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Tagged with: 2002

Feb 2002 - Anglogold Newmont

What does “fair and reasonable” actually mean ?

The latest corporate battle between Anglogold and Newmont each making “fair and reasonable” yet increasingly higher offers for Normandy has called into question the whole comment called a “fair and reasonable offer being made to shareholders and consequently that is why they should accept now! “. Only one year ago (17 Jan 2000), no one was interested in Normandy at 93c, it was even still languishing at 106c in September 2001, and yet it has been in a corporate bidding battle that has resulted in NDY attaining a share price of 199c (16 Jan 2002).

Feb 2002 - Aquarius Platinum

Aquarius Platinum Ltd (AQP) – A Buying Opportunity based on potentially significant profit growth

  • The share price of AQP has drifted sideways up to about 900c for most of the past year since January 2001, despite a number of very positive fundamental improvements amidst ongoing uncertainty over Russian deliveries impacting on the pge prices, especially platinum.
  • During 2001, AQP increased the holding in its main operation (Kroondal) from 45% to 95%, and In mid-2001 upgraded the Kroondal mill by 50% by installing a regrind circuit, with production attaining that higher level before December 2001. The regrind circuit also expected recoveries to improve by about 10%. •
  • The increased holding in Kroondal was made using a placement and some Rand-denominated loans (about R629m) which with the 50% fall in the Rand against the A$ and US$ during 2001 reduced the loan by approximately one-third, from US$79m to US$52m. Operational costs have similarly fallen with the rand’s value, enhancing profitability too.
  • Marikana has started construction, and could be in production by very late 2002, while the more profitable Everest South is still in feasibility study.

Mar 2002 - Hill 50 Limited

When to keep silent

Many years ago, we can recall one of a teacher’s apparently favourite comments in school reports (they apparently cannot make such negative comments anymore) that, “Smith must learn when to speak and when to keep silent”.

Apr 2002 - Mercury Asset Mgmt

It appears that Mercury was right after all

Julian Baring’s Mercury Asset Management (swallowed by Merrill’s) were the chief proponent of trying to stop gold companies from hedging or forward selling their gold production on the basis that such activities dampened or held back the gold price. We can recall on more than one occasion seeing Mercury and trying to defend the actions of Australian gold producers.

Apr 2002 - Gympie Gold

Gympie Gold Ltd (GYM) – Undergoing a Dramatic Transformation

  • Gympie Gold Limited is a gold and coal company that is undergoing a dramatic transformation, resulting in increased gold and coal production, higher profitability and growth in earnings for its shareholders.
  • The old-timers failed to recognise the significance of the ore shoots in the Inglewood structure and their relationship to the Gympie Veins which are all recent breakthroughs in understanding GYM’s gold mineralisation. This is already reaping benefits resulting in a sudden spate of discoveries of stockworks, ore shoots and Gympie Veins, which with the new 1mtpa decline and move towards rubber-tyred mechanisation all point to production growth at its QLD operation
  • One of the first conclusions that we made on completing a valuation of Gympie is “where is the mistake”, because the valuation using a 7% NPV or constant money cashflow (the norm for gold is 5% and for coal is possibly 7%) was more than double its share price of A$1.07, so we “hacked” the model, and yet the valuation was still more than double its share price of A$1.07 (since risen to A$1.18).

May 2002 - Healthy IPO

Achieving A Healthy Exploration IPO (or at least trying to)

This article is drawn from a presentation that Keith Goode of State One Eagle Research made at AJM’s “Exploration Hotspots’ Conference” on 2 May 2002 in Sydney being “A broker’s view on bringing companies to market based on a perspective of recent exploration company floats”, and was designed to try and offer useful, practical advice.

