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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.

Feb 2009 - Year End & China

  • 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 - 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 - 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 - Kingsgate Cons

Kingsgate Consolidated Limited (KCN) –Building Chatree up to >200,000ozpa

  • Kingsgate’s Chatree gold mine in Northern Thailand has now received all its required approvals to mine Chatree North and commenced blasting its “A” prospect in mid-January 2009. At a throughput rate of 2.4mtpa, the expected average grade of ~2g/t results in production of ~140,000ozpa gold and some silver credits (~0.6Mozpa silver or an additional ~10,000ozpa gold equivalent).
  • However, initial grades at “A” appear capable of being >2g/t and when combined with mining higher grades (possibly >6g/t) in C-North, production could increase to 75,000oz to 85,000oz for the first half of 2009, resulting in Kingsgate achieving its ~100,000oz (+/- 3,000oz) forecast for the year ended June 2009.
  • With credit markets in turmoil and debt available at double-digit rates, we have assumed that KCN achieves its increased production through gradually extending its plant (to 5mtpa and >200,000ozpa) at a slower rate, by using its own cashflow.
  • As Chatree North still lies within the Phichit and Phetchabun provinces, the original BOI (Board of Investment approval) tax incentives for Chatree should apply (8 years’ tax-free from 27 Nov 2001, then 5 years at 15% tax), although further concessions are being sought with the increased expenditure.
  • However, the new Chokdee discovery covering a wider footprint than Chatree lies ~20km NW of Chatree in the Phitsanulok province. Hence it would require its own separate new BOI, aside from the likelihood of being a standalone operation.
  • Initial indications are showing that Chokdee has the potential to become a significant discovery, extending over 700m on strike and open in all directions. Interestingly its pyrite has the same lead isotope as Chatree, inferring that it was part of the same magmatic event as Chatree (although its gold mineralisation has some similarities & a separate visible gold-in-quartz veinset amongst the 3 lodes).

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.

May 2009 - Silver Lake Res

Silver Lake Resources Limited (SLR) –Taking the next step to producing >70,000ozpa

  • Silver Lake Resources (SLR) has achieved its production target of 50,000ozpa at its Daisy-Milano operation at Mount Monger in WA, currently producing a steady ~1,000oz per week with the occasional 1,500oz week. With the Christmas Flats open-cut expected to start in July 2009 and the probable expansion with an additional 300,000tpa mill at its Lakewood plant, SLR’s gold production appears to be moving into the next phase, taking production beyond 70,000ozpa.
  • SLR still appears to be on-track to achieve its 2011 production target of 150,000ozpa, possibly by 70,000ozpa to 100,000ozpa (or so) from Mount Monger & 50,000ozpa from its Murchison Project at Moyagee/Comet/Tuckabianna. Currently SLR is examining its milling opportunities at Murchison, ranging from toll-treating to having its own initially 500,000tpa to 600,000tpa mill (doubling to 1.2mtpa later).
  • Due to SLR’s current total cash costs of ~A$600/oz to A$700/oz, Silver Lake is generating significant cashflow at current gold prices >A$1,000/oz of ~A$1m to A$2m per month (its best week so far was selling 1,550oz at A$1,550/oz). This is increasingly enabling SLR to build up a war-chest capable of financing a mill expansion at Lakewood, start its Murchison operation & remain debt & hedge-free.
  • In fact in the June Qtr of 2009, SLR may have recouped its ~A$13m acquisition cost of Daisy-Milano from Perilya and the acquisition of the Lakewood plant, just over a year since first production in April 2008 (which itself was only ~6 months from the acquisition from Perilya & subsequent listing of SLR in November 2007).
  • The Daisy-Milano orebody is shaping up to be a dream orebody, with ~400m on strike of almost continuous gold mineralisation. The recent delineation of Daisy-Milano on strike at the 8 Level infers a significant increase in resources, and visible nuggetty gold is becoming common with grades in oz/t or even kg/t.

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

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