Tagged with: 2009

Feb 2009 - Enough Shares

Do You Have Enough Shares on Issue?

Hindsight is a wonderful thing, as it so simple afterwards to recognise the possible mistakes. Golden Tiger (GTX) is an exploration company that is holding an EGM on 11 March 2009 to “close down and dispose of it operations” in China, because it appears to have run out of funds.

Well it was a nice rally over the Christmas/New Year period, it seems hard to believe that Albidon quadrupled to 32c or Panoramic touched $1.42/share, along with many other price rises, before the doom and gloom settled back in, on plenty of negative media releases.
Perhaps we should change the western world years to conform to the Chinese ones, after all China has basically been on holiday up until now. The Year of the Ox started on 26 Jan 2009, and China was still on holiday for the week after that. Since China has such a significant impact on world metals’ demand and even if it is only 7% GDP growth on 2008, it is still growth (and in fact about 3 or 4 years’ ago, 7%pa was in fact the target). [Of course, the actual growth rate may still be up to 1.5% higher than an official stated 7% growth rate].
We have actually seen a number of positive releases relating to China, along the lines of metal restocking immediately ahead of Chinese New Year, rising spot iron ore prices (its almost doubled from the US$40/t lows of early Nov 08 to about US$75 to US$80/t), Jinchuan forecasting an increase to 125,000t of nickel production (from ~ 110,000t) in 2009, etc. – but virtually none of that appears to have been reported in the Australian press.
We possibly were too optimistic with our scenario expectation of the early stages of a commodity market recovery occurring in March/April 2009 (probably led by nickel), but it is still very early in the 2009 year to push that recovery expectation out to 2010, especially as China has not really started yet.
At the China Mining Conference in Beijing in November 2008, we attended the commodity sessions, for which the general main points were that;
China needs the grade and the orebodies. It is not really bothered about the next 3 years, more how to fill in the growth demand gap from years 20 to 40, and hence wants to control orebodies outside of China to achieve that goal (either by funding companies or controlling them – acquisitions to be done at bargained prices).
It also thought that it was criminal to hold countries to ransom (like BHP and RIO) on the iron ore prices, companies can make reasonable profits, not excessive profits.

Mar 2009 - Removing Stigma

Removing the Stigma on Daisy Milano and Wiluna

Usually when a mine acquires a reputation for being “difficult”, often due to the expected geology being different, or the mine has poor ground conditions, or it has the tell-tale succession of owners, or it is refractory, then it acquires a stigma or an “avoid” perception. It consequently then often becomes “unloved” from both an industry and stock market viewpoint.

Mar 2009 - NW/SE Special?

What is so special about NW/SE

No matter where you go in the world, the number of orebodies that we (ERA) have encountered where the feeder structure is or appears to be striking NW/SE or NNW/SSE is simply staggering, especially for gold.

Mar 2009 - Apex Minerals

Apex Minerals NL (AXM) – Extending Wiluna Beyond A 5-year life at ~150,000ozpa

Apex Minerals (AXM) bought the 3 mines of Wiluna, Youanmi and Gidgee (for its Wilson’s orebody) using scrip and cash, with the intention of treating the refractory (needs biox) ores at Wiluna. Production was expected to increase from ~110,000ozpa to eventually ~200,000ozpa, trucking ore from Gidgee & Youanmi.
However, during exploration at Wiluna to extend its perceived life beyond 1 to 2 years, AXM made a number of discoveries including re-interpretation of the existing Wiluna orebodies, such that Wiluna currently appears capable of filling its own plant alone for at least 5 years at a production rate of ~150,000ozpa.
Initially AXM has focused on the almost N/S striking East Fault Structure comprised of the East Lode area in the south, and the hidden Calais area in the north. Both areas remain open on strike and at depth with more than one lode, and the complete West Lode (parallel to East Lode) is still virtually untouched.
In the East Lode opencut, AXM has found that the historical over-reconciliation in the pit has been due to a previously unrecognised (or historically forgotten) hangingwall orebody that lies adjacent to East Lode, and may not have been mined underground, resulting in an initial open-cut block of ~400,000t @ ~4g/t.
At Calais (which consists of two lenses, with the 50 west of the 100), it can be shown that the gold mineralisation distribution appears to be “shadowed” or “almost duplicated” from the 100 lens onto the 50 lens, so AXM’s new Burgundy discovery on the 50 lens may also occur on the 100 lens.
Wiluna does have the potential to evolve into a significant goldfield, as it has all the required characteristics of different ages/events of gold mineralisation, in a number of different forms, and in a range of different host rocks. Wiluna is already over 5moz in size (4moz mined already, and >1moz identified in resources).

May 2009 - Picture Sizing

Reducing the file sizes of pictures

Often we receive reports from companies and others containing one or two pictures that are 1meg to 5meg in size, or see reports where the pictures are fuzzy and out of focus or have poor resolution.