May 2002 - Golden Cross Res

Golden Cross Resources Ltd (GCR) – Gaining a Step on the Production Ladder

  • Golden Cross is in the process of making the transition from a pure exploration company to a gold producer through re-opening the Adelong goldfield in NSW, with initial production targeted at up to 35,000ozpa.
  • GCR has a number of prospects all in NSW, and has moved to farm-out a number of them in the past 4 months as it focuses on Adelong, such as with MIM in February over Copper Hill, Triako in April over Yellow Mountain and Sipa in May over its Broken Hill properties. In most cases the farm-out is for up to 70% of the prospect.
  • GCR is currently in the process of negotiating its financial arrangements to enable it to move into construction and development of the Adelong goldfield. Although there are 3 styles of gold-in-quartz mineralisation that we observed, based on the different wallrocks and strikes of the lodes, the old Challenger mine is the first that is planned to be re-opened.
  • The recently completed feasibility study showed that payback of the $3m to $3.5m required to re-open the mine and commence plant throughput could be achieved within 1 year depending on the treatment rate through the plant.

Jun 2002 - Lasseter’s Reef

Has Lasseter’s Reef been found….by Newmont ?

In a recent Exploration Conference in May in Sydney, Bruce Kay of Newmont (previously Normandy) made two references to Lasseter in his presentation on the Tanami as the best block of ground in the world. The first reference was to the cave which Lasseter inhabited and may have added to the confusion since the second expedition may have gone in the wrong direction, while the second reference stated :

Jun 2002 - Pan Aust Resources

Pan Australian Resources NL (PNA) – Advancing its Laotian Gold Project Towards Feasibility and Production

  • On 14 June 2002, PNA shareholders are to vote on a number of steps that have the capability to materially enhance their company resulting in gold production possibly by December 2004, by approving the acquisition of the Phu Bia coppergold project in Laos from Newmont.
  • The results of initial scoping studies suggest that Phu Bia could be capable of producing 70,000ozpa of gold from a 3mtpa heap leach operation advancing into 25,000ozpa of gold and 25,000tpa of copper from a concentrate in a 3mtpa conventional plant, that could later be expanded to 5mtpa.
  • Further infill drilling is currently required to complete the pre-feasibility study on Phu Bia and assess the initial processing route as heap leach and/or CIL, with a combined CIL/heap leach route potentially capable of materially higher gold production. The treatment alternatives depend mainly on drilling higher grade targets of 4 to 5g/t at Ban Houayxai and 8g/t at Long Chieng Track, plus the 3 to 12g/t gossans, and deeper copper-gold mineralisation at Phu Kham.
  • PNA also still has its Puthep copper project in Thailand on which it is waiting for Cabinet approval in order to advance it to the next stage having completed a viable pre-feasibility study.

Jul 2002 - American Model

Following the North American Model

It is a foregone conclusion that Newmont is likely to dump or sell the non-gold asset baggage either individually or as a package that it acquired along with Normandy such as Gossan Hill, the Australian Magnesium project in QLD, that cobalt operation in Africa’s Uganda etc, simply because they are non-gold. While it is deemed OK for an Australian gold company to hold non-gold assets, it is not for a North American company.

Jul 2002 - Elkedra Diamonds NL

Elkedra Diamonds NL (EDN) – Encouraging Signs in the First Drilling programme

  • Elkedra is already seeing encouraging signs (or potential indications of diamond bearing formations) from the geochem analysis of its first drilling programme at Mt Ultim.
  • The initial success consists of individual drillholes containing a darker red sandy unit, a micaceous chip, and a thick clay zone, which are all regarded by EDN as possibly anomalous, and could potentially indicate highly weathered kimberlite. These units or zones and others are to be subjected to second-stage heavy mineral analysis to identify possible diamond indicator minerals (results possibly by end July 2002).
  • While the initial geochem results continue to be assessed from both Mt Ultim’s 7 drillholes and Central Craton samples, the second drilling program commenced in the last week of June 2002 in the Central Craton focusing on at least 15 high priority anomalies, consisting of aeromag and photo-feature anomalies.
  • Manganese was also found in two grab samples in the Central Craton prospect. Although it has to be acknowledged that they were grab samples, one of the manganese values was relatively high at 42%Mn along with lower percentages than usual of deleterious elements such as iron (Fe) at 0.16% and silica at 5.8% SiO2.

