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Tagged with: 2003

Jly 2003 - LionOre Mining

LionOre Mining International Ltd (LIM) – Developing Into A Premier Nickel & Gold Company

  • LionOre Mining (LIM) has had a staggering growth record in terms of gold and nickel discoveries and converting them into producing assets within only the past 2 years, to become a major nickel and gold company focused on Australia and Botswana with a market cap exceeding A$1bn.
  • LIM currently has three operating mines, being two nickel (Emily Ann in Australia, and Tati’s Phoenix in Botswana) of which both are in phases of expansion, and one gold (Thunderbox in Australia). LIM is aiming to convert some of its exploration prospects (like the Waterloo/Amorac nickel prospect) into mines too.
  • On 3 June 2003, LIM announced its intention to list on the ASX in July 2003 and merge with Dalrymple (DRE) on the basis of 1 LIM –for- 2.92 DRE shares requiring about 25m new LIM shares to be issued. The merger was expected to be completed in September 2003, and result in LIM holding 100% of Thunderbox, Waterloo, and the North Eastern Goldfields, plus Dalrymple’s other exploration assets, in addition to LIM’s existing holdings at Tati and the Emily Ann area of WA.
  • In its latest 2002 Annual Report, LIM stated its 3-year strategic targets as doubling attributable nickel production to at least 30,000tpa, and increasing the Thunderbox asset in WA to achieve sustainable gold production of more than 200,000ozpa.

Jul 2003 - PayDirt Conference

SWITCH from ZIM to AQP, Poss Spec Buy PPD

  • We attended the Paydirt Platinum Conference on 14-15 July 2003 in Perth, and about a week before that, a South African lunch with the SA Minister of Mines and SA High Commissioner which elaborated on some of the BEE aspects and changes. We have subdivided this one-off comment into 3 areas, namely, the outlook for commodities such as platinum, palladium and nickel; our observations on presentations by AQP, AXM, CSM, LIM, IGO, PLA, PPD and ZIM; and the SA lunch.
  • The outlook for platinum and palladium is mainly based on an excellent presentation by Johnson Matthey (JM) who advertised their new website (www.platinum.matthey.com) which contains a lot more newsy items etc than it previously used to. The outlook for nickel is based on a mix of the presentations but mainly on CSM’s view of chrome demand in China based on their stainless steel outlook.
  • The presentation by JM focused on what had caused the price fluctuations so far this year (to June 2003), namely Chinese jewellery demand stopping at US$700/oz, funds liquidating their long positions, SARS occurring at the second annual seasonal demand time (there are 3 per year : Chinese New Year, May and October). Then Chinese jewellery demand came back, plus the weakness in the US$ and Bush’s comments about fuel cells prompted the funds to return and drive the price back up to about US$650/oz. Platinum to December 2003 and beyond : (Appears to be in short supply, could rise further).
  • Platinum supply is short. The 50% increases in the total production from South Africa and Zimbabwe by 2007 are needed to achieve a balance between supply and demand, any hiccup and there is a shortage. If demand wants to rise further faster, then it can’t, there is simply not enough.
  • The platinum market has been helped (to remain in balance) by Russian and Swiss sales. However, the Russian selling is believed to have effectively gone. Russian sales were down from 1.3moz in 2001 to 980,000oz in 2002, and the 2002 sales were inflated by repaying a platinum based bank loan. So current sales are believed to be just Norilsk and Far Eastern Russian production. The platinum deficit increased from 370,000oz in 2001 to 570,000oz in 2002. It has been kept in check by the Swiss reducing their stock levels by 1.5moz over the past few years, to result in a major shortage of above-ground stocks of platinum. JM was leaving their forecast of US$590/oz to US$690/oz to the end of 2003, the inference being.