Jun 2009 - The Next Avoca

The Next Avoca

The stock market is always looking for the next Avoca, namely a resource stock in which the share price rises by a multiple, and the market cap of the company rises up through A$100m, A$300m and possibly even the $500m levels.

Jun 2009 - Gold Re-Emerges

Australia’s Gold Sector Begins to Re-emerge

The re-emergence of Australia’s gold sector has taken longer than we thought it would, but it is gradually emerging.

Jul 2009 - Dykes & Faults

Dykes and Faults can be an Opportunity

We all know the theory, a dyke gets injected in a weakness in the earth, sometimes there are dyke swarms. Occasionally a dyke and/or mineralisation is injected along a fault – and in general they are regarded as a nuisance.

Jul 2009 - Panoramic Res

Panoramic Resources Limited (PAN) –Significantly reducing costs and capex by up to $40mpa while growing beyond 20,000tpaNi

In some ways, the lower nickel price has been beneficial to Panoramic, because it caused the company to have a complete review of its cost and capex expectations for 2008/9. Combined with the across the board 10% reduction in all employees’ salaries, Panoramic encouraged its contractors to do the same, which has resulted in reductions of A$1m-$2m per month on each mine (totalling ~$40mpa).
Panoramic’s 20,000tpaNi target may be achieved in the coming year. PAN’s forecast is up to 19,000tNi, but it really depends on what average grades come from the keel zone of Lanfranchi’s Deacon as individual grades there range up to ~11%Ni. In fact if Deacon averages ~4%Ni in one of the months in mid-2010, Lanfranchi could be producing at an annualised rate of 20,000tpaNi for that month.
The ~50,000tNi resource delineation of the Lower Orebody at Savannah has extended the mine life to at least 10 years based on treating 700,000tpa (~70m vertical per year) at 1.3% to 1.4%Ni for ~8,000tpa Ni (with material copper and cobalt credits). That takes PAN’s production beyond 20,000tpaNi from mid-2011.
Savannah appears to have been sub-horizontally injected & hence horizontally domained, so its orebody changes with depth as in the latest drillhole intersection in the Deeps covering ~10m of Ni mineralisation including ~3.3m of solid massive (Kambalda-looking) nickel ore grading an ERA expected ~ >= 2% to 3%Ni.
Aside from Savannah’s nickel production increasing due to higher nickel grades at depth, its production could increase by ~10% to >750,000tpa following the expected receipt of 2 spare 50t trucks from Lanfranchi (surplus due to the new six-wheeled 60t trucks), and the planned purchase of a new 60t truck for Savannah.
The nickel and A$/US$ exchange rate hedging undertaken by PAN has been extremely astute, resulting in significantly higher cashflows to PAN, such as the recent (MQ09) US$70m puts at US$73c paid for with US$70m calls at US$56c.

Jul 2009 - Avoca Resources

Avoca Resources Limited (AVO) –Moving into the 2nd Phase, targeting production of 150,000ozpa to 190,000ozpa for at least 10 years

Avoca has been advancing at a fast pace since discovering Trident in 2005 establishing sufficient ore (by June 2006), dewatering the Poseidon South open-cut and old workings by July 2007, start production, building and commissioning a plant within a year (by July 2008). And then producing ~130,000oz by June 2009.
Avoca has established that its 1mtpa rated plant is capable of treating ~1.25mtpa (and probably ~1.5mtpa with minor modifications) mainly due to the gravity circuit achieving ~60% of the recovery (double that expected). Which has paved the way for AVO to move into the 2nd Phase, bringing the satellites on stream such as Fairplay, Chalice, Two Boys, & Vine etc, and hence taking production into a targeted range of 150,000ozpa to 190,000ozpa for at least 10 years.
Avoca has given guidance of 190,000oz production for the coming year to June 2010, based on treating 1mt @ ~5.8g/t from Trident with a recovery ~97% for ~180,000oz at a cash cost of ~A$440/oz, and processing ~270,000t of low grade ~1.2g/t ore at a ~95% recovery for ~10,000oz at a cash cost of ~A$684/oz. However, the average Trident grade appears capable of being between 6.3g/t & 7.0g/t, and Fairplay may start production at ~2.0g/t possibly by January 2010.
The near vertical high grade Athena veins appear to be the mainstay of the Trident mine (blowing out periodically into the Western Zone) and becoming enhanced into bonanza grades when they are intersected by some of the high grade eastern flats (such as Eos) on the 1005 Level which has raised the average mine grade from ~3g/t to ~4g/t, up to ~6g/t.
AVO has submitted a revised takeover offer for Dioro of 1 AVO – for – 2.3 DIO (which has now been unanimously accepted by Dioro’s directors) as part of the 3rd phase strategy to increase production to ~250,000ozpa (although it appears likely to require up to two years to identify the underlying capability of the DIO assets). Avoca has a long-term stated target of becoming a 500,000ozpa producer.

