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Tagged with: 2005

Aug 2005 - Sino Gold Limited

Sino Gold Limited (SGX) –Targeting an achievable 500,000ozpa within 3 years

  • The Mining Licence (ML) approval for Sino Gold’s Jinfeng was received on 16 June 2005 on the basis of a 12-year life treating 1.2mtpa to produce 180,000ozpa from about SQ 2006. During the approval period, a scoping study was completed in November 2004 on Phase 2, being a 50% expansion of Jinfeng to 1.8mtpa to produce ~300,000ozpa from MQ 2008 by bringing in the underground earlier.
  • White Mountain in Jilin Province is showing signs that it could become SGX’s next gold mine, with a fairly consistent width of about 20m at grades >4g/t (two intersections in JQ 2005 were 20.4m @ 8.2g/t and 21.2m @ 5.8g/t) extending over at least 1.1km (and still open on strike and at depth). Should it be capable of achieving production rates of ~150,000ozpa, then Sino Gold may be able to achieve its target of 500,000ozpa of production as soon as 2008.
  • The construction of Jinfeng has started in earnest and already the bulk earthworks are 75% complete. In doing so, the orebody has been exposed and with it a number of ore zones and splays that were not in the original model, inferring that the strip ratio may be lower than the expected average of 13 to 1, which should reduce costs and result in additional mill feed.
  • SGX’s experience in achieving MLs at both Jinfeng and Zhangjiashan within one year of the EL being granted implies that the White Mountain ML may be achieved within one year (since it already has its EL), and hence White Mountain could be in production by 2008, especially since it appears to be free milling (not refractory). Sino Gold are aiming to delineate a 1moz resource and conduct feasibility studies at White Mountain by 2006, possibly develop in 2007 and start production in 2008.
  • SGX has an extensive exploration programme at Jinfeng and its surrounding region in Guizhou Province. Aside from the deep drilling already extending the main Jinfeng orebody 120m deeper, there are numerous drill-ready targets within a total area exceeding 530sq km mainly covering parts of southern Guizhou.

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Aug 2005 - Cons Minerals

Consolidated Minerals Ltd (CSM) –Becoming a Mid-Tier Diversified Mining Company

  • Consolidated Minerals’ operations are based in WA where it has established an ore reserve/resource life of more than 10 years at Woodie Woodie and a position in the market of consistently producing one of the highest quality manganese ores in the world, currently at 1mtpa. CSM has also been producing 250,000tpa chrome from Coobina, and is now enhancing its product range with nickel production from Reliance’s Beta-Hunt mine, followed by future copper production from Jabiru.
  • CSM’s annualised manganese production has risen to 1.0mtpa and appears capable of reaching at least 1.2mtpa or so. When Coobina runs out of ore (in possibly 5 years’ time), it is expected to move the Coobina plant to Woodie Woodie South and increase production to at least 1.5mtpa of manganese.
  • Production from Reliance’s Beta-Hunt mine is expected to double when East Alpha starts in MQ 2006 and builds up to 4,000tpa to 5,000tpa Ni by December 2006, increasing total mine output to a credible 9,000tpa to 10,000tpa Ni. CSM has a long-term target of producing 15,000tpa to 20,000tpa Ni which appears to be attainable, particularly when it has its own concentrator.
  • CSM is able to have its own concentrator treating nickel ore from old WMC nickel mines because Reliance obtained the nickel rights from Gold Fields, and is hence capable of reaping the benefits like Jubilee (JBM). It should also receive the gold credits from its orebodies, & expects to treat orebodies such as TIR’s Armstrong.
  • The market has upgraded CSM as it achieves higher profits and dividend distributions. This trend has resulted in CSM’s share price increasing by almost 7 times in the past two years from 62c to its current price of $4.00, and is expected to continue, especially as its nickel production strategy unfolds.

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Sep 2005 - Nickel at Kambalda

Finding More Nickel at Kambalda

The purchase of WMC’s old nickel mines at Kambalda by a number of junior mining companies has resulted in a number of listed companies with lives greater than 7 years (based on minable resources) such as at Independence’s (IGOs) Long mine, Consolidated Minerals’ (CSMs) Beta Hunt, and Mincor’s (MCRs) Widgiemooltha operations, all of which we (ERA) have visited this year (to August 2005). It should be noted that this column has been based on observations which may not conform to some geological theories.

