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WPG Resources Builds Development Case For Giffen Well With Strong Iron Recoveries

WPG Resources (ASX: WPG) has received further encouragement to start development of its Giffen Well magnetite iron project in South Australia after metallurgical testwork demonstrated high mass recovery to concentrate and high quality concentrate.

The Davis Tube Recovery (DTR) testwork has produced mass recoveries in excess of 40% resulting in high quality concentrate grades of more than 68% iron.

This testwork was carried out on a total of 247 five metre composite samples using a grind size of 95% passing 45 microns.

DTR and other metallurgical testing on the oxide material are continuing. In addition, further testwork will be conducted to optimise the plant design as part of the Preliminary Feasibility Study that is scheduled for completion in the March quarter of 2013.

Executive Chairman Bob Duffin said the results were encouraging and that an iron ore mine with an anticipated low mining strip ratio, and with the treatment plant located close to rail, could be developed and operated at competitive cost.

This is particularly true if energy from WPG's Penrhyn coal project could be made available as anticipated in the PFS.

Based on the resource estimates of 689 million tonnes at 30.9% iron and the metallurgical testwork, the Main Zone of Giffen Well has the potential to produce about 5 million tonnes of high grade concentrate per annum from treatment of about 13Mtpa of plant feed, for a project life of at least 30 years.

However, WPG noted that further exploration work will be needed to move the 38% of the resource tonnage within the Inferred category to Indicated or Measured categories.

Duffin added that 5Mtpa of concentrate could be exported using WPG's Port Pirie assets, although new approvals would be required.

Giffen Well

Giffen Well's high grade, combined with WPG's existing port assets at Port Pirie and the potential access to low cost power from the company's Penrhyn coal project, points to a viable economic integrated resource development.

Importantly, WPG has after tax earnings of $171 million for the 2012 financial year, largely attributable to the sale in October 2011 of the company's then iron ore assets to OneSteel (now Arrium) (ASX: ARI).

The key distinguishing features of Giffen Well include its high grade, proximity to rail and WPG's port infrastructure, likely low mining strip ratio and favourable metallurgical characteristics, which will be confirmed as the Feasibility Studies progress.

WPG's existing port assets at Port Pirie minimise capital required for development, and its wholly owned Penrhyn coal project could provide low cost electricity for the treatment plant and other uses.

The company is focusing on a modest scale of production with manageable capital expenditure requirements.

Iron ore market re-entry

WPG's re-entry into the iron ore market in January this year has so far proven successful, with a resource already defined and exceeding that at the nearby Hawks Nest project that WPG sold to OneSteel in late 2011.

The company had been trying to get access to Giffen Well since 2008.

Giffen Well is a well know high grade magnetite BIF deposit with low levels of impurities where over 50 holes had been drilled in the past.

The main BIF zone is 3.9 kilometres long and up to 350 metres thick, while two smaller BIF zones are located between 600 metres and 800 metres to the west of the main zone.

In all cases the mineralisation extends beyond the limit of drilling and is open at depth.

WPG can earn up to an 82% joint venture interest in the Giffen Well project from Brisbane-based Maosen Australia with a A$5 million payment and funding of a Bankable Feasibility Study.

Analysis

With strong testwork, a large resource and superior infrastructure, Giffen Well has all the hallmarks of a successful project.

Despite this, the market does not appear to have factored in the project as WPG, with a market capitalisation of about $19.5 million. is trading close to cash backing with cash of about A$15.9 million as of 30 June 2012.

Savvy investors will find this to be a strong buying opportunity with catalysts for further growth in the release of the Pre-Feasibility Study and further exploration.

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