Aug 2009 - Innovations

Recent Innovations to Reduce Costs

In their presentation at Diggers and Dealers, Norton Goldfields (NGF) devoted some time to recent innovations that they have applied to reduce costs. When we wrote our (ERA) July 2009 Panoramic (PAN) report we referred to the significant cost and capex savings that Panoramic was achieving across its mines by up to $40mpa including the use of the new Sandvik 6-wheeled trucks at Lanfranchi.

Aug 2009 - DnD - SLR

Buy Silver Lake Resources (SLR)

There were a number of available mine site visits before, during and after this years’ Diggers (which was apparently the highest attended so far). Many people remarked that they were surprised by the number of local and large international fund managers at this years’ Diggers. The mood was certainly more upbeat, possibly due to the higher share and commodity prices compared to last years’ approaching cliff to fall from.
We were part of a group that visited Silver Lake’s Daisy Milano during the conference (during most of Tuesday – the 2nd day). This review is based on that visit and SLR’s presentation at Diggers.
Silver Lake (SLR) - Buy at A$0.645
Silver Lake continues to move from strength to strength as SLR’s understanding of the Daisy Milano orebody and goldfield continues to evolve. The SLR trip consisted of an open-cut followed

Aug 2009 - DnD - NGF

Spec Buy Norton Goldfields (NGF)

There were a number of available mine site visits before, during and after this years’ Diggers (which was apparently the highest attended so far). Many people remarked that they were surprised by the number of local and large international fund managers at this years’ Diggers. The mood was certainly more upbeat, possibly due to the higher share and commodity prices compared to last years’ approaching cliff edge to fall from.
We were part of a group that visited Norton Goldfields’ operations at Paddington on the Sunday afternoon (2 August 2009) before the conference. This review is based on that visit and NGF’s presentation at Diggers.
Norton Goldfields (NGF) - Spec Buy at A$0.19
NGF appears to currently be a high cost operation producing ~35,000oz per qtr at a total cash cost of A$955/oz in JQ09, that is only expected to materially improve in early 2010 as the new Homestead underground comes into production. We notice that the individual mining companies are beginning to diverge again when it comes to including what costs in the total cash costs, especially as regards the woolly areas of royalties and capex. NGF’s operating cash cost method is possibly on the conservative side as they were A$720/oz including royalties in JQ09.
NGF were applying a number of measures aimed at reducing their cash costs such as the 3 methods of reducing overburden removal costs shown in Figure 1a. Norton estimate that the use of these techniques has reduced their usual costs of up to $9/bcm down to $2.50/bcm to $6/bcm, and have a target of reducing their costs to $5/bcm (divide the bcm by the SG to get tonnes).

Aug 2009 - DnD - NGF, SLR

Spec Buy NGF ; Buy SLR

There were a number of available mine site visits before, during and after this years’ Diggers (which was apparently the highest attended so far). Many people remarked that they were surprised by the number of local & large international fund managers at this years’ Diggers, possibly because the performance by the major gold stocks (apart from Anglogold) has been so poor. The mood was certainly more upbeat, possibly due to the higher share and commodity prices compared to last years’ approaching cliff edge.
We were part of groups that visited Norton Goldfields’ Paddington before the conference, Silver Lake’s Daisy Milano during the conference (during most of Tuesday – the 2nd day) and Catalpa’s Edna May afterwards. Catalpa is our next report and is hence not included in this review. You do wonder though whether the group members on the visits do realise what they are seeing on a visit, especially in the case of Silver Lake’s further new additional mineralisation underground at Daisy Milano.
We did not attend all the sessions, and there were many rumours and comments, and some of the perceptions have already affected share prices as in the case of Magma Metals (MMB) and Troy (TRY). The following is based on general comments that we encountered and perceptions that we made :
Who appears to be doing well : Silver Lake (SLR) stands out, followed by Avoca (AVO). Most of the nickel plays seemed upbeat as in Panoramic (PAN), Mincor (MCR) restarting Miitel and Western Areas (WSA), with Independence (IGO)’s lower guidance of 8kt to 8,4ktNi for 09/10 possibly recovering back towards 9ktNi as Moran was currently expected to be developed from JQ2010, and of course IGO has its 30% of Tropicana.
Pan Aust (PNA) referred to a possible new drill-ready discovery called Ban Phonxai about 20km from Phu Kham (PK’s grades were expected to increase due to the infill drilling) and the 33% expansion of PK was to be made at the end of 2010 for commissioning in JH2012, with the feasibility study on its ~A$130m >100kozpaAu/>700kozpaAg Ban Houayxai gold project due in MQ2010, ideally producing in DH2011. Terry at OZ Minerals (OZL) thought that a deficiency gap was approaching in copper and most projects needed US$2.50/lb to justify approval. Terry rated OZL’s current strategy as probably 1 copper, 2 gold, were recommencing underground studies at Prominent Hill, were keen on junior JVs and was undertaking a 100-day strategic review, with more details to come.