Flano set to fire his first Arrow in battle of Simandou North

The shakedown in lithium and nickel prices, and the pregnant pause in a gold rally pending US interest cuts, means that iron ore’s continued resilience despite all the naysayers is something to behold.

For five or so years now the price of the steelmaking material has been called by all of the lead forecasters to be headed for a retreat to $US80/t on peak steel fears, a rebound in Brazilian production and more recently, China economic growth fears.

But here we are in January and the price is as strong as could be hoped for at $US132.25/t compared costs of production of around $US20/t for the ASX-listed majors BHP, Rio Tinto and Fortescue.

The price is well short of the CY2021 average of $US156/t. But there are no complaints from the big three because the reality is the current price is a licence to print money and is likely to be well ahead of their internal price forecasts.

The share price strength of the big three reflects all that. But if it is amped up leverage to iron ore’s ongoing price strength that investors are seeking, there are some junior explorers worth watching.

There aren’t that many.

There were lots of them during the original China boom when iron ore got to more than $180/t before crashing for a while. Many worked up deposits measured in the hundreds of millions of tonnes in the Pilbara but could not overcome their biggest challenge – securing rail and port infrastructure solutions

One of the companies that did crack the problem was Atlas Iron, now owned by Gina Rinehart’s Hancock Prospecting. Its solution was to truck the ore to port and in its heyday under founder and CEO David Flanagan it went on to become a 10mtpa-plus producer.

As mentioned here in December, Flanagan is back for another crack at building an iron ore business. But not in the relative comfort of the Pilbara. It’s in Guinea, West Africa, with its name – the Simandou North Project – saying all that needs to be said about its location.

The project is 15km along strike from the tenement boundary with Winning Consortium’s 1.88 billion tonne high-grade portion of the Simandou deposit which, in turn, is along strike from Rio Tinto’s 2.88 billion tonne portion.

In what has to be the single biggest investment in a new mining project anywhere in the world, Simandou’s high-grade resource is now being developed for first production at a cost of $A40 billion.

Key to the development is the joint construction of a 675km railway to a new port on the coast, and the government’s 15% stake in the enabling infrastructure, which critically for an explorer like Arrow, is to be of the multi-user type.

It is nation-building stuff. Arrow has previously confirmed an extension of the Simandou banded iron formation host into its ground, with scout drilling returning a 12m hit of 60.1% iron.

Next month Arrow gets busy with a 50-hole drilling program to start to pin down some scale on its side of the fence, with geologist Flanagan due to hop on a plane to Guinea this Saturday after first getting in some Australia Day celebrations with zinc cream, a lamb chop and a beer.

It’s early days but interesting stuff for Arrow with its 0.5c share price and modest $38 million market cap after shares from the group’s current recapitalisation are taken into account.

“If you were fishing for iron ore deposits, this is a great place to put your line in the water,” Flanagan told investors during the week.

“Our tenement is absolutely along strike from the largest undeveloped (and now being developed) iron ore project in the world.”

Uranium:

The uranium price has continued to build on last year’s stunning gains. It is now being quoted at $US106/lb, which is getting close to double the $US60/lb incentive pricing uranium explorers said for years they needed to fire up the sector.

The current price compares with $US48/lb at the start of CY2023, and the $US91/lb closing price for CY2023. There is more to come, according to Shaw and Partners, which has just upgraded its uranium outlook to a come-hither $US150/lb.

The firm is no johnny-com-lately to the uranium space. It has faithfully followed the sector and the ASX-listed players over the years when everyone else considered uranium dead in a post-Fukushima world.

So what it has to say on the where-to-from-here in a recent research report is worth noting.

Shaws noted that the spot uranium price has surged through $US100/lb on the back of supply constraints and renewed global interest in nuclear energy.

“The price rise has been larger and earlier than expected, although at this stage the market remains orderly, and the price increases do not appear to be driven by panic buying,” Shaws said.

“(But) That might change if utilities believe that they will have difficulty covering their fuel demands late this decade.”

Given that outlook, Shaws has materially upgraded its uranium price forecasts, which now peak at $US150/lb in CY 2025/26/27.

That has led to big increases in its price targets for the uranium stocks it follows, the biggest being 180% to 34c for Peninsula (PEN), 122% to 72c for Lotus (LOT) and 95% to $7.04 for Bannerman (BMN).

What can be said with certainty is that such optimism doesn’t exist anywhere in the resources space at the moment.

BHP:

It is as tough as ever for ASX-listed juniors with early-stage exploration projects of merit to get on the radar of investors looking for leveraged exposure to a potential discovery that could excite.

There is a sure-fire way to get on the radar – become a winning applicant to BHP’s Xplor program, where BHP supports a junior’s exploration effort with a grant of up to $US500,000 and access to its technical nous in a six-month program aimed at accelerating the discovery process.

The world’s biggest miner had more than 500 applicants for the program this year and has just announced the six private and listed companies to come away with a smile.

Today’s interest is in the two ASX-listed juniors to become part of program, now in its second year. They were Hamelin Gold (HMG) and Cobre (CBE). They are true juniors with market caps of $12.6 million and $22.3m respectively.

The market caps are after both posted share price gains on news of them joining the Xplor program, one that might or not help accelerate the discovery of a BHP-scale deposit, and one that might or might not led to a project partnership with BHP.

Hamelin moved up from 7.8c to 8c in response to the since the Xplor announcement but has since settled back at 7.5c. Cobre has rocketed from 4.4c to 7.5c.

Hamelin’s attraction for BHP was nickel-copper-PGE potential of its Hawkeye prospect in the Tanami. The discovery of the mineralised ultramafic intrusion last year was a first for the Tanami. The company’s gold projects in Tanami sit outside the program.

Cobre’s attraction was its copper exploration in the emerging Kalahari copper-belt (KCB) in Botswana. The company is the second biggest landholder in the KCB behind Sandfire (SFR) which owns the newish Motheo mine in the country.

The KCB is also where Chinse miner MMG recently acquired the Khoemacau copper mine from private equity interests for $US1.8 billion. It really is elephant country.