Michelago Limited (MIC) – Merging with Golden China Resources (AUC.V)

• On 14 December 2005, MIC announced that it had executed a BCA (Business Combination Agreement) under which it intended to merge with Golden China Resources Corporation (AUC.V) using a scheme of arrangement. In the BCA, both companies undergo a consolidation of their shares such that MIC shareholders receive 1 new AUC –for- 25 MIC shares and AUC shareholders receive 1 new AUC –for- 5 old AUC shares (or effectively MIC shareholders receive 1AUC –for- 5 MIC).
• As part of the BCA, Golden China Resources (GCR) intends to provide MIC with a >US$9.2m loan (secured by MIC’s ASG (Gold Ridge) assets), to add to the US$12.2m ANZ loan and other monies being used to replace the US$25m working capital facility that Shandong BioGold was receiving from the Bank of China to purchase the concentrates treated at the BioGold facility in Shandong Province.
• Michelago sees the proposed merger as providing the next stage in its growth due to Golden China’s: advanced refractory project at Nibao in Guizhou, exploration and financial assets, 85% international institutional holding, and Hong Kong based investment bank sponsorship connection providing another access to China.
• Golden China’s refractory Nibao orebody asset in Guizhou may be able to initially supply the expansion of BioGold and enable the combined company to reap the full benefits of mining the ore through to gold bars. Nibao could also have the potential to feed a separate Bactech (bacterial oxidation or bacox) plant in the Golden Triangle. Golden China also has a number of exploration assets and agreements in China at various stages of exploration through to possible fruition.
• All of the current 3 orebodies at Nibao have differing characteristics and their geological interpretation is under review as further information comes to hand. The resource at Nibao could ultimately range between 1moz and 4moz, although just how much is mineable (some of the grades are <1g/t) depends on the PFS and subsequent BFS, as the orebody requires a higher cost bacox-type process.
• MIC still appears to be receiving little recognition for its holding in ASG and hence Gold Ridge, despite the increase in the gold price potentially significantly upgrading the Project’s worth. Gold Ridge appears to have upside potential from the “gaps” in its orebodies, at depth, and the fact that its resources were top-cut.

How Deep Can the South African Platinum Mines Go ?

It was widely believed that due to differing geothermal gradients, the maximum depth that the South African platinum mines would ever extend to could be up to 1600m or 1700m below surface, compared to the gold mines extending to depths of 4km or so. However, that platinum depth limit gradually crept closer to surface to a perceived ~1200m to 1300m.

Platinum Australia Ltd (PLA) – Bringing Smokey Hills into Production at ~95,000ozpa 4E (>40,000ozpa platinum)

• Platinum Australia (PLA) currently has two main projects in South Africa that are in the process of being taken through to platinum production, namely Smokey Hills in the east (~13km NW of Steelpoort) and Kalplats (~90km SW of Mafeking).
• PLA expects both projects to soon receive their “New Order” Prospecting Rights allowing Smokey Hills to convert to a Mining Right after completing the BFS in June 2006, and Kalplats to extend the exploration, upgrade the ore resource and complete a BFS by June 2007.
• Smokey Hills is a conventional UG2 eastern limb (of the Bushveld) reef that is expected to initially be mined by open-cut and then underground, very similar to the UG2 being mined underground on the adjacent Modikwa (ARM/Angloplats) platinum mine about 4km further south. Production has been estimated at ~95,000ozpa 4E PGM (Pt, Pd, Rh, Au) based on diluted grades of 5.0g/t and 82.5% recoveries, although >5.2g/t 4E and >=85% recoveries appear to be achievable.
• Kalplats represents a previously unrecognised style of platinum mineralisation in 3bn year-old greenstone rocks. Initial studies show that production from the >3.5g/t higher grade reefs could result in 3E PGM production rates ~190,000ozpa, although we have used a more conservative model on 3.25g/t and ~175,000ozpa.
• Both Smokey Hills and Kalplats appear to have significant upside potential. Smokey Hills could extend its planned mining west across the boundary into Modikwa ground in an arrangement with ARM/Angloplats, while Kalplats appears to have been misunderstood, with recoveries ~80% using conventional techniques, and possibly material extensions on strike and on parallel structures.

