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Tagged with: 2003

Nov 2003 - Nickel Price

How long can the nickel price stay about US$5/lb?

This time round, everyone could be in for a big surprise.

On 7 November 2003, the LME nickel price closed at US$12,080/t or US$5.45/lb, and the forward curve price is still above US$10,000/t or US$4.54/lb in 27 months’ time (or January 2006). In their presentation on the Junior Nickel Sector at the Paydirt Nickel Conference in Perth on 23 October 2003, Hartleys showed a comparison of nickel price forecasts from some of the major brokers which showed a general expectation of the nickel price peaking at (depending on the broker) either about US$4.25/lb in 2004, or about US$4.75/lb in 2005, before collapsing to and then remaining at about US$3.25/lb from 2006.

Nov 2003 - EXCO Resources

EXCO Resources NL (EXS) – Using White Dam to Attain Early Cashflow

  • EXCO is an exploration company that has recently acquired a 40% interest in the Drew Joint Venture (with Polymetals, and is farming in to increase its interest to 60%). The Drew Joint Venture contains the prospective White Dam gold mine and surrounding properties (in South Australia), enabling EXS to attain early cashflow.
  • White Dam has a non-JORC resource of about 5mt at 1g/t (or 160,000oz), so EXCO are infilling to generate an accepted reserve and resource by about February 2004. After which a trial 30,000t to 50,000t heap-leach is expected to be commissioned as part of a scale up to full 1mtpa to 2mtpa production.
  • EXCO expects to use the early cashflow from the Drew Joint Venture to advance its expected copper operation at Mt Margaret, since the acquisition of White Dam provides EXS with two relatively advanced projects (Drew and Mt Margaret) that are both on the cusp of making the transition from exploration into production.
  • Mt Margaret lies immediately east of Ernest Henry in the Mt Isa district of Queensland. The recent discovery of higher grade near surface mineralisation (such as 29m @ 3.64%Cu & 1.28g/tAu, and 65m @ 2.55%Cu & 0.56g/tAu [including 9m @ 4.28%Cu and 25m @ 3.78%Cu]) has resulted in a review of the pre-feasibility study with a decision on the next stage of advancement expected in March 2004.
  • Should a small 0.5mtpa operation be established at Mt Margaret, then EXS’ other nearby regional prospects such as at Hazel Creek and Boomara could come into the viability equation, especially with Turpentine Creek’s (in Hazel Creek) 16m @ 2.94%Cu & 0.59g/t Au from 24m including 8m @ 4.28%Cu.
  • EXCO has established a select drill-ready portfolio of potentially promising Middle Proterozoic primarily copper – gold exploration projects, although the range does extend to include the other base metals such as nickel-PGM and leadzinc- silver. The projects are mainly in the form of a series of joint ventures in which EXS is largely the minor contributor with a major company providing the bulk of the exploration finance.

Nov 2003 - MIC - Prod Forecast

MIC - Production Forecast to 300kozpa at AGM Gold – US$425/oz next ?

  • This comment is based mainly on our attendance at Michelago’s AGM at 3.30pm on 19 Nov 2003 in Sydney, and an update on our viewpoint of the gold price.
  • Michelago (MIC) : Rated as a Spec Buy
  • MIC gave a calendar year production forecast in its 2003 AGM presentation, in accordance with its target of attaining gold production of 300,000ozpa within the coming 5 years or so, as shown below :
  • In response to questions on cash costs, MIC stated that they expected BioGold’s production costs in 2004 to be about US$220/oz to US$230/oz, being based on purchasing concentrates from producers at 55% to 75% of the gold price (depending on what state and type the concentrate is sourced from).
  • The driver for MIC’s share price is probably the signing of the SFJV’s. At this stage, the exploration JV’s are expected to be signed before Christmas, and the production such as BioGold after Grant Thornton has completed its due diligence by the end of 2003. Biogold could be approved in March (after the Chinese New Year and the Summer festivals) or May 2004, and any subsequent required financing in JQ04, which has resulted in the production estimate shown in the above figure from about mid-2004 for an attributable 51%. It should be noted that MIC does not have to have the SFJV signed in order to start exploration, from what we can see, a number of other Chinese exposed gold companies are not waiting.

Nov 2003 - Terramin Australia

Terramin Australia Limited (TZN) – A New High Grade Zinc Stock

  • The IPO Offer : Terramin Australia Ltd (TZN) is offering a subscription of 25m shares at 20c to raise $5m (minimum subscription $5m, underwritten by Taylor Collison Limited) to complete feasibility studies on the relatively high grade Angas Zinc Project, re-interpret and advance the Menninnie Dam Zinc Project, and explore by JVs its pipeline of gold-copper projects, all in South Australia.
  • Some $1.1m of the raising enables TZN to complete its 1997 farm-in agreement to acquire a 60% interest in the Angas Zinc Project from the original JV partner Aberfoyle (since taken over by Western Metals, which is now in receivership). The agreement was extended for 2m TZN options in June 2003 to include Menninnie Dam (South Australia’s potentially largest lead-zinc deposit), and TZN has a call option over the remaining 40% in both projects.
  • It is possible to identify some continuity of a high grade mineralised zinc zone over 80m of strike at Angas (in diamond drillhole nos 29, 36 and 37, with 14m @ 21%Zn from 192m in DD29, 6m @ 16%Zn from 95m in DD36, and 12m @14.6%Zn from 45m downhole from surface in DD37). Copper mineralisation is minor at less than 1%, although lead and silver values can be material. In TZN’s opinion, the Sedex total (Fe+Pb+Zn) percentage content should be used to delineate the lode.
  • TZN think that the Menninnie Dam Zinc orebody has been misinterpreted and does not strike north-south, but is instead fault controlled east-west, and verification using the MIMDAS system is planned. If it is based east-west then most of the drilling of ~10 years ago was targeting an orebody in the wrong direction.
  • Although Terramin’s main focus is on high grade zinc projects and bringing them into production, it does also have a number of copper-gold projects of which the most advanced is the Gina Block part of the Ingomar Project (about 100km west of MNR’s Prominent Hill) where gold anomalies apparently coincide with folds and fault structures, and a major regional anticlinal fold has been interpreted.

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