Jul 2002 - Abelle Limited

Abelle Ltd (ABX) – A Neat, Very Profitable 75,000ozpa or so Gold Mine

  • Abelle is operating the old Gidgee mine (that used to belong to Australian Resources (ARS) before that company went into receivership in early 1999), and is currently producing about 75,000ozpa at a cash cost of US$215/oz and total cost of US$260/oz (at an A$ exchange rate of US57c).
  • Our initial impression on visiting the mine in mid-November 2001 was that it was capable of generating annual after-tax profit of A$2m to A$10m per year, depending on how well the visible gold in quartz underground was “running”.
  • Gold production has the capability to increase materially since about one-third of current production is coming from extremely low 0.8gpt stockpiles which could be replaced by oxide ore (when found) or from increased underground production.
  • In our opinion there is in fact significant upside potential for both gold production and life. However, it is more a case of where to start, and which order to take the targets in, and consequently we have used scenario analysis in pages 6 & 7. For example, the current underground life is conservatively 6 years, excluding reopening either Kingfisher or Omega, and a decline is being sunk in Butcherbird.
  • Currently the exploration direction is being made towards the potentially more prospective Gidgee anticline, by focusing on already delineated oxide targets and a number of classic exploration “gaps”, before the mill runs out of “soft” ore in about 2 years’ time. An alternative could be to spend possibly $10m more capex and increase underground production so as to replace both the surface sources.
  • We have provided profit and cashflow estimates for the scenario range (pages 6 & 7), with ABX’s share price (on a 5% NPV) capable of being between 40c and 105c.

Jul 2002 - Tanami Gold

Tanami Gold NL (TAM) – Bringing Prospects into Fruition in Elephant Country

  • Tanami Gold are first and foremost a gold company, focusing on gold with the view that should base metal prospects emerge within their tenements, then TAM may consider possible joint ventures or other options to fund or divest such assets. TAM does not intend to use their gold assets to finance diversification into base metal assets.
  • Over the past 8 years, Tanami Gold has built up a tenement package of 64,000sq km focused in 4 regions of the Tanami-Arunta Province (essentially all within the Northern Territory), which has become the envy of virtually all the world’s major resource companies as they have gradually realised that the NT is “elephant country”.
  • The NT has become elephant country partly because it was classified as too hard to explore in and its restrictions on mining and royalties were regarded as archaic and insurmountable. Whereas, TAM has shown that they are not insurmountable, and more importantly there are structures on a mega scale that cause geologists to salivate, and yet have still not had one drillhole into them.
  • TAM has established farm-in jvs with some of the gold majors such as Newmont and Barrick, and appear to be centred within a “land grab” with Anglogold even pegging “postage stamp” blocks probably because Callie’s (>10moz resource) surface footprint was only about 40m by 20m.

Jul 2002 - Independence Gold

Independence Gold NL (IGO) – Long Nickel Acquisition is part of the Aim to Create Substantial Shareholder Wealth

  • The Southstar Database is offering IGO a plethora of opportunities for the creation of individually focused companies.
  • The purchase of WMC’s Long nickel mine for $15m under the separately managed Lightning Nickel Pty Ltd is part of IGO’s aim to create substantial shareholder wealth.
  • Based on mining only Long and Victor South’s ore reserves of 750,000t at 3.6%Ni for 27,000t of nickel, at a rate of 150,000tpa, IGO’s Nickel management team (headed by Tim Moran) has estimated a 10% NPV of $46m for their attributable nickel. This was based on $60m in after tax cashflow over 5 years, using a nickel price of US$3.15/lb (US$6950/t), and an A$ exchange rate of US55c.
  • In our opinion, the 27,000t of Ni should be capable of being exceeded since it excludes almost the same again in the Long orebody’s resources, additional recoverable ore from the pillars (even allowing for geotech), and any possible exploration discoveries.
  • Lateral thinking by the IGO team following conceptual viewpoints outside of standard theory has resulted in evaluating two promising 100% owned gold prospect areas called Jeerinah (near Paulsen’s) and Yalgoo West, where initial results have been encouraging.

Aug 2002 - Platinum Production

Platinum production from Australia appears to gradually becoming a reality

And the first platinum producer is……….well, maybe, Platinum Australia.