FRS - Ferraus Limited

[jonojpsg]

Much has been said from me about this one lagging the rest of the iron ore sector so I shoud do some figures to support this.

FRS have a Manganese and Gold deposit which are forming up nicely but I will value those at nil for this exercise.Cash $22mill.

316 mill tonne of 50-55% Fe

210 mill tonne of the above is avge 58.5%

All DSO (correct me if I'm wrong)

Shares on issue 210 mill
Options to be converted 7.5mill (that will bring in some cash too)

Total fully diluted 217.5 mill shares
@ 82.5c
Market cap = $179mill
less cash of $20mill
MC = $159mill for iron ore, manganese and gold

So just attributing value to iron ore
$160mill / 316mill tonne
= 50c per tonne of DSO

This has got to be one of the cheapest around at the moment surely.
It is a great position not far from the rail line and BHP's Jimblebar Mine. It has some Asian interest Wah Nam at 19.9% and China Rail at 12.61%.

It is part of the Alliance with Brockman etc etc.

I just don't understand why this is lagging at the moment.
Can someone tell me? Recent drilling not yet in certified resources has been brilliant as usual.

Perhaps the grade is lacking compared to others - 58%+ is fair but the rest would possibly need upgrading?? Not sure - plenty of other DSO IO out there at 60+% which may be making this less attractive? WHo knows, just thoughts...

 

[Sean K]

Just undervalued on a comparative basis I think and should have it's day all else being equal.

 

[YELNATS]

This has got to be one of the cheapest around at the moment surely.
It is a great position not far from the rail line and BHP's Jimblebar Mine. It has some Asian interest Wah Nam at 19.9% and China Rail at 12.61%.

It is part of the Alliance with Brockman etc etc.

I just don't understand why this is lagging at the moment.
Can someone tell me? Recent drilling not yet in certified resources has been brilliant as usual.

Hey Grace, thanks for the analysis.

If I'm permitted to ask, would you like to include an opinion at what you think share price it could/should be trading at, comparing it to say BRM which hit $4.80 today?

 

[basilio]

This has got to be one of the cheapest around at the moment surely.
It is a great position not far from the rail line and BHP's Jimblebar Mine. It has some Asian interest Wah Nam at 19.9% and China Rail at 12.61%.

It is part of the Alliance with Brockman etc etc.

I just don't understand why this is lagging at the moment.
Can someone tell me? Recent drilling not yet in certified resources has been brilliant as usual.

Your analysis has almost always been spot on Grace. I think you are just ahead of the curve.

The question is why havn't the professional analysts also crunched the numbers with the same result?

 

[happytown]

...

FRS have a Manganese and Gold deposit which are forming up nicely but I will value those at nil for this exercise.

noted that you are valuing them at nil

however

re a gold deposit, can you provide details of the jorc resource (only gold project with FRS located sofar was spun out into LSN and FRS hold less than 10% of shares in LSN - 1.5M of 24.9M shares as of FRS' sep qrtly rep)

as to a manganese deposit, can you provide details of the jorc resource

from their 2009 ann rep they indicated intersections at Enachedong were uneconomical and since then they have only gotten rock chip samples (up to 57.6% Mn) - observations of Mn explorers show good rock chip samples rarely equate to hi-grade drill intersections (ie 40% + for Mn)

initial search cannot locate jorc resources, ie deposits for Au and Mn for FRS, and as mentioned above the Au was spun-off into LSN, can you assist in providing details of the jorc resources for these deposits you mentioned

 

[happytown]

wah nam is on the hunt

subsequent to their t/o offer for brm this morning they have just launched a t/o offer for frs

6 wah nam shares for every frs share (they are offering brm 30 wah nam shares per brm share)

 

[adobee]

the annoucement states this is equivalent to $1.30
with this in mind why are people selling at $1.05

 

[YELNATS]

the annoucement states this is equivalent to $1.30
with this in mind why are people selling at $1.05

For the same reason BRM is currently selling at $5.70 or less when the Wah Nam offer is valued at $6.47.

"A bird in the hand...."

 

[Sean K]

Wah Nam might have come off a bit, thus reducing the value of the initial offer. Just a guess.

Was only a matter of time before these got snapped up.

 

[YELNATS]

Wah Nam might have come off a bit, thus reducing the value of the initial offer. Just a guess.

Was only a matter of time before these got snapped up.

You would think so, but Wah Nam are currently up more than 12% today in Hong Kong, thus now valuing their offer at $1.46 for FRS and $7.29 for BRM, using the 7.82 exchange rate quoted in Wah Nam's offer letter.

 

[grace]

noted that you are valuing them at nil

however

re a gold deposit, can you provide details of the jorc resource (only gold project with FRS located sofar was spun out into LSN and FRS hold less than 10% of shares in LSN - 1.5M of 24.9M shares as of FRS' sep qrtly rep)

as to a manganese deposit, can you provide details of the jorc resource

from their 2009 ann rep they indicated intersections at Enachedong were uneconomical and since then they have only gotten rock chip samples (up to 57.6% Mn) - observations of Mn explorers show good rock chip samples rarely equate to hi-grade drill intersections (ie 40% + for Mn)

initial search cannot locate jorc resources, ie deposits for Au and Mn for FRS, and as mentioned above the Au was spun-off into LSN, can you assist in providing details of the jorc resources for these deposits you mentioned

Yes happytown, no jorc yet. Sorry, my focus was on the iron ore and thus I put no value on anything else as I didn't have time to scrutinise.

