Investing in iron ore through Alien Metals (UFO)

IGTV caught up with Alwyn Vorster, non-exec chairman of UFO, to discuss the recent developments from which the board is fully expecting a swift route to production. With the share price as low as it is, against the more bullish metrics of the recent reports into potential asset values, will it get to production without being taken over? The company says while it would have to consider any moves on share ownership, it is working on the basis that it will take the company into production and beyond.

(AI Video Summary)

Alien Metals

Alien Metals, a company listed on London AIM, recently provided an update on its iron ore development study in Western Australia. To put it simply, the company is studying the potential for mining high-quality iron ore in an area called the Hancock project. The chairman of the company, Alwyn Forster, highlighted four key points about the project: iron ore is a valuable resource, Western Australia is a great location for mining it, the Hancock project has a promising story with lots of potential, and the company has limited financial resources but can still make the project work.

The study has been ongoing for about five to six months and aims to mine 1.2 to 1.5 million tons of iron ore per year. The plan is to transport the ore to a port and sell it to the Chinese market. The project is waiting for final environmental approval, which is expected in the next few months. If everything goes well, construction could begin in July or August, and the first shipment of ore could happen in December 2024.

Iron ore prices

Iron ore prices are currently strong, which is good news for the company. Forster explains that there is high demand for iron ore because it's needed in many products related to electricity and a low-carbon environment. Alien Metals believes that their high-quality iron ore can contribute to this demand.

The Hancock project

In terms of finances, Alien Metals is a small company with limited funds. However, the capital needed to develop the Hancock project is manageable for them, estimated to be between AUD 20 to 30 million. The company expects to be profitable as long as the iron ore price remains above USD 80 to 90.

The company's share price has not been reflecting the strength of the iron ore market, and Forster attributes this to uncertainties in the management team. While Alien Metals is not actively looking to be taken over, they are open to joint venture partnerships. Interested parties have expressed their desire to cooperate in developing the Hancock project.

Forster believes that Alien Metals is undervalued compared to its potential earnings from the Hancock project. He suggests that the company's market capitalization should be around AUD 200 to 300 million, compared to its current value of around AUD 20 to 30 million.

The next steps for Alien Metals include securing the final permits, starting construction by July or August, and potentially beginning operations by the end of this year, with cash flow expected in early 2025.