebyn and Beenbynganna Hill.

The 100 per cent owned Western Creek project is another that benefits from its proximity to BHP Billiton’s near surface Silver Knight iron ore deposit which is hosted in the Marra Mamba formation. Western Creek comprises a thick zone of flat lying or shallow dipping iron ore within 50 metres of surface and it is only 15 kms from the Mount Newman mining leases in the Pilbara where there are rail facilities. The current inferred resource amounts to 52.4 million tonnes of direct shipping ore at 56.7% iron and this is another where Mike reckons a significant uplift can be achieved as he has been encouraged by the initial results from helicopter and ground supported surface mapping and rock sampling over additional targets of similar mineralisation.

Lest investors think that Giralia is simply about building a portfolio of saleable iron ore projects he points out that scoping studies are in progress with a view to production at two projects where infrastructure solutions are readily available. The first of these is the 75 per cent owned Mt Webber project which is part of the Daltons joint venture with Haoma. It is only 150 kms south of Port Hedland and around 30 kms from the BHP and Fortescue rail lines. There is plenty of activity in the area as Atlas Iron is carrying out a pre-feasibility study on its Abydos deposit only 25 kms to the north and Fortescue has announced encouraging results from its joint venture with Baosteel on the nearby Glacier Valley magnetite deposit.

Mention of magnetite brings us to the other project undergoing scoping which is the Yerecoin project which is 150 kms north of Perth and only 1 km from a rail line. No resource has been estimated as yet , but drilling earlier this year gave intersections of 72 metres at 32.4% iron and 52.4 metres at 31.6% iron. Magnetite requires concentration but this magnetite is coarse and Davis Tube Recovery work has shown that it can be upgraded to a high quality concentrate. Sure, concentration costs money but the result can be sold for a higher price than direct shipping ore where the rough sums work out as an operating margin of A$15/tonne on ore sold for A$60/tonne. Anyway Mike Joyce recons that this could be fast tracked into production so it will be worth watching.

‘Pregnant with possibilities’ is a fair summation of Giralia and it is worth noting that its portfolios not confined to iron ore. The Lake Frome joint venture in which it has a 25 per cent free carried interest is bang next door to the Beverley uranium mine and its Snake Well gold project covers 45 kms of strike on the Archaean Tallering greenstone belt in the Western Murchison. Giralia has a 100 per cent right to the gold and Zinc Co Australia is earning a 75 per cent interest in other commodities. Then there come other projects in gold, copper, nickel and zinc, any of which could come good. Small wonder the share chart looks healthy as more investors climb on board.