Jul 2003 - Pan Aust Resources

Pan Australian Resources NL (PNA) – Phu Bia Gold Project Approaching the Completion of its Pre-feasibility Study

  • The current focus for PNA is the completion of its pre-feasibility study which is on schedule for September 2003. Perhaps not surprisingly, Phu Kham (which literally translated means “mountain” of gold) is shaping up as the most prospective area with spectacular intersections such as GRC58’s 30m at 3.7g/t in the oxide gold cap ending in mineralisation and showing fairly regular grade continuity throughout the drillhole.
  • PNA provided targets in a presentation in late July 2003 of potentially commencing production from its Phu Bia Gold Project in late 2004, increasing to an annualised rate of 50,000ozpa gold from 2005, and then rising to 110,000ozpa gold and 50,000tpa copper as the Phu Kham copper-gold orebody (beneath the gold cap) comes into production from 2007.
  • The pre-feasibility study appears to be heading towards a combined 1.5mt to 2.0mtpa CIL and heap-leach plant located at Phu Kham (PK), possible trucking from Long Chieng Track (LCT) and a heap-leach at Ban Houayxai (BH).
  • Although the infrastructure is already reasonably good, it is being dramatically upgraded by the new south to north power line from the hydro-power station through to Phonsavan, which bypasses about 8km east of Phu Kham and is scheduled for completion in December 2003. A partly sealed road parallel to the power line is also scheduled for completion some 2 years’ later.

Aug 2003 - Michelago Limited

Michelago Limited (MIC) – Advancing towards Gold Production in China

  • The approval of a number of resolutions on 16 July 2003, has paved the way forward for MIC to acquire a 60% interest in two joint ventures with 40% held by the Laizhou Jincheng Gold Mine Group (Laizhou Gold) in the Jinya Gold Mine and nearby Exploration tenements located in the Guangxi Zhuang Province of southern China.
  • A Chinese feasibility study was completed on the Jinya Gold Mine following 304 diamond drillholes, exploration level and shaft development, and minor mining of the near surface ore in 1995. The mine closed in 1997 (due to the ore’s refractory nature), after producing 380,000t at 5g/t. The Jinya ore was tested in early 2002 (as part of the feasibility study) and bacox recoveries were a very acceptable 95%.
  • However, a revised study and review of the data is being undertaken by Michelago. MIC have a conceptual schedule of commencing construction in January 2004, with trial underground mining starting in December 2004, and process plant commissioning in June 2005 for concentrate sales at 39,000ozpa from August 2005. MIC then intends to complete a feasibility study in April 2006 based on installing a bacox plant in Guangxi for production from November 2006.
  • The development of the Jinya Gold Mine is being driven by the 40% JV partner Laizhou Gold which is doubling the size of its Bacox plant (in the Shandong Province) to 200,000ozpa in November 2003 and needs refractory ore.
  • The Jinya gold ore mineralisation has been classified as Carlin-type by the US Geological Survey in a recent open-file. It has the potential to develop into a significant gold district, and has the advantage that it does not need to find a bacox plant to treat its ore, it already has an offtake agreement for a 95% recovery.

Aug 2003 - Invest Outside Aust

Investing Outside of Australia Becomes Fashionable Again

The old adage for gold share investment of firstly Western Australia, then other (mainland) Australia, and then outside of Australia has changed dramatically in the past year, especially in the past 6 months. The rationale for why WA gold companies usually had twice the market cap of those in say NSW (aside from Newcrest’s revival) is that the gold orebodies in WA are perceived as being more predictable than in NSW.

Aug 2003 - Independence Gold

Independence Gold NL (IGO) – Hitting the Jackpot !

  • On 7 August 2003, we visited IGO’s Long Nickel mine and its new underground development at Gibb South, with a small group of brokers, analysts, fund managers, and the media.
  • Initial grades had been regarded as relatively disappointing in the 5% to 6%Ni vicinity, compared to the drillhole intersections at about 7% to 10%Ni, but IGO had recently encountered a horizontal “seam” or lode of massive ore averaging 21%Ni (some samples are ~27%Ni). This seam was observed (by us) to be about 10cm to 2m thick, overlain by up to 1.5m of disseminated 4%Ni, as shown in Figure 1.
  • This latest nickel mineralisation is clearly bonanza, jackpot-style. However, the prize is perceived to be Victor South which has widths of massive ore up to 30m of 3% to 7%Ni, and a number of 10m at 10%Ni drillhole intersections. Development production could start by June 2004 after completing the remaining 1.8km to be driven in the improving ground conditions towards the south, by April 2004.
  • The budget forecast for 2003/04 is 150,000t at 3.3%Ni and should be the worst case scenario since the grade has been reduced by 10% from the 3.6% expected (based on the feasibility study of an average ~3.45% from Long, plus sweeteners). There is 2,000t of Gibb South on the ROM pad at 6% to 7% Ni, and the production tonnage may also have been reduced by 10% with 41,000t treated in JQ03.

