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Tagged with: 2007

Jan 2007 - Rebuilding China

Rebuilding China

This column is based on observations made during our (ERA) 3-week visit to China in November 2006 when we attended the China Mining Conference in Beijing. Before the conference we visited the properties of Golden Tiger (GTX) in western Guangxi, and Sino Gold (SGX)’s Jinfeng mine in southern Guizhou, and after the conference I visited some friends in Hangzhou about 220km south of Shanghai. So gaining experience of what is happening in the rural areas of China, besides the main cities of Beijing, Shanghai and Guangzhou.

Jan 2007 - Year End & China

  • The construction pace of growth in China appears to be accelerating and is involving bridge building engineering feats and extensive spending on railways & rail networks with US$190bn allocated up to 2010 and more to 2020.
  • It didn’t matter where you went in China, literally everywhere was in major construction in villages, towns, cities, plus new railways & new freeways etc.
  • The main base metal of interest still appears to be nickel (based on INCO and Falconbridge both taken over, & Jinchuan’s offtakes with a number of ASX listeds).
  • I re-iterate a comment I made in our last annual review dated 3 January 2006, namely to anyone that still insists that “commodity prices have to fall”, or “China’s growth has to come to an end”...you should ask them “when was the last time you visited China?”.
  • This comment is based on ERA’s (my) last visit to the China Mining (November) 2006 Conference in Beijing, in which I visiting Golden Tiger’s operations in Western Guangxi and SGX’s Jinfeng operations in Southern Guizhou during the week before the conference, attended the conference and saw a number of blue skies over Beijing including an almost clear sky flight from Guiyang to Beijing, and then visited Shanghai and some friends studying Mandarin at a university in Hangzhou.
  • The disparity that we wrote about in the performance of Australian nickel companies during 2005 and our comment that “we believe both (Mincor and Sally Malay) are capable of exceeding A$1 per share, with Independence capable of being well over $2 per share”, was an understatement as during 2006, both MCR and SMY exceeded and are still more than $2/share, with Independence rising to over $5/share, before dropping back.
  • Both Inco and Falconbridge have been taken over, so comparisons with them cannot be made any more – surprisingly no one has focused on why they were taken over as in why not aluminium, copper or zinc companies. However, Table 1 below reflects a “what if” nickel stayed at US$15/lb (US$33,000/t) since current share prices appear to be indicative of nickel prices of ~US$

Feb 2007 - Zambian / DRC

The Re-birth of the Zambian / DRC Copperbelt

One of the main themes of the presentations at the Indaba 2007 Conference in Cape Town was the re-birth of the Zambian/Katangan (DRC) Copperbelt. Last year there were some papers on progress on the Zambian side, which were updated this year.

Mar 2007 - Oz’s Uranium Mine

Australia’s Next Uranium Mine

Australia’s “three (uranium) mine policy” that was enacted in 1983, stopped Australia’s then burgeoning uranium industry in its tracks, with all other approvals seemingly withdrawn except it seems for the ones that were producing, namely Nabarlek (NT) (stopped production in 1988 and was environmentally cleaned up, though apparently held by Cogema), Ranger (NT) (still owned by ERA which became a subsidiary of RIO) and Olympic Dam (SA) (WMC’s now BHPB’s), as shown in Figure 1.

Mar 2007 - WCP Resources

WCP Resources Limited (WCP) –Exploring and Drilling Specific Targets

  • Since the appointment of Levi Mochkin to the board in April 2006, WCP has aggressively established an Australian exploration portfolio of overlooked gold, copper, and/or uranium prospects, and turning them to account through re-examining their geology and then drilling specific targets.
  • Early success already occurred in late 2006, with a gold intersection of 33.8g/t over 9m (within 22m @ 14.9g/t) about 50m below the bottom of the old ~50m deep Whistler Pit of the Montague Goldfield Project in central Western Australia, with assays pending from subsequent drilling. There is the possibility of further upside potential with mineralisation identified in the perceived barren hangingwall, the possibility of flatter mineralisation, and encouragement further south at Rosie Nth.
  • WCP has three copper-gold-uranium targets in different parts of Australia, being the shear-hosted Mombo Bore in WA, the IOCGU of Lake Torrens in SA and IOCG at Lilleyvale in QLD. Initial 3d-IP surveys have recently been completed at Mombo Bore identifying potentially significant drill-ready targets at Kingfisher & Mickey’s Well. Depending on drilling results, WCP may have made a new discovery.
  • The Lake Torrens JV appears to a be a standard IOCGU target located at the exploration “hot-spot” on strike northwest between Prominent Hill and Olympic Dam in SA, (and in fact consists of a number of targets), while the Lilleyvale IOCG in QLD is located on strike southeast of Ernest Henry and Cannington.
  • WCP also has a number of palaeochannels that have the potential to contain uranium in the calcrete-form amongst 6 WA projects (with historic trenches and sampling dating back to the late 1970s) and in the sandstone-form in the Coulta JV in SA (on which a recent 2007 radiometric survey verified the potential for anomalous uranium).

