story of the month

STORY OF THE MONTH - Shaw River Resources puts manganese in the spotlight

Iron ore, coal and copper are the ‘glamour’ performers of the global bulk resources industry and manganese is much less fashionable, but this does not concern Australian junior Shaw River Resources.
Shaw River knows full well that manganese is a vital component of steel making and knows that this puts it in a promising position with its suite of manganese prospects in the Pilbara region of Western Australia.
Its major focus is the Baramine prospect in East Pilbara. It is 80km from the significant Woodie Woodie deposit and shares the same rock units that host this operating mine. It also has the 701 Mile prospect in the Pilbara’s south-east, the Mt Minnie prospect in West Pilbara and has just gained new exploration licences adjacent to Mt Minnie and at nearby Dingo Creek.
Shaw River’s managing director Vincent Algar says exploration at Baramine has revealed promising mineralization and the company is confident that further work will identify high-grade direct shipping ore (DSO).
“We have had some good hits already and what we have to do now is outline areas of continuity.
“Our primary objective is high-grade DSO. These bodies have eluded us so far but we have only tested 10% of the area so it’s not like we’ve looked very hard.
“The plan is to explore a bit harder and we’ll find the DSO.
“We have looked at mines like Woodie Woodie and we know that generally they have found ore bodies between half a million and two million tonnes around 40% in grade suitable for a DSO operation and what we are intending to find.
“Just to give you an idea, at current prices 1.2 million tonnes @ 40% manganese is $288 million in the ground, before costs.
“It’s a great starting point … and that’s at an ordinary price. There are signs that the price is going to rally which makes the economics even better.”
Shaw River is finishing a geophysics program, which includes EM, gravity and IP surveys and is doing a lot of structural mapping.
An initial drill program earlier this year returned 45 significant manganese intercepts, including 3 metres @ 32.6% manganese and 1 metre @ 38.7% in Area 1, where a 1.5km-long manganese trend was identified with only 350 metres of strike extent tested; and 5 metres @ 24.1%, 3 metres @ 20.2% and 8 metres @ 15.6% in Area 3 where a 660 metre trend has been identified.
Vincent Algar says the company is integrating this information to create a series of drill targets. There will be around 4000 metres of drilling carried out by the end of the year and another 8000 metres by June 2010.
“Those targets will follow-up our previous work as we develop a resource base on what we have already drilled and extend the current occurrences, which will also extend the knowledge of the structure. Some drilling will focus on new targets generated from the geophysics and mapping.
“We are starting to generate a resource inventory as well as working on a number of targets outside the 10% already tested.”
The company hopes to have a resource estimate completed by the end of February 2010. It also aims to continue exploration at other Pilbara tenements.
Vincent Algar says manganese prices directly correlate to steel demand. “Unlike iron ore it’s not purchased prior to steel making, it’s actually towards the end of the steel making process.
“When steel demand picks up as it has in the past few months, the price for manganese and manganese alloy increases.”
He says Chinese demand is important for manganese but not the most important factor. “If the US economy is firing, along with Europe and to some extent Japan, they outweigh the Chinese economy by some magnitude.
“The Chinese are producing for those markets as well. Their domestic demand will increase anyway but they also export a lot and need America to be firing as it is such a massive market.”
All steel production requires manganese. In Australia there are three major mines annually producing more than half a million tonnes – Groote Eyland, Woodie Woodie and Bootu Creek. There are also a few smaller producers with around 50,000-100,000 tonnes.
“The major producers are far too few for what Australia should be producing, given its potential.
“Historically companies haven’t concentrated on exploring for manganese because there have never been great margins and there was no direct steel link.
“Now it is definitely linked to steel and it is not going away. Its usage is increasing and there are other interesting properties, including battery and agriculture uses which are low in volume but high in margin.”
Shaw River’s major shareholders are Atlas Iron with 42.7% and OM Holdings with 12.5%. It was formed as a spin-off from Atlas in December 2006. Vincent Algar says, “We did our original agreements based on a sharing role of their ground for our base metal and gold projects.
“Since the spin-off we have strengthened our corporate relationship with Atlas and our shift towards manganese exploration has given us an extra lift owing to its correlation with iron ore. We are also able to draw on their experience of developing projects in the Pilbara.
“The OM investment is also interesting as they are a manganese producer and have a lot of knowledge of the manganese market, manganese production and resource development.”
He says the Pilbara is a big area and it is important to be close to infrastructure or close to the infrastructure corridors that provide access to the ports otherwise supply lines can be stretched too much. Baramine and 701 Mile are close to a corridor and Mt Minnie is almost right on another corridor.
“We have a healthy cash balance of about $7 million. You can always raise more money but raising too much at too low a price can erode shareholder wealth. Raising it in incremental amounts as the project progresses adds value for shareholders.
“The balance we have puts us in a resilient position to execute an aggressive program over the next 12 months in different projects, not just Baramine.”

For more information contact:
Shaw River Resources
Vincent Algar
Managing director
Phone: +61 8 9226 4455
Fax: +61 8 9226 4255
Email: [email protected] This e-mail address is being protected from spambots. You need JavaScript enabled to view it
Website: www.shawriver.com.au


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