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Tagged with: IGO

Dec 2001 - Independence Gold

Independence Gold NL (IPO Raising $3.5m) – Has significant upside potential from the rights to WMC’s Southstar database – SPECULATIVE BUY at 20c

  • Independence Gold NL (IGO) is offering 17.5m shares at 20c by way of an IPO. Over-subscriptions of a further 2.5m shares could increase the total amount raised to $4m. Within 3 months of successful listing, all shareholders receive 1 option (details to be announced post listing) – for - every 2 shares held.
  • IGO has an associated relationship with Ranger Minerals (RGS) who provided the initial seed capital of just over A$1m for which it received 15m ordinary shares in IGO (which with the 1m contribs is expected to be 28.8% of the total shares issued of 55.6m).
  • IGO has 5 joint ventures covering a suite of metals namely gold, PGE’s and base metals, of which the most advanced are the gold projects. The JVs are Chesterfield, Goldsearch, Randles Find, Southstar, and Dolphin.

Jul 2002 - Independence Gold

Independence Gold NL (IGO) – Long Nickel Acquisition is part of the Aim to Create Substantial Shareholder Wealth

  • The Southstar Database is offering IGO a plethora of opportunities for the creation of individually focused companies.
  • The purchase of WMC’s Long nickel mine for $15m under the separately managed Lightning Nickel Pty Ltd is part of IGO’s aim to create substantial shareholder wealth.
  • Based on mining only Long and Victor South’s ore reserves of 750,000t at 3.6%Ni for 27,000t of nickel, at a rate of 150,000tpa, IGO’s Nickel management team (headed by Tim Moran) has estimated a 10% NPV of $46m for their attributable nickel. This was based on $60m in after tax cashflow over 5 years, using a nickel price of US$3.15/lb (US$6950/t), and an A$ exchange rate of US55c.
  • In our opinion, the 27,000t of Ni should be capable of being exceeded since it excludes almost the same again in the Long orebody’s resources, additional recoverable ore from the pillars (even allowing for geotech), and any possible exploration discoveries.
  • Lateral thinking by the IGO team following conceptual viewpoints outside of standard theory has resulted in evaluating two promising 100% owned gold prospect areas called Jeerinah (near Paulsen’s) and Yalgoo West, where initial results have been encouraging.

Feb 2003 - Independence Gold

Independence Gold NL (IGO) – Long Nickel Mine Acquisition Could be Significantly Profitable for IGO

  • IGO’s wholly owned subsidiary Lightning Nickel Pty Ltd bought WMC’s Long/Victor nickel mine for $15m on 17 Sep 2002. This was based on IGO’s estimated return of $60m in after tax cashflow, from producing 27,000t of nickel over 5 years (treating 750,000t of 3.6%Ni ore reserves at 150,000tpa) and receiving a nickel price of US$3.15/lb (US$6950/t), and an A$ exchange rate of US55c.
  • IGO ramped up beyond their targeted production rate of 12,500tpm (150,000tpa) inonly 3 months (by January 2003), and are also achieving 10% to 15% highergrades than expected of >4% nickel (due so far to less dilution than expected).
  • Long’s life appears likely to be at least 7 years all probably at greater than an average annual grade of 4%Ni. This is based on our site visit observation of progress to date, the driving towards Gibb South and new extensions there, probably a favourable decision on Victor South in 2003, the current mining rate of 34% in resources (outside of reserves) and additional remnant mining,
  • The geology appears to be so complex that it is virtually impossible to put strike limits on the orebodies, resulting in a strong probability of extensions to them within the lava channels. There also appears to be at least 3 possibilities of finding new unmined orebodies : either within the existing channels, below the Long lava channel, or there could be a link between the Durkin orebody (to the northwest) and Long as shown in figure 6 on page 4.

Aug 2003 - Independence Gold

Independence Gold NL (IGO) – Hitting the Jackpot !