Apr 2007 - Uranium Numbers

Those other uranium numbers

At Paydirt’s Uranium Conference held in Adelaide in March 2007, the other actual uranium numbers were covered, such as how much U3O8 yellowcake is used in a reactor, demand/supply and what prices are received. Uranium must be a bit like a mathematicians dream with so many numbers involved. Although asking producers and even nuclear representatives at the conference what percentage U235 is in U3O8 resulted in a surprising range of about 0.71% to 1.0% to don’t know.

Apr 2007 - Mintails Limited

Mintails Limited (MLI) – Recreating ERGO with a 300,000ozpa Gold Production Target

  • Mintails (MLI) which had the rights to a number of sand and slimes dams west of Johannesburg in South Africa, merged with Skeat Mining who had their own mining fleet (of CAT 777’s) and an option over the old ERGO treatment plants and some sand and grit dumps east of Johannesburg in January 2007. The result is a company that could restart a more efficient ERGO, producing gold & uranium.
  • Anglogold’s ERGO (East Rand Gold Operations) treated over 900mt of sand and slime in a 27-year period from early 1978 to December 2004, and produced about 8.3moz gold and possibly ~2,500t of uranium. In its peak years, (not all the same year) it treated 51mt of slime, produced over 460,000oz gold and ~300t of uranium.
  • When ERGO closed its Brakpan plant in 2004, there were still a number of slimes dams that could be processed within its own stable and those owned by other mining companies, but they became uneconomic at a cost of US$400/oz (including head office expenses), and ERGO was wound down and closed during MQ 2005.
  • Mintails can be subdivided into 3 divisions, namely : sand and grit, slimes, and other projects. The sand and grit operations at Mogale in the west and HVH in the east, are providing the current cashflow while the WERGO slimes plant is being constructed for gold and possibly uranium production adjacent to Mogale, and WERGO – East could be based on refurbishing the old ERGO plant at Brakpan.
  • MLI could be able to achieve production of 300,000ozpa from treating 3.6mtpm by the end of 2011, however, we have used a more conservative build up to 2012.

May 2007 - Gold Mineralisation

Flat Gold Mineralisation

We find that our (ERA) research often has a common theme within a particular year, be it nickel or China or this year (2007) so far, flat gold mineralisation.

May 2007 - Mineral Deposits

Mineral Deposits Limited (MDL) –Taking Two Company Making Projects into Production in 2008

  • Mineral Deposits (MDL) is one of those rare companies that has two company-making projects, being its Grande Côte Zircon Project and Sabodala Gold Project both in Senegal, West Africa and both currently expected to commence production about the same time, being ~ the September / December Quarter 2008.
  • The Grande Côte Zircon Project consists of processing near-shore sand dunes at a rate of ~52mtpa, from possibly late September Quarter 2008. MDL has ~60 years’ experience processing mineral sands in NSW during which it received a number of environmental awards, and recognised similarities between its past experiences and the Grande Côte Project, which could produce ~ 90,000tpa or more of Zircon.
  • The Sabodala Gold Project is expected to produce an average of ~150,000ozpa (initially 200,000ozpa or higher) from its rated 2mtpa plant over at least a 6–year mine life. MDL appears to have most of the North Mara management team, besides extensive experience within its board to construct, commission and operate a gold mine in Africa.
  • Both operations are being constructed by Ausenco (who have built numerous projects, most recently SGX’s Jinfeng mine), and the operations appear to have the potential to achieve higher than rated capacities. The Sabodala Gold project in particular may be able to initially achieve significantly higher than forecast grades.
  • Both projects have the potential for higher resources, Grande Côte’s being north along the coast, and more than estimated; and Sabodala : regionally both inside and outside the lease, at depth, possible other joint ventures, and in comparison to nearby orebodies (such as Sadiola [14moz], Loulo [8moz], & Yatela [ >2moz]).

Jun 2007 - VMS or VHMS

The latest “buzz” word - VMS

Move over IOCG, or IOCGUs (iron-oxide copper-gold uranium) orebodies, the VMS’ or VHMS’ (volcanogenic-hosted massive sulphide) orebodies are coming!

Jun 2007 - Jabiru Metals

Jabiru Metals Limited (JML) –Bringing Jaguarinto Production at ~30,000tpa Zinc & Establishing Two Additional Zinc Mining Operations by 2010

  • Jabiru was founded on the Jaguar VMS (volcanogenic massive sulphide) orebody located about 55km north of Leonora in WA, which according to ERA assumptions with Teutonic Bore, could produce ~40,000tpa Zinc (Zn) and ~15,000tpa Copper (Cu) per year at C1 cash costs of (minus)US$ - 0.25/lb Zn (after by-product credits).
  • There is significant potential for the Jaguar/Teutonic Bore ~3mt massive sulphide field to be increased, based on comparisons to other fields such as Golden Grove at 44mt and Rosebery, now at 38mt, which have multiple lodes in clusters and depth extensions. Jabiru’s orebodies could extend on strike or have others within the 4km distance between them as the historic exploration was only based on 600m centres from the original Teutonic Bore mine, and the current orebodies have ~300m strike footprints based on relatively shallow depths.
  • Jaguar was designed on the basis of a 5-year mine life, which appears to easily be capable of being achieved. Aside from extensions to the orebody on strike and at depth, Teutonic Bore exhibits the potential to be re-opened possibly as a mixture of an open-cut cut-back and underground stoping, by the first half of 2009.
  • JML recently won the tender for the Benambra VMS orebody in Victoria, with a possible 8-year life @ 1mtpa and production of ~30,000tpa Zn & ~14,000tpa Cu (based on a preliminary scoping study), and expects to soon start drilling and complete a BFS by late 2008/early 2009 for production by mid-2010.

