This microcap stock says it now owns world’s largest undeveloped magnetite iron ore play

Wed 04 Jan 23, 4:36pm (AEST)
Two yellow mine vehicles at work in an open cut iron ore project at an unknown location
Source: Two yellow mine vehicles at work in an open cut iron ore project at an unknown location

Key Points

  • Cyclone Metals buys Block 103 permit from privately held Australian company for only $1m in shares
  • Inferred resource for the ‘Greenbush’ target at the project sits at 7.2bn tonnes of ore at a grade of 29.2% total iron ore
  • Project sits nearby an operation managed by Indian giant Tata Steel

Small cap, big claims: that is the defining essence of Cyclone Metal’s (ASX:CLE) announcement on Wednesday that it has acquired rights to explore the world’s largest undeveloped magnetite ore deposit.

Cyclone Metal’s new acreage is located in Canada 30km northwest of Schefferville, a mining town. 

The company picked up the relevant permit for Block 103 under Canada’s resources legislation from Australian company Labrador Iron Pty Ltd.

Under the deal, Cyclone will pay for Block 103 by issuing $1m in shares to Labrador Iron.

It's worth noting that Cyclone's market cap currently sits at $15m, with shares worth a third of a cent. 

Labrador's shares will be issued at a discount to this at $0.0025/share.

What are the benefits? 

On Wednesday, Cyclone said the project has already seen some $35m expended on it, due in part to its proximity to Indian giant Tata Steel’s iron ore operations nearby. 

The project also boasts a 12km strike length, of which only 4km has been assessed to form part of the existing JORC-compliant mineral resource, leaving upside potential for the bankability of the project.

An inferred resource published in 2013 found potential for up to 7.2 billion tones of ore at total ferrous grade of 29.2% and magnetite alone of 18.9%.

Can Cyclone blow away competition? 

Management is confident that the Labrador Trough geological formation has a high chance of good results.

“The strategic geographical position of Block 103 with established infrastructure, services, and transport corridors, greatly supports the development potential,” Cyclone chief Tony Sage said. 

“Block 103 is the largest undeveloped magnetite deposit globally and comparable to other world-class producing assets and large developers.”

Sage also said the acquisition puts Cyclone in league with “other major iron ore players.” 

How is the company going? 

While the company’s share price closed up 100% today, that’s only due to its nature as a penny stock.

As a result, one week performance is up 25%, and one year performance is down -16.67%. 

The company is ranked 1,774 of 2,426 companies altogether and is not covered by brokers. 

Highly illiquid, the stock is one of the lesser known (or less sensational) microcap stocks on the bourse. Its newsflow announcements are not particularly voluminous. 

At the end of the September quarter, Cyclone only had $126,000 in cash; but spent $626,000 over the same period. 

Whether or not the project in Block 103 can turn the company’s fortunes around remains to be seen. 

A look at Cyclone's six month charts reveal an illiquid stock
A look at Cyclone's six month charts reveal an illiquid stock


Written By

Jonathon Davidson

Finance Writer

Jonathon is a journalism graduate and avid market watcher with exposure to governance, NGO and mining environments. He was most recently hired as an oil and gas specialist for a trade publication.

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