Pluton Resources Limited (ASX:PLV) Re initiation of Coverage, An Austock (ASX:ACK) Research Report

Perth, Aug 23, 2010 AEST (ABN Newswire) - Following the recent resource upgrade and positive beneficiation test results we have reinitiated coverage of Pluton Resources (ASX:PLV).

We rate PLV a Speculative Buy with a target of A$0.76/share - based on our risked DCF valuation.

Positives

PLV is an emerging iron ore story that is unbridled with any offtake deals, therefore potentially an attractive acquisition for an Asian steel mill.

The recent announcement that the overlying low grade iron mineralisation can be successfully processed to a high grade concentrate is a key step forward for the project.

- The project location is a key positive, as there is no need for the development of rail infrastructure.

- The near term catalysts for PLV will be; the defining of a Direct Shipping Ore (DSO) deposit at the Isthmus prospect and cementing a development/offtake deal with a third party.

- A second drill rig is due to commence exploration in late July; which will help accelerate the rate of exploration and also assist with resource definition.

- We have assumed production of 2.6mtpa DSO and 2.5mtpa concentrate commencing mid to late 2013.

Risks

- Given the early stage of resource development requires that an investment into PLV should be viewed as speculative in nature.

- We have some concerns at the grade of the deposit, the strip ratio and the pace at which exploration is being undertaken to date.

- As this is still an early stage project we await the results of the PFS currently in progress to gain a better appreciation of the project parameters.

OVERVIEW

PLV announced in June 2010 an upgrade to their 100% owned iron ore resource on Irvine Island (WA). The resource upgrade was based on results from the current drilling program.

Resource increase

The resource is currently reported as 90Mt @ 46% Fe and 204Mt @ 23% Fe for a total of 108Mt @ 66% iron equivalent. Up from 54Mt @ 49% Fe.

We have used the term iron equivalent to represent the fact that the 66% iron content does not relate to an in ground resource grade but a concentrate grade.

More resource upgrades expected

As drilling continues we expect that the resource will be upgraded in both size and classification.

The project is located on Irvine Island which is situated off the NW coast of WA and is adjacent to Cockatoo Island and Koolan Island. Both of these islands have an extensive iron ore mining history with production of high grade DSO dating back to the 1950's.

Mount Gibson (ASX:MGX) (PINK:MTGRF) is currently mining ~3mtpa from Koolan Island and Cliffs is currently building a sea wall at Cockatoo Island to resume mining activities there.

Key advantage is location to market

All three islands are strategically close to the Australian iron ore deposits supplying the key Asian markets. All have deep water access adjacent to the deposits, with no rail infrastructure required.

Strong Asian interest in project

We understand PLV has entered into a series of non-binding NDA's with Asian interests. This confirms our understanding that Asian steel mills are still interested in shoring up supply outside of the 3 major suppliers.

For the complete Pluton Resources Research Report produced by Austock (ASX:ACK), please refer to the following link below:
http://www.abnnewswire.net/media/en/docs/63572-ASX-PLV-Austock-Research-Report.pdf

Contact

Tony Schoer Managing Director and Chief Executive Officer Tel: +61-411-232-711 Email: tschoer@plutonresources.com www.plutonresources.com