Jul 2007 - Nickel Lava Channels

Divergent Nickel Lava Channels

Sally Malay’s recent discovery of the Deacon orebody (probably >60,000t Ni @ at Lanfranchi @ 2.6%Ni, being still open at depth with intersections of 93m @ 2.24%Ni & 72m @ 2.95%Ni), appears to be another diverging nickel lava channel, raising the question as to whether they are more common than envisaged.

Aug 2007 - Sally Malay Mining

Sally Malay Mining Limited (SMY) –Heading with Deacon and Sally Malay to >20,000tpa Ni within 2 years (by 2009)

  • Sally Malay has made significant discoveries at both its namesake operation in the Kimberleys of northern WA with the potential Northern orebody, and the probably >60,000t Ni Deacon orebody at Lanfranchi, south of Kambalda.
  • The company-making Deacon alone enables Lanfranchi to attain expected production rates of 350,000tpa, which when added to Winner and a deeper more consistent Lanfranchi orebody, could result in the Lanfranchi mine producing ~15,000tpa Ni from 2009, of which SMY’s 75% would be an attrib ~11,000tpa Ni.
  • The recent discovery of the potential Northern orebody in May/June 2007 at the western end of Sally Malay could result in the mine to achieving throughput rates of ~0.8mtpa to 0.9mtpa in its own right and production of ~10,000tpa to 12,000tpaNi, without Copernicus. Add SMY’s 60% of Copernicus and production ~11,000tpa to 13,000tpaNi may be achievable.
  • The intersection of Ni mineralisation in the Sally Malay decline, resulted in the discovery of the possible Northern orebody with an intersection of ~18m @ 2%Ni and realisation that the Turkey Gabbro dips ~60ºNorth (not vertically), increasingly exposing the Sally Malay intrusion with depth. Further fan-drilling (assays pending) has exposed new mineralisation as potential additional ore sources.
  • There is also significant exploration upside potential at Lanfranchi, ranging from more continuous Lanfranchi orebody mineralisation (based on EM infilling), Deacon/Helmut having joined, extending deeper & possibly even meeting Schmitz. Plus the initial disseminated nickel encouragement from the Northern dome.

Aug 2007 - Consmin Tragedy

The Consmin Tragedy

In February 2007, Consmin (Consolidated Minerals or CSM) embarked on a plan to become a major resource company by entering into a deal with Pallinghurst (Pall), which may still occur, just not for most of its original loyal shareholders. Why is it a tragedy? Well if it hadn’t embarked on this path, it would probably be trading at closer to A$5/share with a very rosy future for all its shareholders, whereas instead it appears almost certain to rise as a very different phoenix from the ashes.

Aug 2007 - Avoca Resources

Avoca Resources Limited (AVO) –Targeting Gold Production >200,000ozpa from Two Operating Mines by 2009

  • The recent acquisition of Chalice and its tenement package has opened up a significant number of drill-ready targets for potential mineralisation that could become a second mine or additional ore source for Avoca’s developing Trident mine near Higginsville in WA, and take its production well beyond 200,000ozpa.
  • The supergene discovery at Wills (~25km north of Trident), lends weight to our (ERA) expectations that the new Higginsville mill could treat ~1mtpa from the Trident underground, and ~0.2mtpa to 0.3mtpa from the numerous near surface open-cuts and low grade stockpile resources for many years to come.
  • At AVO’s Higginsville operation, two drives intersected Trident’s Eastern Lode ore in July 2007, namely the steeper dipping Eastern Lodes (on 1170 Level), and the flatter dipping Eastern Lodes (on 1155 level), starting to build an ore stockpile.
  • Exploration appears to be establishing that the gold veins at Poseidon extend from the old pit through the Poseidon South underground, and then directly link through Trident to the recent intersections 200m north of Trident (and still open north on strike), with the pyrrhotite and arsenopyrite (non-refractory, more crystalline) event providing the spice for the higher grades.
  • At Chalice itself, there are a number of possibilities post dewatering the old open-cut, with unmined ore under the southern wall, a series of IP anomalies to be drilled that have similar signatures to Chalice, and the Cavalier Prospect which has surface mineralisation and intersections resembling that above Trident.
  • The interim treatment of Trident ore before the 1mtpa (rated hard) plant is completed by mid (June/July) 2008 has become more complex with two solutions (Paddington and Norseman) having fallen into AIM listed (private equity backed) hands, and consequently toll treatment costs at all available plants have soared to unfriendly (ERA’s viewpoint) >A$30/t levels (which could delay planned stoping).

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