Speculating Excavation: Iron Ore In Labrador & Quebec

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Date posted: 03.25.2010 (5:00 am) | Write a Comment  (1 Comment)

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By The Rat

First of all, I’d like to thank the Intelligent Speculator for allowing for me to write a guest post and be featured on what I consider to be a great personal finance resource.

As you may have noticed from the image, this is not one of those usual threads discussing potential gems within the technology sector. I think the Speculator is doing a terrific job covering a lot of the news and investing opportunities within this field, and I’ll leave him to work his magic in that regard.

As a result, I’ve decided to cover what I consider to be a potentially good company to watch out for in a totally different sector – mining. I’m optimistic that I can be consistent with the intent of this site by highlighting a company that isn’t necessarily making a pile of cash at the moment, but may easily be on its path to excavation, extracting minerals, and making money.

New Millennium Capital Corporation (NML: TSX-V) is presently a small company with a market capitalization of around $146 million. The company is listed on the TSX Venture with a current ask price of about $1.11 per share.

Here’s a snapshot of the company’s 1-year chart, complements of the newly enhanced Globe Investor site:

It was only this past autumn that the stock price was hovering at about $0.52 per share. I vividly remember this because I was seriously considering buying in at that time.

New Millennium is seeking to develop projects in Northern Quebec and Labrador.  The company’s website states, “New Millennium controls the emerging Millennium Iron Range, which holds the world’s largest undeveloped iron ore deposits in the Province of Newfoundland and Labrador and in the Province of Quebec.”

Another interesting piece of information to note is that NML is financially backed by a reputable and large corporation. We’ve all heard of China’s thirst and demand for various commodities as it has experience dramatic economic growth, right? Well, iron ore is no different, and India can be considered by many to be ‘next in line’ to experience dramatic economic growth.

As the company website mentions, “Tata Steel, the world’s sixth largest steel company, owns 19.9% of New Millennium and is the Company’s largest shareholder and strategic partner.”

One of the company’s strategic initiatives involves the Direct Shipping Route (DSO) and the results of this project’s feasibility study have recently been released. Here are some of the highlights from the release issued on February 25, 2010:

Highlights of the DSO Project Feasibility Study:

  • Production assumption of 4 million tonnes per year (“mtpy”) of Sinter

Fines and Super Fines products.

  • Proven and Probable Mineral Reserves of 64.1 million tonnes (“mt”).
  • Variable stripping ratio, from mine to mine, with an average of 1.03

over the life of the mines.

  • Total initial capital cost of US$ 300 million and working capital of

about US$ 13.5 million.

  • Sustaining capital, capital leasing, mine rehabilitation and Goodwood

development at US$ 115 million

  • Internal rate of return (“IRR”) of 29% (unleveraged and before

corporate taxes and mining taxes).

  • Payback of 3 years after the start of commercial production.
  • Direct jobs creation of about 200 at the mine, wash plant and

administrative areas.

  • Anticipated start of commercial production in Q3, 2011, provided that

certain advanced engineering, purchases of equipment and site infrastructure development are made in March, 2010.

Whether you’ve noticed on the Business News Network (BNN), or in the news elsewhere, many analysts seem to think that iron ore prices are poised to increase in 2010 and beyond.

New Millennium has a very large iron ore deposit, and it appears as though they are making the necessary steps in getting the excavator to the ground and begin production.

The overview of the anticipated projects section of the company website highlights the eventual construction of a slurry pipeline, ship loading facilities, and related infrastructure.

From a disclosure perspective, I presently do not own a position in this company; however, I am keeping a close eye on it for investment purposes.

Despite the fact that my investment strategy normally entails investing primarily in companies that pay dividends or income generating investment vehicles, I may make an exception with this company. I believe it is well positioned to experience share price appreciation.

However, with that being said, I am the furthest thing from being a professional so do your own due diligence, research the company more, and decide for yourself.

In the meantime, it’s been a pleasure showcasing a potential ‘diamond in the rough’. I wish you the best of luck with your investment decisions!

[Image Source: http://www.flickr.com/photos/ashakoor/3641135688/] – Many thanks “Ending the Rat Race” for this guest post

More on this topic (What's this?) Read more on Iron Ore Prices at Wikinvest
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1 Comment

  1. avatar

    [...] 4500 shares at $1.13 per share. If you’d like more information about this company, I wrote a guest post for the Intelligent Speculator a while back – feel free to read up.  Total amount of [...]

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