An announcement this week by iron ore hopeful Western Desert Resources Ltd (ASX: WDR) that it has awarded a three-year mining service contract to Theiss, a subsidiary of Leighton Holdings Limited (ASX: LEI), has thrown the spotlight back on the $355 million miner.
Last year was a pivotal year for Western Deserts. After announcing a major upgrade to mineral resources at the company’s Roper Bar project in April, the company proceeded to raise fresh capital to fund the final stage of development and then on 19 December the company announced that the inaugural export shipment of iron ore had commenced.
While the potential of the Roper Bar resource is exciting, the scale of the project is significantly smaller than projects undertaken by the new ‘third force’ in iron ore – Fortescue Metals Group Limited (ASX: FMG). At present the total inferred, indicated and measured mineral resource estimates is 611 Mt @ 40% Fe, including direct shipping ore (DSO) of 47.4 Mt @ 57.3 Fe.
The speed and success with which Western Deserts has brought this project to production is extremely impressive and is a credit to the board and management team. That team includes a number of high profile directors, including Rick Allert who was previously the Chairman of AXA Asia Pacific, prior to its merger with AMP Limited (ASX: AMP). Scott Perrin who was previously a director of Billabong International Limited (ASX: BBG), and Bruce Mathieson who is a director of ALH group, a hotels and liquor retailing joint venture between Woolworths Limited (ASX: WOW) and interests associated with the Mathieson family.
The size of Western Deserts’ resource, the experience of the team backing the company and the fact that the infrastructure is already in place means there is a lot to like about this company.
The downside is the unpredictable nature of commodity prices. Just this week analysts have reportedly been lowering their iron ore price forecasts due to increased supply of the metal and weaker demand for steel in China.
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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.
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