Thursday, 27 June 2013

Zanaga Iron Ore (Zioc:Ln) Update - 27-06-2013

Zanaga Iron Ore

Buy into weakness starting at 11p

Firstly I have to hold my hands up on Zanaga as i offered up a speculative buy at 17p and although my belief in the company has not really changed clearly sentiment towards Zanaga and the small cap listing has. 

Iron ore has retreated somewhat (Although not unexpected) and the merger between Xstrarta and Glencore has left some questions to be asked, This coupled with black rock selling down its position in Zanaga has saturated the positives listed here:

·  Current cash position year end 2012 as announced today is $40m or £26.3m
·  Market Cap  £30m
·  Shares in issue 278.777m
·  72.89% of shares in issue not held in public hands (End Jan 2013)
·  Net assets £144m

2012 Highlights

·    Substantial increase and upgrade in Mineral Resource1
-    57% increase in overall Mineral Resource to 6.8Bt at an average grade of 32.0% Fe
-    74% increase in Measured and Indicated resource category to 4.69Bt with an average grade of 32.5% Fe
·    Maiden Ore Reserve Statement of 2.5Bt at 34% Fe
·    Feasibility Study drilling programme complete
·    Extension of Mining Exploration Licences to August 2014
·    Pipeline PFS successfully completed on schedule with positive results
-    Production of 30 million dry tonnes per annum over 30 year life of mine
-    Slurry pipeline identified as optimal transportation solution - >US$1 billion capital expenditure saving on direct costs compared to rail
-    Premium product of 68% Fe, with low impurities, expected to receive above benchmark pricing
-    Forecast competitive operating costs - in industry bottom quartile
-    Capital expenditure of US$7.4 billion, in line with previous estimates
-    Significant expansion potential

The real question will be when small cap equity markets eventually hit the rock bottom and the cyclical trend changes! where will the clever cash go? It's my honest belief that those with a strong case will be first to see the early bulls through the door.

Iron ore will no doubt become popular again in the coming months as the mills don't stop burning for to long.  Zioc's ore forcast is just about as good as it can get however the final decision on who will take Zanaga on will ultimately come from Glencore-Xstrata.

Meanwhile the background sellers finishing and that has to be better than a poke in the eye...

Lets not forget the PFS cost hundreds of million dollars and are not fag packet equations generated from a shoe string study (as many small caps do).

Hope some of you are bunkering down ready for the magic of the markets.

All the best Doc

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(These are but opinions derived from my own experiences and thoughts and do not adopted as statement of fact)

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