Midwinter came tocontrol part of the Northern Lights project through its acquisition of a 49% interest in private company Capricorn Iron. Capricorn owns a 70% interest in Northern Lights.

Midwinter managing director Adrian Griffin said his company would progress to full ownership of Capricorn once it had gained approval from South African authorities.

The project lies 300 kilometres north of Johannesburg in the Limpopo province, close to the borders with Botswana and Zimbabwe, and has already managed to produce concentrates of very high grade and quality.

The area has become a hotspotfor those seeking an entrance into South Africa's fledgling magnetite iron ore sector.

A prospecting campaign in 2010 identified a number of substantial targets from data generated by airborne magnetic surveys, with a line spacing of 200 metres. It revealed more than 28km of broad magnetic signatures of buried magnetite deposits.

In particular, Midwinter outlined a 15km-long magnetic anomaly on the Northern Lights project, and Griffin said this was where the 2011 follow-up drilling campaign would focus.

The anomaly is in an area subject to a recent prospecting right application, which is yet to be granted, but the expectation is this will be forthcoming in the near future.

"It was not a difficult decision to conclude that the largest anomaly is where we should concentrate our drilling." Griffin told RESOURCESTOCKS.

"Last year's reconnaissance campaign provided us with sufficient confidence to continue exploration with a reasonable expectation that some of the anomalies drilled to date will advance to resource status and that there remains even greater prospectivity in areas not yet drilled."

With this in mind, Midwinter has set itself an exploration target of 400-450 million tonnes of similar quality iron ore.

Griffin said the depth of mineralisation at Northern Lights was limited only by the extent of drilling. He said oxidation was restricted to near-surface material and the oxidation had little effect on magnetic recovery of concentrates.

Assays showed banded iron formations and surface iron ore samples ranged in grade from 23-41% iron.

Encouragingly, mineralisation is coarse-grained and would be amenable to low-cost concentration processes such as low-intensity magnetic separation.

In test work carried out on samples earlier this year, material from both oxidised and primary magnetite ore was ground to pass 45 microns.

Davis Tube extraction produced high grade concentrates of 69.9% iron in both cases. Recoveries in the primary zone were estimated to exceed 90%.

Grinding to a coarser 180microns produced only slightly lower grade concentrates at slightly lower recovery rates.

"So work is continuing to determine the optimum combination of grinding, recovery and concentrate quality. Head grade assays of the ore and concentrate assays both showed very low levels of impurities," Griffin said.

"This underpins the ability to deliver superior concentrate quality."

He said there was a clear visual demarcation line between ore and waste, which would be of practical benefit in mining operations.

"Petrological examination of ore samples showed that the impurities mainly occur as, or within, separate non-magnetic minerals," Griffin said.

"These minerals are rejected during the concentration process, where only the magnetic phases are recovered from the crushed rock.

"As a consequence of the distinctive mineralogy, impurity levels reporting to the magnetic concentrates are significantly lower than the levels recorded in the ore prior to processing."

All this means that when it comes time to assessing development options, the ore will require minimal crushing and comparatively low energy requirements.

"This is going to have a huge impact on reducing or capital and operating costs," Griffin said.

The Limpopo province has only recently come to the attention of investors.

In contrast to Western Australia's Pilbara region, the Limpopo iron ore province is undeveloped, providing greater opportunities for entry and consolidation at the smaller end of the market.

And when it comes to the ever-important issue of infrastructure, Limpopo beats the Pilbara hands down.

"Limpopo prospects are close to established arterial roads, railway lines, high tension power lines - which run across the Northern Lights project - and groundwater resources," Griffin said.

"As well, the local availability of raw materials such as coal, gas and limestone will enable of production of value-added materials if required."

So with a good understanding of the deposit, beneficiation and infrastructure availability, Midwinter has started investigating its routes to end-users.

"The quality of the concentrate produced from Northern Lights ore will be very high and this potentially provides us with an entry into either domestic or export markets," Griffin said.

"Infrastructure networks connect to domestic steel producers and the project is close to proposed international heavy haulage railway lines.

"The project is about 800 kilometres by rail from the nearest deep water export port of Maputo. The port has the capacity to handle 10 million tonnes per annum of bulk materials and adequate rail capacity exists to service its requirements."

Griffin said it was a case of "right place, right time" for juniors operating in South Africa.

He noted the attention being demanded by the junior sector, in a country traditionally dominated by multinational gold, diamond and diversified producers.

"South Africa is a politically stable country, with a strengthening mining culture focused on smaller companies," he said.

"As recently as five years ago the scene was dominated by big companies like Rio Tinto, De Beers and Anglo American. These companies didn't bother investigating the smaller mineral deposits.

"But now smaller companies, predominantly from Australia and Canada, have woken up to the opportunities here."

On the corporate side, Midwinter is managed by a board of experienced mining professionals with decades of experience covering acquisitions, exploration, development, financing and operations.

Griffin was the founder of Australia-listed Ferrum Crescent, which owns the Turquoise Moon iron ore project, also in the Limpopo province.

While he is still a significant shareholder in Ferrum, he has stepped away from all corporate and board duties.

"The experience gained there indicates to me that Northern Lights is going to be a very similar project," he said.

The investment cast for Midwinter is strong.

As RESOURCESTOCKS went to press, the company was capped at about $4 million.

Its cash reserves were $3 million, indicating a valuation of about $1 million for the Northern Lights project.

This low enterprise value representsa big investment opportunity.

"Midwinter presents a significant opportunity for investors to participate in a project with a very low value ascribed to the project at this early stage of its development," Griffin said.

"The significant upside will come steadily as we continue to test these very large undrilled magnetic targets."

*A version of this report, first published in the August 2011 edition of RESOURCESTOCKS magazine, was commissioned by Midwinter Resources