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Sep 2005 - Mincor Resources

Mincor Resources NL (MCR) – Ramping Up Production by 40% to 14,000tpa Nickel from March Quarter 2006

  • Mincor Resources (MCR) commissioned its two “new” re-opened nickel mines of Redross and Mariners, and extension of Miitel into North Miitel during 2004/2005 and expects to produce ~13,000t of Ni during 2005/2006 inferring that it could produce 14,000tpa Ni from MQ2006.
  • While Wannaway is expected to continue as long as it profitably can, Miitel remains the mainstay of MCR’s operations at Widgiemooltha (south of Kambalda in WA), and with the increased exploration, extensions both north & south of Miitel have already been discovered lengthening Miitel’s probable life beyond 5 years.
  • MCR is a relatively conservative company, only including remnant pillars in resources if there is an MCR approved plan to mine them, which has resulted in a very high resource to reserve conversion rate of >90%. Resources were 68,000t Ni as at 30 June 2005 having increased by a net 12% (8,800t Ni) since June 2004, and a further upgrade is expected within the next 6 months (by MQ 2006), based on the new discoveries and extensions to ore boundaries since late June 2005.
  • There is a market perception that the Widgiemooltha Dome’s Ni grades and orebody sizes are lower than Kambalda’s and it is less prospective. However, the average Ni grades are in fact similar, with high tenor >10%Ni also present, such that the eastern side of the Widgiemooltha Dome appears to be just as prospective with potentially material upside since it has been explored to a lesser degree.
  • While the Widgiemooltha area is littered with old gold workings, the north-south striking Lake Zot dolerite (mainly under the salt lake) has not been drilled for gold, despite its host rock similarities to Gold Fields’ St Ives and Avoca’s Higginsvile, and its proximity to WA’s renowned gold mineralisation-feeding structures. MCR have a programme to RC drill the Lake Zot dolerite starting in October 2005.

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Oct 2005 - Lanfranchi

Lanfranchi – the sleeping giant ?

In the last issue of Paydirt (October 2005, Issue 122) this column discussed the progress that has been made by the junior nickel miners on the Kambalda and Widgiemooltha nickel domes. Since then we (ERA) have visited Sally Malay’s (SMY’s) 75% owned (Donegal Resources owns the remaining 25%) Lanfranchi Nickel Mines (LNM).

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Oct 2005 - Sally Malay Mining

Sally Malay Mining Limited (SMY) –Extending SMY’s Life Beyond 8 Years

  • Sally Malay is currently increasing production at both of its nickel mines, being the 100% owned Kimberley Nickel Mines (KNM) in northern WA and 75% owned Lanfranchi Nickel Mines (LNM) south of Kambalda, to ~8,000t Ni pa in 2006.
  • Based mainly on the existing ore reserves of the central orebody at KNM, SMY’s life is about 5 years. However, so far, there has been an ~24% positive reconciliation in contained nickel in the upper orebody (mined essentially from the open-cut). Also, the initial underground levels are exposing significantly greater widths than expected such that the first stoping block indicates a 50% increase in tonnes or 43% increase in contained nickel.
  • Drilling is also extending the Sally Malay orebody further west, with the intersection of 3.6m at 3.1% Ni (and 0.95%Cu) in drillhole KUD56 ~40m from the western boundary inferring further extensions to reserves and resources. When combined with the 11 drillholes already having intersected the lower orebody (below the 500 fault), SMY’s life at KNM could be at least 10 years, at possibly a higher grade than current ore reserves.
  • The initial exposures of Helmut South at Lanfranchi are reminiscent of the thick widths of Helmut with a 16m true width (35m intersected) @ 4.1% Ni containing an 8.1m true width (17.4m intersected) higher grade zone at 5.4%Ni. Some of the Lanfranchi mines were renowned for their thick widths and high grades such as the 6m to 8m thick massive sulphide at 10% to 12%Ni in Schmitz, and the 13,680tNi mined from Skinner in 2000, consisting of 260,000t at 5.3%Ni.
  • Lanfranchi also has the potential to realise a significantly longer life following the discovery that a complete host sequence and contact boundary exists on the northern overturned side of the east-west striking dome. Theoretically the lava channels/embayments that have been mined to-date across the southern side of the dome could recur along the northern side of the dome too.

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Nov 2005 - CSM, WMR, BHPB

Is CSM going to rattle WMR/BHPB’s Cage?

In the last two issues of Paydirt (October and November 2005, Issues 122 and 123) this column has discussed the progress that has been made by the junior nickel miners on the Kambalda, Widgiemooltha and Lanfranchi nickel domes. Since then we (ERA) have visited Titan Resource’s prospects and approaching nickel and gold mines at North Widgiemooltha, completing the picture with some surprising outcomes.