Can't believe I was only thinking to myself yesterday how I should buy more of those. Might still.

 

[JTLP]

You would think so, but Wah Nam are currently up more than 12% today in Hong Kong, thus now valuing their offer at $1.46 for FRS and $7.29 for BRM, using the 7.82 exchange rate quoted in Wah Nam's offer letter.

They're not getting valued at those prices because who wants shares in Wah Nam? It's just a scrip bid - if they offered cash it would be at or above those prices.

 

[grace]

They're not getting valued at those prices because who wants shares in Wah Nam? It's just a scrip bid - if they offered cash it would be at or above those prices.

Wah Nam will co list on the ASX if bid is successful per the fine print. Who are Wah Nam? I don't know much about them. I agree that they will be able to raise money better than over here. However, it is a low ball offer to get some good quality ore. I wonder if someone else might be interested? BHP have a few $$ up their sleeve. FRS and BRM are well positioned next to their own rail lines. There is certainly some scope for BHP to be interested. They did take out UMC as I recall. Let's see what the next week brings.

 

[shinobi346]

They're not getting valued at those prices because who wants shares in Wah Nam? It's just a scrip bid - if they offered cash it would be at or above those prices.

Agreed. I'd rather take the money thanks than take shares in a foreign company I dont know. They may be thinking too that the US$ is gonna drop more/AUD rise more so they thought they better jump in now before it gets expensiver.

 

[prawn_86]

I highly doubt BHP will make a bid. They are too big a company to be able to do a quick analysis and launch a counter offer. Look at all the due diligence etc that has gone into their other attempts.

 

[grace]

I highly doubt BHP will make a bid. They are too big a company to be able to do a quick analysis and launch a counter offer. Look at all the due diligence etc that has gone into their other attempts.

Sorry prawn, I'm going to have to disagree with you here. It is BHP's job to watch all share movements in any iron or junior in the Pilbara.

BHP kept China Rail out on UMC last time. Link below. Every chance they will do anything they can again to keep the Asian interest out.

http://news.ninemsn.com.au/article.aspx?id=876712

 

[basilio]

Sorry prawn, I'm going to have to disagree with you here. It is BHP's job to watch all share movements in any iron or junior in the Pilbara.

BHP kept China Rail out on UMC last time. Link below. Every chance they will do anything they can again to keep the Asian interest out. Grace

BHP's interest is in keeping as much control of iron ore sales as possible. In effect a monopoly. Buying out other potential suppliers or restricting their capacity to reach the marketplace will be part of their strategy to keep up prices and volume.

Can't see them letting Wah Nam get away with this proposal lightly.

 

[adobee]

Wah Nam seems to be a limo company going into mining ..
They will need cap raising to pay for the take over ..
Majorority of there other money is in shares in these companies already..
I dont think it will happen.. but it may have made there current holdings worth a bit more..

 

[grace]

About time the Directors got that PFS and resource upgrade out. I can't see shareholders agreeing to this takeover offer at all. There is some value in that iron in the ground.

• PFS confirms Project is financially robust and technically viable
● Key estimates from the PFS are:
● NPV8 Range from A$1,120 to A$1,340 million
● IRR Range from 24 to 26 per cent
● Significant opportunities to further enhance value
● Board approves commencement of Definitive Feasibility Study

The PFS is based upon the following key parameters:
- life of mine production was assessed to be 227Mt (wet);
- the final product grade is approximately 59% Fe, 2.3% Al2O3, 4% SiO2, 0.09% P,
8.3% LOI;
- product specification is comparable to Fortescue Metals Group Rocket Fines and
Rio Tinto Iron Ore Pilbara Blend fines;

● Maiden Iron Ore Reserve of 126 million tonnes
● 23% increase in + 55% Fe Mirrin Mirrin resource; now 37.9 Mt
● Current Resource Total = 328.7 Mt Corporate Objective = 400 Mt

And on the transport front...

FerrAus Limited advises that it has today requested BHP Billiton Iron Ore, which is
representing the Mount Newman Participants (BHP Billiton Minerals Pty Ltd, Mitsui-Itochu
Iron Pty Ltd and ITOCHU Minerals & Energy of Australia Pty Ltd) to agree by 5pm WST,
Tuesday 16 November 2010, to the appointment of Professor Allan Fels AO as the
independent expert to determine the final terms and conditions of a binding rail haulage
agreement for the carriage of FerrAus’ iron ore on the Mount Newman railway system.

 

[mr. jeff]

Hello all FRS followers,

anyone been watching the chart lately? Looks like a picture book triangle at the moment, any Technical people out there who might have a clue which way it will break?! I guess it will depend on whether there is further news flow, but interested in any opinions...