Nevada Iron (ASX: NVI) has had a fresh lease of life stemming...

Nevada Iron (ASX: NVI) has had a fresh lease of life stemming from the appointment of executive chairman Mick McMullen.
McMullen, also chairman of gold producer Lachlan Star (ASX/TSX:LSA) - with unhedged gold production operating at a 57,500 ounces of gold production run rate - is upping the stakes at Nevada Iron, fast.

In March, the name was changed from Richmond Mining Limited to Nevada Iron Ltd and on 29 March 2012 the Company raised $3,000,000 via the issue of 12,000,000 fully paid shares, at an issue price of $0.25 per share.

Cashed up, McMullen and his team are moving aggressively at the Buena Vista iron ore project, hiring U.S. based management and looking to ensure the project is on a strong footing, enhancing project economics. 

The drilling completed to date forms part of an aggressive programme being undertaken at the Buena Vista Iron of approximately 100 RC holes and 9 diamond drill holes.

A review of historical drilling, at the Section 5 target, indicates potential for additional resources and higher grade magnetite mineralisation at Buena Vista.

Spectacular total iron values, over considerable vertical distances, were reported during March quarter with numerous assays of over 50% Fe reported at Section 5.
Section 5 deposit at its Buena Vista Iron Project in Nevada is shaping up to be a major deposit, with initial indications from recent drilling suggesting the mineralisation is much larger than the defined exploration target of 12 to 18 million tonnes at 18 to 26% total iron.
The delineation of higher grade exploration targets and prospects is expected to lead to a revision of the existing mine plan and definition of a larger project.
Update
The company is rapidly advancing towards production at the Buena Vista Project, and is on track to begin commissioning in 2012/13.
Drilling at the Section 5 deposit has encountered magnetite mineralisation over a strike length of up to 450 metres, maximum widths of 250 metres and to depths of 200 metres where several holes terminated in mineralisation.

Highlighting the size potential of the Buena Vista Project, currently identified exploration targets provide for an additional 195 to 268 million tonnes of exploration potential.

Nevada Iron is undertaking an aggressive drilling program comprising around 100 reverse circulation holes and nine diamond drill holes.

The current drill program is targeting an increase to the resource base to support the case for future expansion of the project.

The potential to delineate additional shallow higher grade JORC Resources is most evident at Section 5 where historical drilling intersections include 49.8 metres at 33.4% iron from 14 metres, 59.4 metres at 32.6% iron from 75 metres and 139.4 metres at 29.9% iron from 1 metre.

Importantly, these historic results highlight the potential for the Section 5 prospect to be a source of overall higher grade mineralisation than the West Deposit, and it is less than a kilometre from the proposed location of the beneficiation processing facility.

The delineation of higher grade exploration targets and prospects is expected to lead to a revision of the existing mine plan and definition of a larger project.

A total of 3,380 metres of diamond drilling and 11,730 metres of reverse circulation drilling has been completed in the current program, with around 1,440 metres of reverse circulation drilling remaining.


Ground magnetic survey

A ground magnetic survey has been completed over the majority of the project area which has identified substantial new geophysical targets.

This work indicates that the West Deposit, that was the previous basis of the 59 million tonne Reserve for the Feasibility Study, is just one of a number of magnetic anomalies in the area, and is potentially not the largest deposit on the project.

The West Extension magnetic anomaly is located immediately to the west of the West Deposit. The West Deposit Resource of 100.2 million tonnes at 20.3% iron is terminated in the western end due to a lack of drill data.

The new magnetic survey clearly indicates a magnetic anomaly that extends at least 300 metres further west, and recent drilling by Nevada Iron has intersected mineralisation in this area.


Optimisation plan

The company recently completed a review to assess changing the scope of the project and optimising it where possible.

This review, while not yet complete, found that increasing the Phase 1 plant throughput from 4.8 million tonnes per annum to a minimum of 6 million tonnes per annum will be beneficial for project economics.

Also, scheduling higher grade mineralisation in the initial years of the project has been deemed possible, with substantial economic benefits.

Further upside stems from the development of a Phase 2 project, which will enhance the economics and make the project more attractive to offtake financing partners.

To more fully scope the project, Nevada Iron has committed to an aggressive exploration program targeting an increase in the existing JORC Resource, as well as a conversion of the known higher grade exploration targets and prospects to JORC Resources.


U.S. advantage

The Buena Vista Project is strategically located close to established infrastructure which reduces the development costs and shortens the time taken to get the project into production.

Inclusive to the many advantages inherent in Buena Vista are the low capital cost, the low risk political environment, the cash costs which are equivalent to or better than the majority of emerging magnetite producers and the relatively short time to production. 

The project also represents a much lower operational risk than most emerging producers because of the proposed scale of production.


Analysis

Nevada Iron has a market cap. of A$16 million and with a cash position of around $3.6 million at the end of the March 2012 quarter has an enterprise value of $12.4 million.
Mick McMullen and his team are finding strong support in North American markets from investors and this is likely to propel valuation growth in 2012/13 as the Company hits its milestones.
When you consider the company’s rapid advance towards production at the Buena Vista Project, with commissioning to begin before the end of 2012, coupled with the growth in overall resources likely, Nevada Iron’s valuation seems slight at present.
 
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