Stocks to Buy Atlas Iron (AGO)


Atlas Iron AGO ASXAtlas Iron (AGO) is an emerging iron ore producer and explorer. With a growing number of high quality iron ore projects and one of the largest landholdings in the lucrative Pilbara region, AGO is now one of the area’s largest iron ore producers.

The company’s significant projects include the Pardoo operation, the Ridley project and the Mt Webber Direct Shipping Ore (DSO) project, in the Pilbara region.

Following the commencement of mining at Wodgina in June 2010, AGO is on target to ramp up iron ore exports from 1 million tonnes per annum (Mtpa) to 6Mtpa during the December 2010 quarter.

AGO is on target to achieve its growth target of exporting at a rate 12 Mtpa by the end of 2012.

Iron ore roar

As an iron ore explorer/producer, AGO is well placed to benefit from continued strength for the iron ore market.

Chinese demand has been driving up the price of iron ore over the past few years and prices have gone wild.

Spot iron ore prices in China have extended gains after domestic steel prices added strength this week and iron ore miners continued raising offers and tightening supply.

At the recent Steel Index conference, the global seaborne supply of iron ore is anticipated to rise 8.5% to 1.1 billion tonnes next year.

AGO boasts multiple iron ore port options at Anketell, SW Creek, Utah and Oakajee, and has six off-take agreements with more to come in FY11.

Recent developments

In June, AGO announced the commencement of its Wodgina DSO Iron Ore Project in WA.

With the commencement at Wodgina, AGO is expecting combined iron ore exports at its Pilbara operations to total 6 Mtpa by December 2010.

In September, AGO excited the market by confirming a 50% increase in reserves at its north Pilbara Projects.

In the same month AGO loaded the first iron ore from its Wodgina and Pardoo mines, onto the Bergen Max export vessel at the New Utah Point Port in WA.

AGO advised that the port is at the heart of its plans to ramp up production to 6Mtpa by Christmas, and then 12Mtpa by 2012.

AGO signed up with mining sector bigwig BHP Billiton on 18 November, entering a memorandum of understanding (MOU) on iron haulage and port access at Port Hedland.

The two miners said the talks involve hauling iron ore from AGO’s Pardoo mine via BHP’s Goldsworthy rail line.

AGO has been one of the hot stocks since these developments, and has continued to climb on rumours of receiving multiple approaches from Chinese parties interested in buying the company’s Balla Balla iron ore project in Pilbara.

Quarterly results

AGO’s most recent results are for the September quarter. It was a landmark quarter, with first ore-on-ship at the new Utah Point port facility, commenced mining at Wodgina and production ramp up at Pardoo.

Over the quarter, 313,719 ore tonnes were shipped; 612,649 ore tonnes were processed; and 774,653 ore tonnes were mined.

DSO Reserves increased by 50% and AGO completed a merger with Aurox Resources in August, allowing for a greater expansion of port facilities.

AGO finished the quarter with $108 million of cash on hand at 30 September – which has increased to $120 million at 25 October.

Outlook

As the iron ore market returns to robust boom times, AGO is taking advantage of current conditions, ramping up some projects and making great sales of others.

AGO has a very healthy balance sheet, with $120 million cash on hand, and is free of net debt.

Going ahead, AGO will continue to explore Pilbara for further opportunities to add to its already-impressive project portfolio and will focus on mining at Wodgina and production ramp up at Pardoo.

As a result, AGO will be one of the stocks to watch in coming months.

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