Thursday, 28 March 2013

Century Iron Mines rallies after latest news as management endorses the iron ore developer

After releasing preliminary economic reports for two of its iron ore projects in the past week, management of Century IronMines (TSE:FER) has been showing its confidence in the iron ore development company, with its VP of corporate development and investor relations, Bob Leshchyshen, buying up 63,200 shares yesterday. 
Leshchyshen was joined by the company's corporate secretary and general counsel, Michael Skutezky, who also acquired 6,000 shares in the public market on Wednesday. 
Shares of Century Iron rallied more than 17.6 percent on Thursday, with investors seemingly encouraged by the company's latest news, lately trading at 40 cents this morning. 
On Tuesday, the company took another step toward de-risking one of its iron ore assets in Canada by releasing a preliminary economic assessment report for its Joyce Lake direct shipping ore (DSO) project, just days after announcing a similar report for its Duncan Lake property. 
The latest NI 43-101 compliant report, based on 100 percent ownership, shows a pre-tax net present value of $94.5 million at an 8 percent discount rate for Joyce Lake, which is located in the province of Newfoundland and Labrador, near Schefferville, Quebec. 
The internal rate of return was pegged at 35 percent pre-tax, with initial project capex estimated at $96.6 million including contingency, and a projected payback period of just under three years from production start-up. 
The Joyce Lake DSO deposit is part of the Attikamagen project in which Century has joint ventures with Wuhan Iron & Steel Company (WISCO), the fourth-largest steel producer in China, and Champion Iron Mines (TSE:CHM). Century and WISCO hold a 56 percent stake in Attikamagen through a joint venture company called Labec Century Iron Ore, with Champion holding the remainder. 
The company's strategy is to build value initially by low-capital expenditure DSO projects to generate early cash flow, positioning Century for the "much larger" magnetite/taconite projects - like its Rainy Lake property in Quebec - which require higher capex and financing. 
Direct shipping ore refers to iron ore that can be shipped directly to a steel furnace. DSO mines are typically rarer than the magnetite-bearing banded iron formations, but are considerably cheaper to mine and process as they require less beneficiation due to the higher iron content. 
The company, which is aiming to become a major iron ore producer, is one of the largest iron ore companies in Canada, in terms of number of claims by area. It has 6,493 claims and titles, covering some 198,779 hectares in the provinces of Québec and Newfoundland & Labrador. It has interests in four iron ore projects, none of which yet generate revenue.
At the end of last week, it also unveiled the results of a preliminary economic assessment for its Duncan Lake joint venture project in northern Quebec, projecting a 20.1 percent internal rate of return (IRR) pre-tax. The preliminary economics report, done by Met-Chem Canada, concluded that based on 100 percent ownership of the project, the net present value is estimated at $4.1 billion pre-tax for a project with a mine life of 20 years. 
Initial capital costs were pegged at $3.8 billion, for a project generating 12 million tonnes per annum of iron pellet production - with a payback period of 4.2 years. 

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