  • On 7 August 2003, we visited IGO’s Long Nickel mine and its new underground development at Gibb South, with a small group of brokers, analysts, fund managers, and the media.
  • Initial grades had been regarded as relatively disappointing in the 5% to 6%Ni vicinity, compared to the drillhole intersections at about 7% to 10%Ni, but IGO had recently encountered a horizontal “seam” or lode of massive ore averaging 21%Ni (some samples are ~27%Ni). This seam was observed (by us) to be about 10cm to 2m thick, overlain by up to 1.5m of disseminated 4%Ni, as shown in Figure 1.
  • This latest nickel mineralisation is clearly bonanza, jackpot-style. However, the prize is perceived to be Victor South which has widths of massive ore up to 30m of 3% to 7%Ni, and a number of 10m at 10%Ni drillhole intersections. Development production could start by June 2004 after completing the remaining 1.8km to be driven in the improving ground conditions towards the south, by April 2004.
  • The budget forecast for 2003/04 is 150,000t at 3.3%Ni and should be the worst case scenario since the grade has been reduced by 10% from the 3.6% expected (based on the feasibility study of an average ~3.45% from Long, plus sweeteners). There is 2,000t of Gibb South on the ROM pad at 6% to 7% Ni, and the production tonnage may also have been reduced by 10% with 41,000t treated in JQ03.

May 2005 - Independence Group

Independence Group NL (IGO) –Lightning Nickel Providing the Driving Force towards IGO becoming a Mid-Tier Mining House

  • IGO’s Long mine of Lightning Nickel appears to be settling down as a 9,000tpa Ni operation (5,760t Ni attributable at 64%) at the lowest cash cost per lb in Australia of payable metal at A$3.05/lb in MQ05. IGO’s aim is to find another stand-alone Ni orebody that can be accessed from Victor South or Long South, so that production could be increased to 12,000tpa to 15,000tpa Ni (attrib : 9,600tpa).
  • The MQ05 production results from Gibb South have been spectacular, averaging 8.3%Ni milled for the current ‘04/05 year, with the March quarter itself averaging 10.3%Ni (according to ERA’s records, this is the highest achieved from any orebody by any mine in WA). Ni metal reconciliations at Gibb South are a very impressive 3.6 times compared to reserve. Now Victor South in the same channel is increasing production, with the potential for higher grades and greater reserves.
  • IGO is making progress with its intention to have its own producing gold mine possibly at Frances Furness and/or at Dalwallinu. Frances Furness appears to have the potential to become a small ~15g/t underground operation, while Dalwallinu could become a newly discovered goldfield.
  • There appears to be a market rating disparity between Independence (IGO) and Jubilee (JBM) in that IGO has higher reserves (+50%), twice the reserve life, ~10% lower cash costs in MQ05, and half the attributable production, yet JBM’s market cap even after adjusting for net cash is more than 4 times IGO’s.
  • As part of its aim to become a mid-tier mining house, IGO is evaluating its acquisition of almost 20% of Matrix (MRX) for possible copper production and is making progress in its other areas of exploration in gold and nickel.

Aug 2005 - Independence Group

Independence Group NL (IGO) –Lightning Nickel Continues to Provide the Driving Force behind the Independence Group

  • IGO’s Long mine of Lightning Nickel appears to be settling down as a relatively low cash cost, 9,000tpaNi operation (5,760tpaNi attributable at ~64%). IGO’s aim is to find another stand-alone Ni orebody within the Long mine, so that production could be increased to 12,000tpaNi to 15,000tpaNi (attributable : 7,700-9,600tpaNi).
  • The recent discovery of the McLeay deposit south of Victor South could evolve into a stand alone orebody, being open in all directions and with a number of surfaces. Drilling is expected to establish an initial resource by September 2005.
  • The Gibb-Victor lava channel is establishing a record as one of the highest grade lava channels at Kambalda, with Gibb South averaging 8.0%Ni (largely due to occasional 18% to 20% Ni zones), and Victor South averaging 4.6% to date. Both Victor South and the new McLeay deposit lie within this lava channel. Depending on the dilution at Victor South in the coming year, IGO could produce between 8,500t and 9,500t Ni based on average grades for the mine of 3.5% to 4.0% Ni .
  • The lava channels shown to date are simplified schematic representations of what the orebodies within them broadly follow. The recent drillhole intersections by IGO outside of these lava channels and beyond perceived boundaries within the channel (such as the 3.4m @ 4.5%Ni below 12 Level at Long) and the spectacular 4.4m @ 16.2%Ni show that there appears to be the capability to add material resources to Long and Victor, and extend Lightning Nickel’s life.
  • IGO continues to mine significant ore outside of its reserves, averaging up to 46% more nickel since IGO started in October 2002 (at 8% lower on grade), which also infers further extensions to Lightning Nickel’s life (usually based on reserves).

