Charter Pacific shares jump 60 percent on African iron ore permit
SYDNEY May 30 (Reuters) - Shares in Australia's Charter Pacific Corp Ltd leapt 60 percent on Friday after the resource investment group received a 30-year license to mine iron ore in Mauritania.
Charter was granted the license from Mauritania's Council of Ministers to mine at the Legleitat iron ore deposit in the Sahara Desert, the company said in a statement during Friday morning trade.
Shares of Charter ended the day 59.6 percent higher at 7.5 Australian cents. The stock has now risen 66.7 percent since the start of the year, compared with a 2.6 percent gain in the benchmark index.
"We've already had enquiries about buying the ore right at the mine gate," Executive Chairman Kevin Dart told Reuters.
"It's early days, and we haven't made any decisions... It shows the fundamentals for iron ore demand are strong despite the price weakening recently."
Iron ore prices have fallen 28 percent this year. Analysts say prices could fall further as supplies rise from Rio Tinto and BHP Billiton in Australia and Vale in Brazil, and because growth in China's steel market is slowing.
Goldman Sachs expects the global supply of iron ore to outpace demand by 175 million metric tonnes next year.
Charter has already spent $45 million on pre-production work at Legleitat, and is likely to need a further $22 million before the company can start mining at a rate of 1 million tonnes a year, Dart said.
He said the work so far indicated Charter's cash costs for producing iron ore at Legleitat would be less than $40 a tonne.
The price of iron ore .IO62-CNI=SI is currently $95.70 a tonne.
Iron ore accounts for almost a quarter of Mauritania's $4 billion economy and the government is eager to boost production.
Glencore is also developing a mine in the country to enter the iron ore sector. The company expects to spend $900 million to construct and open the mine by early 2017.
Mauritania's iron ore exports traditionally go to France and Italy, but Asia's rising steel industries also provide opportunities, Dart said. (Reporting by James Regan; Editing by Christopher Cushing)