KERRY STOKES'S ambition to become an iron ore magnate like Andrew Forrest and Gina Reinhart takes a leap forward this week with the expected publication of a new resource estimate by his 52 per cent-owned Iron Ore Holdings (IOH).
It seems that control of the Seven Network, West Australian Newspapers and one of the world's biggest franchises for Caterpillar mining and industrial equipment is not enough for Stokes. It is already known that IOH's Iron Valley discovery in the central Pilbara region of Western Australia is one of the best by a junior company in recent times, with an 88 million tonne resource already in the bag.
The question has been just how big Iron Valley can get. The tip last week was that it would not surprise if an updated resource estimate for IOH comes in at over 100 million tonnes of direct shipping iron ore (DSO), with more to come with additional exploration. It was that type of expectation that was behind IOH's 4c a share, or 5.4 per cent, gain on Friday to 77c.
Little wonder there, given that the size of the deposit at Iron Valley is such that IOH can ponder having the project in production from the second half of 2012 at an annual rate of 5 million to 10 million tonnes, worth $380 million to $770 million at current prices.
Helping the stock has been the progress at the group's "starter" project in the Pilbara, the smaller Phil's Creek DSO project. The plan to get it into production as a 1.5 million tonnes-a-year producer by mid-2010 has been going smoothly.
First there was the mine gate sales agreement with Rio Tinto. and then the land access agreement with the Innawonga and Bunjima people. Taken together, the agreements mean that unlike most other iron ore juniors, IOH will be able to get its iron ore to market.
Rosy outlook at Forte
Forte Energy this week expects the release of a maiden resource estimate from Forte (FTE) for its Firawa uranium project in Guinea, West Africa.
The market was getting excited before the release, pushing the ASX and London-listed Forte shares 2.5c, or 18 per cent, higher on Friday to 16c, with London investors said to be particularly keen on Firawa's potential.
No one will be surprised if the maiden resource estimate is about 10 million pounds of uranium. That would be a good start, given uranium continues to look rock solid at $US54 a pound in the spot market and higher in the important contract market.
The interest will be in what Forte and its consultants see as the upside from here. Again, it is on that point that London punters are said to be keen. Along with North American punters, they recently backed Forte's ambitions in African uranium by taking up stock in the group's $10 million placement at 10c a share.
The world's biggest nuclear power group, Areva, is already on board. It holds 12.6 per cent of Forte and has struck a strategic exploration alliance with the Perth-based junior in Mauritania.
Under that agreement, Forte has access to Areva's exploration database in Mauritania, notably the Bir En Nar project. A development joint venture will be formed between the pair should 60-80 million pounds of uranium resources be outlined within the next two years.
Golden message
Because every ounce of gold ever produced still exists, there is no need to panic just yet that the world gold mining industry is struggling to discover enough of the metal to offset the annual depletion of mine reserves.
But it has got to make you wonder just how far gold prices will need to rise to encourage the global exploration effort needed to find the next generation of big mines it is going to take to halt the annual drain on global mine reserves. All that hit home in a presentation by the head of exploration for Gold Fields, Tommy McKeith, at a conference in London (http://tinyurl.com/mj6e4l ).
Known for his time as chief executive at Troy Resources, McKeith's wake-up call was prepared with input from Richard Schodde, a former guru of BHP Billiton and WMC Resources, now the principal of the Melbourne-based MinEx Consulting.
Gold bulls will love some of the key messages from their work:
Notwithstanding the massive boost in exploration since 1980, the industry is finding fewer deposits.
The current rate of discovery is about 100 to 120 million ounces a year. Given that not all discoveries turn into mines (at best 75 per cent),and that we don't get 100 per cent recovery of the gold anyway, the industry struggles to replace the ounces it mines (about 75 million ounces), let alone grow the economic resource base.
Average discovery costs are now more than $US50 an ounce, up from $US10 an ounce (in 2008 dollars) 25 years ago.
Average head grades have halved in the past 25 years, in part due to innovations in mining technology (with a shift to open pit and heap leach mining). Most of the bigger greenfield discoveries are outside Australia, Canada and the US. In the past decade 70 per cent of the ounces have been found in high-risk countries.
And while the juniors may not like to hear it in a Garimpeiro column, the big miners do a better job at discovery than the juniors (costing $US33 an ounce, versus $US80 an ounce).