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Nov 2005 - Michelago Limited

Michelago Limited (MIC) – A Leveraged Gold Play

  • On 19 September 2005, MIC announced that (subject to shareholder approval) it had made a placement of A$8.2m in the form of 164m shares at 5Ac to settle A$2.1m associated with the purchase of 82% of BioGold in outstanding loans (apart from the concentrate credit facility), purchase the remaining 17% of BioGold for A$1.6m (to increase MIC’s holding to 99%), pay A$1.3m for the BioGold Technology Licence and other financing fees, and have A$3.2m to cover working cap and the completion of the BioGold expansion.
  • Michelago represents a classic leveraged play on the gold price because its profits are based directly on marginal percentages of the gold price, accruing up to ~20% of spot gold revenue from the gold ores that it treats, less treatment costs. MIC’s NPV appears to increase by about 1.6Ac per US$25/oz increase in the gold price.
  • No further funds are being provided to the ASG (Australian Solomon Gold) consortium to complete the feasibility study on Gold Ridge and any required finance before ASG’s expected IPO in perhaps March - June 2006. Consequently MIC are diluting down their holding in ASG and depending on ASG’s required finance, before its IPO, and the IPO itself, MIC could have possibly 29% to 30% post IPO.
  • MIC intends to decide post ASG’s IPO whether to continue to hold its position in ASG, make an in-specie distribution of its holding to MIC shareholders, or make a combination of the two namely, part held, partly distributed. Theoretically MIC’s post IPO 30% holding could be worth ~A$30m or so.
  • The expansion of BioGold’s Bacox© circuit from 100tpd to 200tpd (currently equivalent to 50,000ozpa to 120,000ozpa) is expected to be completed by December 2006 and should gradually increase the current production (including ~100,000ozpa or so from the cyanide leach) to a capacity of ~230,000ozpa by 2007/2008.

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Nov 2005 - Titan Resources

Titan Resources Limited (TIR) –Australia’s Next Junior Nickel Producer

  • Titan appears to be well advanced towards becoming Australia’s next junior nickel producer based on a number of its properties capable of producing nickel, with Armstrong capable of being treated and within a feasibility study, a scoping study in progress on Widgie Townsite, closely followed by scoping studies on Munda, 132N and Widgie 3. All the studies are scheduled to have been completed by the end of March 2006.
  • Titan’s share price fell from about 30c when WMR rejected the Armstrong ore for failing to meet their specifications. It was not that the ore is untreatable, just that it is too similar to Mt Keith ore (it appears to be even better than Mt Keith ore), whereas high iron-rich Kambalda-type concentrates are required (with an Fe:MgO ratio of up to 11:1 they are higher than anything that WMR can produce), to blend with WMR nickel concentrates & prevent WMR’s nickel furnace from overheating.
  • Armstrong ore can be treated to produce an acceptable product and higher recovery than WMR would allocate, and its concentrate can be sold (there are a number of expressions of interest). At this stage the most likely route appears to be CSM modifying the back end of a mothballed gold plant to result in a >1mtpa concentrator at potentially lower costs than TIR may have paid to WMR.
  • CSM has the right to 50% of the Armstrong ore and in November 2005 is expected to have earnt 50% of the gold-nickel orebody at Munda. Munda contains spectacular gold intersections such as 6m @ 27g/t where the nickel and gold orebodies intersect, and separately 11m and 17m @ 17g/t in the hangingwall lode.
  • Conceptually, Titan’s market cap can be theoretically derived from its net cash, 50% of Armstrong and its post AIM floated interest in BioHeap in early 2006. To which can be added 50% of Munda, plus Widgie Townsite, Widgie 3 and 132N. To this can be added possibly a re-opened Mt Edwards and the extensive kms of untested basalt / ultramafic contact that can now be explored at Widgiemooltha using techniques such as SQUID. TIR appears to have the potential to at least double its current share price and attain a market cap of A$40m to A$50m or so.
  • Reed Resources (RDR) have announced that they have entered into a call option (that expires on 14 December 2005) over up to 16% of the Titan shares held by CSM’s wholly owned subsidiary Consolidated Nickel, in which Consolidated Nickel would receive 1RDR – for - 4 TIR shares. RDR’s current 3.8% (~14m shares) held in TIR appears to mainly be held by associates of RDR. RDR may only be able to swap 2m RDR (for 8m TIR) otherwise CSM appears to then hold >19.9% of RDR.

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