(MENAFN- ProactiveInvestors - Australia) Shree Minerals (ASX: SHH) is continuing its climb, hitting an intra-day high of $0.20 â€" a 43% rise from last night's close of $0.14 â€" following Tuesday's final approval for its Nelson Bay River Iron Project (NBR) in north-west Tasmania.
The Federal Government approval for mining to start immediately at the project, caps the progress that the company has made to bring the project to production.
These include:
- Port Access: MOU with Grange Resources;
- Offtake Contract: MOU with Large International Trading house;
- Funding: Advanced stage of discussions with Banks for Debt Funding; and
- Mining Contractors/Equipment Suppliers: Advanced stage of discussions.
Extensive and comprehensive assessment was carried out before the approval was granted to confirm that the mine will proceed in accordance with best practice environmental management, including measures to prevent acid drainage, to protect and enhance wildlife habitat and to minimise the risk of road-kill.
Mining Plan
The production schedule for the first two years comprises the mining of DSO iron ore, which requires no further beneficiation to produce a marketable product, and only needs crushing and screening.
Two separate DSO pits are planned in the first two years (comprising DSO South Pit & DSO North Pit which is within the BFO resources).
This is based on the two pits of approximately 815,000 tonnes of DSO ore at a grade of 57.5%.
The company plans to mine the DSO first followed by BFO material, and then the magnetite resource.
Analysis
Proactive Investors had rated Shree as a Speculative Buy with a price target of $0.40 - $0.50 in a Research Report released on 23 October 2012.
With shares in Shree currently at A$0.18, this marks a 38.5% rise from the price of A$0.13 prior to the release of the report and highlights the attractiveness of NBR.
The NBR project will be profitable at current iron ore prices despite smaller size (v typical iron ore projects).
NBR will have accessible good infrastructure and availability of experienced labour force.
Some investors may still have missed that Shree has the potential to earn $16 million to $18 million over two and a half years with little CAPEX and be highly profitable at current iron ore prices.
Against a Market Cap. of around $19 million, this places Shree at a significant discount to its intrinsic earnings valuation.
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