Aug 2003 - DnD - LHG, SGX, JBM

SWITCH from LHG to SGX, and JBM too?

  • I attended Diggers ‘n Dealers in Kalgoorlie last week and visited IGO’s Long Nickel mine afterwards (see separate report). I thought that there were a number of signs that we are entering into a resources boom. Unfortunately time restricts me from elaborating in great detail, and so mainly oneline comments have been made. However, the main conclusions based on the presentations, were : (in alphabetical order)
  • SWITCH : LHG to SGX, and possibly JBM partly to LIM or IGO/MCR.
  • BUY : IGO, OXR
  • ACCUMULATE : LIM, NCM, SGW, One’s to watch :
  • APO : on the old SGW tenements at Laverton
  • AUZ : revitalising the old Blair nickel mine which is actually not flooded to surface.
  • GTR : maybe, looked interesting but I have never visited Tennant Creek.
  • And amongst the Major Offshore Golds (South African and North American) : (that I liked)
  • Gold Fields, Anglogold and Harmony. Commodities :
  • Gold : Both Newmont and Gold Fields were projecting higher prices to US$400/oz and beyond.
  • Zinc : Kagara presented a paper showing that the Zinc market appears to have bottomed. Zinc prices are often regarded as highly leveraged because they are coming off such a low base.

Sep 2003 - ZIM and AQP

ZIM - Still A Spec Buy, AQP - Bid Coming ?

  • This comment contains 3 sections, namely Impala’s comments, Zimplats and Aquarius. Impala’s comments The Implats press release that accompanied their year end results last Thursday (28 August), had a few pointers as to what may happen in the future to AQP and ZIM, namely :
  • There still could be another bid for ZIM or even one for Aquarius Since, according to the press release (available on IMP’s website) Continued rationalisation of structure Implats has continued to rationalise its corporate structure as the opportunity has arisen. The interests in Mimosa and Zimplats have been consolidated for a full year for the first time. Although currently these contributions are small, as Implats’ interest in Zimplats rises and as expansions at both these operations progress, these are expected to become more significant in the future.
  • In the interests of simplifying operational structures and creating clarity for investors, further changes can be expected in the near and medium term, if an analysis of these opportunities proves to be value-enhancing to shareholders.
  • If you had any doubts about ZIM’s actual worth, you only have to read the first paragraph of this section, namely : (non italics are our inserted comments) Although currently these contributions are small, as Implats’ interest in Zimplats rises and as expansions at both these operations progress (Mimosa and Zimplats), these are expected to become more significant in the future. (note : AQP has the other 50% of Mimosa)

Sep 2003 - Investment Decision

What is relevant when making an investment decision?

The subject of what is considered relevant when making an investment decision is extremely broad, however, for this month’s column we have focused on takeover situations and research.

Sep 2003 - Abelle Limited

Abelle Limited (ABX) – Innovation, Logic and First PNG Production possibly by 2005

  • Abelle’s PNG assets essentially consist of two regional, volcanic mega-complexes about 70km apart, and three significant mineralised systems, being Hamata- Hidden Valley (HHV), the Wafi Gold Complex (Wafi) and the Golpu Porphyry Copper-Gold Complex (also at Wafi). HHV is the most advanced, and is targeted to commence gold production during 2005, after about 12 months’ construction.
  • The 5% NPV for Abelle at current gold prices is almost A$2.80/share. However, it must be emphasised that this is only one of a number of possible scenarios, and there is significant potential for this valuation to be exceeded, simply through attaining slightly higher grades, or including Golpu, or success from any of the other promising adjacent prospects amongst the complexes of HHV and Wafi.
  • The scale of the complexes is huge, Wafi has a newly recognised >6g/t high grade Link Zone with potentially greater than 3.9moz, plus an existing ~4moz gold resource, and a number of gold orebodies within an inner radius of about 500m. Golpu has a delineated >90mt at 2.1% (cu-equivalent) copper-gold porphyry that extends beyond a depth of 1km from surface, & HHV consists of Hamata providing 350,000oz in early cashflow, followed by Hidden Valley / Kaveroi’s resource of >2moz gold and >37moz silver, amongst an overall resource base of ~4moz.
  • The 3 projects have a market stigma attached to them for their previous failure to be developed, but Abelle has made major innovative conceptual differences to previous feasibility studies, that dramatically improve their economics. Abelle has also re-interpreted Wafi as near horizontal mineralisation (and is verifying it through drilling), instead of the near vertical previous interpretations.
  • ABX is moving fast to bring HHV into production, scheduling completion of the feasibility study by the end of October 2003. Our site visit in August 2003 was part of a team examining where to construct the conveyor, access roads, plant etc.