Crescent Gold Limited (CRE) –Bringing Sickle into Production by the end of 2006

• Crescent’s main asset is the old Barnicoat operation of Sons of Gwalia at Laverton in WA to which it has added a number of exploration projects to result in the current sizeable land position. A new discovery was made called Sickle, only ~5km southeast of the existing plant, and CRE has been extending the resources and reserves with a target to start production in the December Quarter of 2006 at 60,000ozpa for 5 years at cash costs of ~US$300/oz.
• The cost of modifying the 1mtpa old plant up to current required standards has been estimated at A$5.6m, and it appears that CRE may then expand the plant up to a rated 1.5mtpa and 90,000ozpa to 100,000ozpa based on resource extensions, for an additional A$6m. Such extensions could come from satellite orebodies, reduction of the cut-off grade with higher A$/oz gold prices and/or following a number of possibilities to extend Sickle below its current 100m depth.
• Aside from the extended life potential at Laverton, CREs other assets are often overlooked, namely nickel, uranium and China. CRE’s 4 uranium exploration projects are still under consideration for possibly an in-specie / IPO distribution similar to some of the recent very successful uranium exploration IPOs.
• The 3 CRE uranium projects in the NT (which approves of uranium mining) are relatively advanced, with a project north of the old Rum Jungle uranium mine, the Tennant Creek project containing uranium anomalism, and the Calvert Hills project containing recognised Westmoreland Conglomerate uranium host rock.

IAMGOLD Corporation (IGD.AX, IAG, IMG.TO) –Combining Gallery Gold into a >500,000ozpa ~ US$275/oz Cash Cost Gold Producer

• This report is based on publicly available information and was commissioned by Gallery Gold Limited (now IAMGOLD Corporation) to increase the market’s knowledge of IAMGOLD Australasia’s operations and regional potential of their key projects of Mupane in Botswana & Buckreef in Tanzania.
• While Gallery Gold brought operating mining expertise and an Australian geological knowledge approach to the merger, IAMGOLD brought financial muscle resulting in a much stronger gold producer with production >500,000ozpa, a market cap >A$2bn, and US$99m in net cash (which includes 148,420oz in gold at US$329/oz).
• Gallery Gold was bought for approximately US$200m, and has two operational areas being the Mupane mine in the Tati region of Botswana that produces about 100,000ozpa at cash costs of US$260/oz, and the Buckreef prospect in the Lake Victoria Goldfields of Tanzania on which a scoping study estimated production of 140,000ozpa at cash costs ~ US$260/oz for capex ~US$55m.
• IAG has holdings in 4 operating gold mines in West Africa, being 40% of Sadiola and 38% of Yatela in JV with Anglogold Ashanti in Mali, and 18.9% of Damang and Tarkwa in JV with Gold Fields in Ghana. These 4 holdings resulted in attributable production of almost 450,000oz in 2005 and have been estimated (by IAG) to produce almost 480,000oz at cash costs of almost US$280/oz in 2006. The addition of GGN currently increases production to well over 500,000ozpa at similar costs.
• All the prospects at Mupane and Buckreef-Busolwa are being re-interpreted using the latest 3 dimensional geological techniques by parts of the same team that successfully applied the technology to Kingsgate’s Chatree mine and region in Thailand. The initial re-interpretations have determined a number of new targets that could lead to higher resources at potentially higher grades.

Study of volcanoes reaping orebody benefits

Just as the modelling techniques have advanced significantly in recent years such that most companies appear to use either datamine, vulcan or surpac to model their orebodies, with exploration identifying potential mineralisation using techniques such as 3d IP, Roly Hills’ 4 winds technology, Nick Archibald’s fracsis fractal graphics, and leapfrog, the study of volcanoes has also significantly evolved.

Avoca Resources Limited (AVO) –Becoming a >100,000ozpa ~US$300/oz Cash Cost Gold Producer, initially with Trident

• Avoca has significantly advanced its understanding of the gold mineralisation at its Trident mine at Higginsville, clearly delineating the 3 main ore types of Athena, Western and Eastern. The current mining plan focuses on building up the Western Zone to a sustainable production rate of >100,000ozpa, and taking ore in the “gap” area while declining both towards the Western Zone and down to Athena.
• It appears that a production rate of >100,000ozpa can be achieved by 2008 through bulk mining the central area of Trident’s 20m - 25m thick Western Zone using Kanowna-Belle style (sub-level open) stoping while bench stoping the ~5m thick Athena for a combined production rate of >700,000tpa @ >6g/t (>125,000ozpa at a 93% recovery).
• AVO is taking the short-cut to production through toll-treating its ore in a number of nearby plants, but such expected production rates soon place a strain on regional plant availability. Consequently, AVO appears likely to construct its own 1.0mtpa to 1.5mtpa plant by 2008, especially if Trident continues to grow, and its regional ore sources are treated (such as Fairplay, the Palaeos, and possibly Erin).
• Trident appears to be a combination of Norseman and St Ives-type mineralisation, with thicker, more continuous and better, steep dipping ultra high grade Athena veins, linked by flats, abutting the Western Zone.
• Just what production rate can be achieved (potentially >170,000ozpa) and at what cash cost appears to be something that can only be delineated through mining from the Western Zone at possibly >5g/t and Athena at potentially as high as 20g/t. While the initial production depends on what can be mined from the “gap” area.