Iron Ore upside potential..... Is it possible for an junior's iron ore stock to run from
.40/share to $7.00 in just over a year......four years from full production?
Is it possible for an junior's iron ore stock to run from
.40/share to $14.00 in just over 2 years......and still three years from full production?
I "guarantee" it has happened!
All hope was lost just before this great run, when it fell from $6.00 to this
.40 level....over a one year period.
I am speaking of a Canadian junior, that worked diligently in 2009 and 2010, towards a start up iron ore mining operation, that came into initial production in 2011. But here is the interesting part, that first year output target was only expected to be 1 million tons/annum. [64% Fe]. Now, they did fall a little short of their target at 0.75 million tons, but they are now working hard to hit their second year target of 2 million tons/annum for 2012, and 3 or 4 million tons in 2013. Their "peak" production target is 6 million tons/annum in 2015.
The iron product they produce is iron fines and lump. Lump commands a slight premium to concentrate, but fines garners a little less than concentrate. And their production breakdown is 25% lump to 75% fines......all with a selling iron content of about 64%.
Now, this is a Direct Shipping Ore [DSO] mining operation, but they do have to perform a [wet] washing process to raise the 'in-ground' iron content from 56% - 58% to the selling product of 62% - 64% iron content. Usually, DSO mining operations have a very low OPEX of somewhere around $20 - $30 ton. But in this particular case they chose to sub out their mining operation to reduce their CAPEX.....of which they were quite successful.....but coupled with the wet processing facility, they were only able to achieve a $50/ton OPEX, having originally targeting $45/ton. Transportation costs are obviously a large percentage of this figure, for they are 500 kms from a shipping port.
This is very much a success story, for it is absolutely amazing that a
.40/share junior with an initial production rate of only 1 million tons/yr, $50/ton operating costs, average shipping grade of 63% Fe.....could garner a peak Market Cap of $800 million in such a short order.
And did I mention, that this is not a 12 month/year operation......but eight months only??
And did I mention, that they only have a compliant resource of only 39.5 million tons, and 115 million tons of historical ore??
I speak of Labrador Iron Mines [LIM.T]