• Increase font size
  • Default font size
  • Decrease font size

Tagged with: 2004

Aug 2004 - Minotaur Resources

Minotaur Resources Ltd (MNR) –Prominent Hill Now in Oxiana’s Production Schedule for Commissioning in late 2007 / early 2008

  • Oxiana Limited (OXR) gave a detailed presentation (which we attended) in Adelaide on 26 August 2004, on their expectations for MNR’s Prominent Hill initially averaging 90,000tpa copper and 110,000ozpa gold from 2008, and its inclusion within OXR’s production schedule on the basis of owning 100% of it.
  • OXR envisage completing an infill drilling programme/pre-feasibility study at a cost of $5m within 9 months to June 2005, earning them 35% of Prominent Hill. Followed by spending $25.5m (to earn 65%) during an up to 12 month full feasibility study and then 18-month construction period leading into 7.5mtpa open-cut production for up to 5 years from late 2007 / early 2008.
  • The estimated capex of A$350m does not include the potential 200,000oz (or more) gold halo surrounding, and gold mineralisation east of, the copper-gold orebody, which could reduce the outlay by at least $50m, pay for the 100m to 120m pre-strip and result in gold production during 2007. The capex may also be reduced by SA Government concessions and/or offtake agreements from China or elsewhere.
  • MNR’s share price has risen close to the conceptual value of $1.65/share that was based on capex of $200m in ERA’s October 2003 report. The usual “rule of thumb” for a project’s approval is to at least achieve the required capex as the NPV (at 10% or 12% and being in Australia, there is no political risk). Consequently, capex of $350m infers that MNR’s market cap has a minimum capability of $123m or $2.35 per share, implying that it could trade between $1.50 and $2.10 per share.
  • The inclusion by OXR of 100% of Prominent Hill in its new forecasts (it was included at 65% in OXR’s presentations around 5 August 2004) does enable OXR to achieve its stated 5-year targets of producing 200,000tpa of copper and 500,000ozpa in gold, and could infer that at some stage OXR may make a takeover bid for MNR. Such a bid could occur by May 2005 ahead of completion of the prefeasibility study, and possibly be in the form of scrip or scrip and cash.

Oct 2004 - Fluorescent Minerals

Using fluorescent minerals to identify ore mineralisation

The use of fluorescent minerals to identify fluorspar and scheelite is known by those mining it. However, it is the first time that I have encountered it being used as an industry standard technique to identify gold and other ore mineralisation in drill-core and underground, which is what I encountered when recently visiting Dragon Mining’s gold mine operations in Finland.

Nov 2004 - Berkeley Resources

Berkeley Resources Limited (BKY) – Drilling its first Project (Xin Zhuang) in the Jiaodong Peninsular of Shandong Province

  • Berkeley has so far established two joint ventures in the Jiaodong Peninsular which is located in the eastern Shandong Province of China, being Ao Xin (an approved SFJV with the Shandong HeXi Gold Mining Group) in western Jiaodong, and Jin Xin (an applied for business licence with the 3rd (Geological) Brigade of the Shandong BGMR (Bureau of Geology and Mineral Resources) in eastern Jiaodong.
  • The first drilling programme has commenced in the Ao Xin JV over the Xin Zhuang prospect which is defining the gold mineralisation under alluvial cover on the primary Jiao Jia fault structure. There are numerous operating gold mines along the exposed Jiao Jia fault structure, and east and west of where the Jiao Jia fault goes under the alluvial cover. BKY are drilling a section between those mines.
  • The Xin Zhuang prospect covers a flexure in the Jiao Jia fault, which bears some resemblance to HeXi’s primary 1.2moz operating mine that lies on a flexure in a secondary fault east of the Jiao Jia primary structure. The initial drilling has produced similar core to HeXi being up to 8 to 9% pyrite in potassium altered (red/pink coloured) granite. However, initial intersections have only been in the
  • 0.7g/t to 2.0g/t vicinity. HeXi has a complex multiple stacked lode system, and these intersections could still be representative of a similar system.
  • On receipt of the business licence, the Jin Xin JV with the 3rd Brigade expects to focus on 3 (of the 8) properties being Shen Shan (containing Kong Xi Shan), Liu Shui Tou (containing the conglomerates), and Ying Wu Shan (containing Wen Deng). All are based on semi defunct gold mine operations, which have had some surface mining and occasional shallow underground mining.
  • With the lowest market cap (at less than half of the next lowest) of its Australian gold company peers in China as shown in Table 1 on page 6 of this report, BKY’s share price could easily suddenly increase.

Nov 2004 - Gold Producer

Could China become the world’s largest gold producer ?

The latest GFMS Gold Survey 2004 lists the top 5 gold producing countries in 2003 as a still declining South Africa (376t), United States (285t), Australia (284t), China (213t) and Russia (182t).