Oct 2003 - China Part 2

China – Part 2 – The Chinese Gold Industry, some of its mines and exploration concepts.

Last month, we covered the basics on China, and in this section, Part 2, we have covered our impressions of the Chinese Gold Industry from a Michelago trip to its operations in China.

Oct 2003 - Michelago Limited

Michelago Limited (MIC) – Producing >120,000zpa of Attributable Gold from About June 2004

  • The signing of a Letter of Intent (LOI) in Laizhou City, Shandong Province, PR of China on 23 September 2003, paves the way for Michelago (MIC) to acquire 51% of Shandong Tarzan Bio-Gold Co Ltd’s (BioGold) treatment operations. Which enables MIC to potentially produce >120,000ozpa of attributable gold from about June 2004 (depending on the timing of signing the Sino Foreign Joint Venture).
  • In addition, MIC signed an LOI with Laizhou Jincheng Gold Mining Company Ltd (Laizhou Jincheng, the parent company of BioGold) for an exploration JV in which MIC may earn a 51% interest in any gold resources below 500m from surface in an area of 10 sq km in the Jiaodong Peninsula of Shandong. The area includes the 3 small underground Jincheng mines that produce a total of ~25,000ozpa at a gradeof ~4.7g/t to 5.0g/t, and some strike extensions.
  • BioGold’s current treatment operations consist of an expanding biox plant that is currently producing about 70,000ozpa from refractory ore, a cyanide-leach plant producing about 130,000ozpa from non-refractory ores, and a 51% owned refinery that also produces about 100,000ozpa from dore, or a total of about 250,000ozpa currently attributable to BioGold for which MIC’s 51% should be >125,000ozpa.
  • MIC is still progressing with its SFJV to acquire a 60% interest in two joint ventures with 40% held by Laizhou Jincheng in the Jinya Gold Mine and nearby Exploration tenements located in the Guangxi Province of Southern China. Initial indications are that indicated and inferred resources to a depth of 280m could be 0.5moz at 5g/t. However, MIC appears likely to undertake further drilling with a view to extending the resources based on ideally producing 60 to 70,000ozpa and a higher ROI instead of 40,000ozpa.

Oct 2003 - Minotaur Resources

Minotaur Resources Ltd (MNR) – Bringing Prominent Hill into Production possibly by 2006

  • After acquiring 100% of the Mt Woods Joint Venture areas, MNR has farmed out the area to Oxiana Resources (OXR) such that OXR can acquire a 65% interest in the tenements that contains the Prominent Hill copper-gold discovery for $34m. The staged farm-in includes an initial $3.5m for infill drilling to result in a resource, followed by a $5m pre-feasibility, and then full feasibility study, which could result in Prominent Hill being in production by the end of 2006.
  • The effective Strategic Alliance between MNR and OXR is a good “combination”, leaving MNR to focus on exploration with OXR taking over the mining aspects of Prominent Hill assuming that it is viable to some degree.
  • The haematite breccia zone of the orebody appears to be consistently mineralised, for the northernmost limb, and a mineralised block can be estimated as containing about 70mt (our figures) (based on a conceptual block about 120m wide by 350m high by 1000m long) that allows for possibly a 30% reduction due to an apparent plunging grade distribution and assumes ~70% of the resource may be mineable.
  • At this stage, it is too early to estimate grades and model MNR until the resource has been determined after the infill drilling. Possibly, Prominent Hill could be a selective 1mtpa to 2mtpa producer initially mining higher grade >2.5%Cu-equiv areas, which were observed in the detailed drillhole 1m sampling as in DP005’s intersection of 209m @ 1.54%Cu & 0.9g/tAu including lengths of 7m to 8m at about3.0%Cu & 4.5g/t Au.
  • However, its actual throughput rate, be it 3mtpa sub-level open-stoping method or capex of ~A$200m depends on the feasibility study. A mine life of 20 to 25 years conceptually appears to be achievable and probably the target of the OXR farm-in.

