Akora Resources (AKO) - DSO Iron Ore Potential from Madagascar

1. Akora Resources has made significant progress in its iron ore projects in Madagascar since its listing in December 2020, despite challenges from COVID-19. They've undertaken three drilling programs and confirmed a maiden resource of almost 200 million tons of iron mineralization.
2. The iron from Akora's Becky Soper site has unique characteristics that allow it to upgrade to higher-grade products suitable for both fines to sintering and for producing direct reduced iron pellets for green steel production.
3. Akora has identified potential for Direct Ship Ore (DSO) which provides a low-capital-expenditure route into production. The surface iron mineralization includes high-grade lump and fines DSO, making it a cost-effective mining option.
4. The company is considering two budgets for 2023, one lean and the other more expansive, aiming to fund its operations. The decision will depend on market conditions and investor support.
5. The top 20 shareholders of Akora Resources hold 60% of the company's shares, and many are believed to be supportive of future placements. The company aims to secure additional funds to clarify and execute its work plan for the upcoming year.

Akora Resources: Promising Iron Ore Potential in Madagascar

Akora Resources is an Australian iron ore exploration and development company focused on the Bezoka project in southern Madagascar. The company listed on the ASX in December 2020 and has made significant progress in advancing the project over the past two years, despite challenges from COVID-19.

Progress at Bezoka Project

• Completed over 140 drill holes, confirming the maiden resource of just under 200Mt of iron mineralization
• Product testing shows an ability to upgrade lower-grade material to high-grade lump fines direct shipping ore (DSO) and concentrate products suitable for steelmaking
• Completed scoping study for 2Mtpa DSO operation, showing attractive economics

Near-Term DSO Production Potential

• Drilling has defined high-grade DSO mineralization starting at the surface, with intercepts up to 12m at 65-67% Fe
• DSO resource expected to be in the range of 8-12Mt based on 50x50m infill drilling program completed in Oct 2021
• DSO production targeted at 1-2Mtpa over 4-6 years, generating revenue of up to $200M per year at current iron ore prices
• Low capex route to production at around $80M for mining, processing, infrastructure
• Scoping study shows attractive margins even with conservative iron ore price assumptions

Longer Term Growth through Concentrate

• Lower-grade primary magnetite mineralization (35-45% Fe) shown to be readily upgradeable to high-grade (68-70% Fe) concentrate product suitable for direct reduction pellets
• Primary mineralization offers significantly larger resource potential than DSO along 6km strike length
• Stage 2 plans for long-life concentrate production feeding into decarbonizing steel industry

Strategic Location and Infrastructure Access

• Deposit located 60km from the port of Tulear, accessible via existing roads and national highway
• Port capable of handling 60,000 tonne bulk carrier ships for iron ore exports
• Existing container handling facilities provide lower-cost interim loading option
• Skilled local workforce available in regional centers

Growing Iron Ore Demand

• Forecast growth in global iron ore demand driven by increasing steel consumption in developing economies
• Shift to higher grade raw materials to reduce the emissions intensity of steel production
• Akora's high-grade DSO and concentrate align with market needs

Favorable Investment Environment

• Business-friendly jurisdiction with a competitive 2-4% royalty regime
• Supportive national government seeking more foreign investment
• Major miners Rio Tinto and Sherritt active in the country

Funding Needs

• Company has low cash burn, sufficient for planning and studies in near term
• Seeking $5-10M to accelerate exploration and development activities
• Funding would fast-track DSO studies and allow exploration of additional targets

Akora Resources presents an attractive investment opportunity given its portfolio of high-grade iron ore assets, a clear pathway to initial DSO production and significant upside potential. The projects are strategically located to key infrastructure in a jurisdiction with established mining credentials. With modest funding, the company can continue to de-risk its projects and create value for shareholders. The growth outlook for premium iron ore products also bodes well for Akora's concentrate production plans.

Cautious Case for Iron Ore Exposure

Akora Resources offers speculative exposure to iron ore exploration and development in Madagascar. With modest funding, the company could advance studies on its Bezoka project to outline a potential low-cost DSO production opportunity.

However, investors should be aware that Akora is currently cash constrained, with only around $7 million at the end of 2022. Further funding will be required to maintain momentum and progress development studies. There is no guarantee the company can raise additional capital on favorable terms.

While the scoping study points to attractive project economics for initial DSO production, the results are based on Inferred resources. More definitive studies based on higher confidence resources will be required to confirm these projections. The timeline for production and revenue is still uncertain. While DSO potentially offers a faster development path, permitting, financing and construction could still take 2-3 years. Larger-scale concentrate production is a longer-term aspiration at this stage.

Operating in Madagascar does present political risks that need to be considered, despite improvements in the operating environment in recent years. Changes to the mining code have also created some uncertainty around fiscal terms.

Overall, Akora offers optionality on iron ore but is a higher-risk investment proposition until project studies advance further and additional funding is secured. Conservative investors may prefer to wait for greater clarity on development timelines and funding requirements.

However, those comfortable with the elevated risks of resource exploration and development could consider a small portfolio allocation. Success in advancing Bezoka could re-rate the stock materially. The current enterprise value appears modest relative to the potential scale of the iron ore resources outlined to date.