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Iron Ridge Resources has big-hitting backers and plenty of potential

Here's a novelty - an iron ore explorer with a very decent fan club. Mining Editor Alastair Ford reveals why Ironridge appeals to some heavyweight backers.

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The project is only 60 kilometres from the proposed port of Mayumba

Get ready for a period of substantial news flow from IronRidge Resources (LON:IRR).

That’s the message from chief executive Vincent Mascolo, speaking just ahead of a trip out to visit the company’s portfolio of iron ore projects in Gabon.

Against prevailing sector sentiment, it’s likely to be positive news too, given the set-up at IronRidge.

After all, this is a company that managed to get listed on London’s AIM market earlier this year at a time when the iron ore price was at its weakest, and positive sentiment towards iron ore juniors was thin on the ground.

“We pulled off the impossible,” says Mascolo. “That was two years of hard work that aged me at least five.”

But Iron Ridge had a couple of things going for it that other iron ore juniors have struggled to bring to the table.

“The fundamental attraction, the fundamental difference is our location, our proximity to the coast,” says Mascolo.

“We’re only 60 kilometres from the proposed port of Mayumba.”

Long-standing investors in bulk commodities will know that nearness to infrastructure is always key to building an economic case for development.

Iron Ridge has it here, in spades, as Mascolo emphasises.

“As an example, the closest mine to port in Australia is in excess of 200 kilometres,” he says. “They need to be producing in huge volumes.”

Indeed, the fact Australian mines need to produce in such huge quantities in order to remain profitable has had a significant impact on the  iron ore pricing in recent years.

The big mines generate the necessary economies of scale to make it viable for the majors, but the increased output has driven down prices across the board as demand has also weakened.

For some juniors the head-winds thus generated have proved just too much to bear, but things have gone the other way for IronRidge.

Its location in Gabon, and the amenability of its ore at the Tchibanga project, have attracted in some serious high level partners who will now be able to insulate IronRidge from any further storms in the equity and iron ore markets.

Following the London listing, South African iron ore, chrome and manganese specialist Assore (JSE:ASR) holds 30% of Iron Ridge’s shares, while the global Japanese trading conglomerate Sumitomo (TYO:8053) holds 12%. DGR Global Limited (ASX:DGR), the exploration and resource generator specialist, holds 26%.

Those are heavyweight names for any company to have on its register, let alone a small iron ore hopeful with the relatively modest market capitalisation of just over £10mln.

But the project, says Mascolo, was the main attraction.

“Two things interested our major investors,” he says. “The low capital expenditure and the low operating cost. Our capital intensity per tonne is very low.”

Very much against the current fashion, Iron Ridge’s major investors were interested in something else too: exploration.

“There are 21 signatures on our ground,” says Mascolo. “History has shown that the region we’ve got under licence is prevalent. We’re quietly confident we’re going to find something.”

It may be some while before the true potential of the Gabon licences becomes clear, but unlike others in the sector, IronRidge does have time on its side.

One analyst in London describes the company as a play on the next iron ore bull market rather than on the current conditions, and with Assore and Sumitomo well positioned to support the company through the ongoing bear market that does have a ring of truth to it.

But as Mascolo’s already said, there’s plenty of news flow on the way and that may well rewaken a jaded market to the potential offered by one of the few iron ore juniors that’s actually doing anything at the moment.

A country manager has just been appointed to oversee an ongoing programme of work being conducted by renowned industry consultant SRK Exploration Services.

The thinking is that SRK will help the company prove up reserves of high grade direct shipping ore that can be dug up at minimal cost and sold directly into the market.

If Tchibanga can generate early cash flow on top of all its other attractions, that really would be the icing on the cake.

Quick facts: IronRidge Resources Ltd

Price: 14 GBX

AIM:IRR
Market: AIM
Market Cap: £58.11 m
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