Oct 2003 - Red Metal Limited

Red Metal Limited (RDM) – Applying a Fresh Approach to Finding Significant Copper – Gold Orebodies in Australia

  • The IPO Offer : Red Metal Limited (RDM) offered a subscription of 60m shares at 20c to raise $12m (minimum subscription $12m, underwritten by Grange Securities Ltd) to drill up to 40 (24 in the first 12 months) delineated copper-gold targets in 13 individual projects in Australia. There are also a number of other projects in joint venture discussion, with their own further drill targets.
  • RDM has secured an interest in a highly prospective portfolio of copper and copper-gold exploration properties in Australia through a Strategic Alliance and Sale Agreement with Phelps Dodge Australasia Inc, a subsidiary of Phelps Dodge Corporation, the world’s second largest producer (at about 1mtpa) of copper.
  • RDM are focusing their exploration on major, relatively high-grade copper, and copper-gold deposits located within the under-explored portions of the fertile Middle Proterozoic terrains (about 1.5bn to 1.8bn years ago), primarily in South Australia, Queensland, the Northern Territory and NSW. Deposit styles include Iron Oxide Copper Gold (IOCG) types similar to Olympic Dam and Sediment- Hosted types similar to the Mt Isa copper mine.
  • RDM use a fresh approach to finding major copper-gold orebodies through their application of sophisticated algorithms on geophysical data to map deep seated magmatic centres and the major faults which focus and control mineralisation. This approach has been applied to advance most of RDM’s more than 13 projects to drill-ready status over the past two years or so, and defined up to 40 targets. Any one of the targets could become a company-maker for RDM.
  • Such is the nature of RDM’s “Alliance” with Phelps Dodge (PD) that the first 3 projects to be drilled in DQ03 are joint ventures (Hawks Nest, Moonta and Browns) in which RDM is free carried by PD (to a decision to mine, provided PD elects to advance them), for 30% of PD’s 70% interest, or about 21% of each project.

Oct 2003 - Goldstar Resources

Goldstar Resources NL (GDR) – Reopening Victoria’s Walhalla Goldfield

  • The IPO Offer : Goldstar Resources (GDR) offered a subscription of 24m shares at 25c to raise $6m (minimum subscription $5m, sponsored by Southern Cross Equities) primarily to re-open the old Walhalla Goldfield in Eastern Victoria. GDR aims to establish an ~1moz resource at Walhalla, an up to 0.5moz resource at its Peak Hill prospect and evaluate at least three other prospects in Australia which have been previously explored but could be re-interpreted.
  • The main focus at Walhalla are the Cohen’s and Empress Reefs which lie along a 1.5km strike length of the delineated 4km long Cohen’s Line of Reef at Walhalla. The Cohen’s reef is not like the more common Victorian styles of gold mineralisation west of Melbourne, and instead is located east of Melbourne and is contained within an almost vertical shear zone.
  • Historic grades in the Cohen’s Reef were exceptionally high being up to 6oz/t or 190g/t over an average width of 45cm and strike lengths of 18m ahead of the mine closure in 1913 due to pumping and ventilation at depths >1km. Almost 1.5moz was extracted at an average grade of 1oz/t or 33g/t over the 1.5km strike length of workings.
  • Recoveries of up to 95% have been attained from gravity concentration testwork of the stockwork ore undertaken in the early 1990’s, which is in contrast to the market’s perception that Walhalla’s ore is refractory. The main Cohen reef historically attained recoveries of 85% to 90% (using stamp batteries). The misperception arose due to a pre-feasibility study of the stockwork resource in 1987 that attained low recoveries because it only considered direct cyanidation.
  • The exploration focus at Walhalla is on three styles of mineralisation, being the stockwork resource over the old Cohen’s reef workings, three possible extensions to the Empress lode system, and extensions to the Cohen’s reef that are greater than 5g/t. Extensions appear to be very possible, given that cut-off grades of up to 18g/t together with perhaps 3 to 8 g/t losses in tailings, infers that somehistorically classified “unpay” areas could be >10g/t.

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