Nov 2004 - Dragon Mining

Dragon Mining NL (DRA) – Bringing Scandinavian Gold Mines into Production

  • Dragon are currently completing construction of their first gold mine in Scandinavia, being their 80% owned Svartliden in northern Sweden commencing in the December Quarter 2004 at an expected production rate of 65,000oz to 70,000oz and cash cost of ~US$190/oz in the first year of the project, based on treating 300,000t at 7.2g/t. Production has been estimated to average 55,000ozpa at cash costs of ~US$230/oz over the mine’s current 5-year life.
  • This is expected to be followed by the wholly owned Vammala operational centre (comprised of Orivesi and Jokisivu) in SW Finland. Exploration is currently extending the reserves and resources at Orivesi, while delineating the extent of Jokisivu for a decision to mine to be made in December 2004. Should the expected approval be given, then production at 60,000ozpa to 80,000ozpa could commence perhaps as early as July 2005 at cash costs of ~US$210/oz.
  • Pampalo in SE Finland could become the third operation for Dragon possibly from mid-2007 at production of 40,000ozpa to 50,000ozpa or so. Resources of almost 200,000oz (0.9mt at 6.9g/t) have been established, and deepening of the decline and establishment of the drill positions for deeper extensions has commenced. There are a number of smaller resources amongst nearby possible satellite operations.
  • Our 5%NPV for Dragon is A$0.30 per share based only on the above 3 potential operations and not giving any credit for the number of other, mainly Finnish, exploration properties that could also become operations. It should be noted that the mine lives should be longer, and our modelled grades could easily be more than 10% higher (each 10% increase in realised grades currently adds A$0.09 to the NPV)

Nov 2004 - Michelago Limited

Michelago Limited (MIC) – Heading for Attributable Gold Production of 215,000ozpa based on 50% ownership of Gold Ridge and its BioGold SFJV (once approved) in China

  • On 29 November 2004, MIC announced that it has become a 20% shareholder in a consortium to acquire the Gold Ridge mine in the Solomon Islands from the American Home Assurance Company (AIG), with a strategy to acquire an additional 30% in the ASG consortium and fund 50% of the acquisition.
  • As part of the funding, MIC has placed 200m shares at 10c (with a 1-for-2 free option at 15c to December 2006) to raise A$20m subject to shareholder approval in late December 2004. The A$20m is to be used to pay the first funding requirement of A$13m (US$10m), $6m as part of the entry into the BioGold SFJV and A$1m for general working capital.
  • The ASG (Australian Solomons Gold P/L) consortium estimates that up to US$90m could be required to purchase the Gold Ridge mine and return it to production of 150,000ozpa for 10 years from the second half of 2006, based on 2.3moz of resources and 1.7moz of reserves as at June 2000.
  • Gold Ridge operated successfully for almost 2 years before it was suspended in unrest following a coup in June 2000. However, the intervention of the Regional Assistance Mission to the Solomon Islands has since restored sovereign stability, and aid has been injected to significantly improve the Islands’ infrastructure.
  • With 75,000ozpa for 10 years and 82% (after SFJV approval) of BioGold’s 170,000oz (ahead of the expansion), MIC could be able to attribute 215,000ozpa of production from 2006. There is a further 51% of 82% of 90,000ozpa from the gold refinery, although margins on dore are almost negligible at 1%.
  • Conceptually Michelago’s market cap could increase to over $200m representing an almost doubling of its current share price of about 10 to 11c. Our target of >20c for MIC remains, rating it as a SPEC BUY.

Dec 2004 - CHINA 2020 to 2040

CHINA – Targeting its Second Growth Phase from 2020 to 2040

We attended the China Mining Conference in Beijing in mid-November 2004 along with over 1000 delegates which like anything in China has undergone dramatic growth from the 40 that attended the first conference 4 years’ ago in 2000, and couple of hundred last year in 2003.

Dec 2004 - Minotaur Resources

Minotaur Resources Ltd (MNR) – Just How Much Is MNR Worth ?

  • This report determines a potential value for MNR of A$2.70/share according to perhaps its base case worst scenario. Applying seemingly realistic copper price sensitivities soon enhances the underlying value to beyond A$3.00 per MNR share.
  • On 9 November 2004, Oxiana Limited (OXR) announced that it had reached an agreement to takeover MNR by a “scheme of arrangement” in which MNR shareholders would receive 1.85 OXR shares –for- 1 MNR share (representing the Prominent Hill assets and liabilities), and 1 MinEx (Minotaur Exploration share, representing the rest of Minotaur, at an estimated IPO of 40c/share)
  • Although we do recommend that MNR shareholders vote in favour of OXR’s offer when it occurs on its expected date in January 2005, it does beg the question as to what MNR is actually worth through OXR and MNR’s remaining assets. ( Note : We have never been commissioned to visit OXR’s operations. Consequently this report is based mainly on presentations, ASX releases, a visit to Pan Australian in Laos, and general knowledge).
  • MNR has been ascribed a value of A$2.29 per share in the OXR merger offer based on A$1.89 for OXR at about A$1.02 per share and 40c for MNR Exploration. However, our analysis infers that very little if anything has been included for Prominent Hill and instead the value appears to be closer to A$2.70/share.
  • OXR is a growth story, which MNR shareholders can access effectively from the first day of Sepon’s new copper production building up to 60,000tpa Cu at cash costs ~US$0.37/lb and a gold expansion to 230,000ozpa at cash costs of ~US$180/oz. Excluding Prominent Hill, OXR has 5-year targets of 400,000ozpa gold and 100,000tpa copper which appear to be attainable. Hence valuing OXR at A$1.02/share just on its Sepon assets appears to be conservative, especially if copper prices >US$1.10/lb are achieved.
  • Minotaur Exploration’s ascribed 40c (actually 42c) value is based mainly on its investment holdings in Mithril and Petratherm, plus the cash to be raised and net cash left within the company, hence valuing the exploration assets at a cost of only A$2.5m. Given the scope and expenditure being incurred on these numerous exploration properties, this appears to be very conservative.

Kitco Spot Gold Price

   Click Chart for Spot Gold Price[Most Recent Quotes from www.kitco.com]

Stock Quote

  (Add .ax for ASX)