Sep 2008 - DnD - SLR, NGF, IGO

Silver Lake (SLR), Norton Goldfields (NGF) & Independence (IGO)

  • Post Diggers last year we wrote “This Comment started out based on the visits we (ERA) took during the Diggers n Dealers Aug 2007 Conference. However, it has been extended following the recent decimation in share prices due to trading on money that did not exist, and requests for our nickel & gold favourites”. That comment applies just as easily for 2008 too, except that this time around the “money that did not exist” has mainly been in different forms of sophisticated shorting.
  • It is often commented that the market likes a story and hates reality, that’s why the old model of the share price rising when a company starts production has gone out of the window. Now companies rise before production and fall when they go into production as reality hits, unless they are still in “story” mode. Our current Australian based and operated favourites are all appear to be debt free, generating cash with cash in the bank, and significant upside potential being for nickel : Panoramic (PAN @ $1.45); in gold : Silver Lake (SLR @ $0.16) and in other (iron ore) : Territory (TTY @ $0.52). – And all of them have PERs in the 2 to 4 x area. (PAN : 194m x $1.45 = $281m, less $130m cash = $151m/$73m = 2.1 x; SLR : 153m x $0.16 = $24m less ~$3m = $21m/$12m = 1.8 x; TTY : 265m x $0.52 = $138m less $1m (check financials when reported) = $137m/$45m = 3.0 x) Our (ERA) current favourites are :
  • Panoramic : Recent August 2008 report, and stacks of upside both at Lanfranchi (due to Deacon) and at Kimberley Nickel due to Savannah. PAN recently reported some more of those thick high grade (double current grade) intersections, indicating further upside potential. Our report had a life of 10 to 15 years at ~15,000tpa - 20,000tpaNi (whereas it could be 15 to 20 years at up to 25,000tpa [which more resembles a portfolio stock]). The NPAT is about $70m per year at prices of A$9.47/lb Ni (US$9/lb and an 0.95US$ exchange rate, currently the nickel price at US$8.3/lb and a 0.81US$ exchange rate equates to 10.25A$/lbNi)
  • Silver Lake : We accept that the share price has fallen to as low as 15c, but how many gold mines are debt-free, treat at ~14g/t (July 2008), encounter 10m @ 6kg/t (6,000g/t in a development drive), have a development face averaging 57g/t, have the capability to double their mill size and could exceed our forecasts of 70,000ozpa by possibly up to 50% more in their first year, potentially generating profits of $1m to $2m per month.
  • Territory : Yes we accept that it lost heaps ~$50m or more last year investing in Monarch etc etc. But at Diggers it was selling its lump at ~A$110/t, fines at A$90/t, say A$100/t on a 50/50 basis. Costs are A$70/t falling to A$60/t (and targeted to go lower), say a margin of A$35/t, which at 2mtpa = $70m less tax = ~$50m NPAT less exploration etc = $40m (and revenues may be US$/t and not A$/t, so the figures could be higher).
  • At Diggers, we also visited Norton Goldfields (NGF) and Independence (IGOs) operations, viz :
  • Norton Goldfields : Being overlooked because of the Paddington history by Pancon. We were surprised by the upside potential seen on the visit (ahead of Diggers) with the old Padd I & II pits to be used as tailings storage (20 years at ~3.5mtpa).
  • Independence Group : Remains a favourite, despite its share price collapse to under A$3/share. Long-Victor and Tropicana could continue as low cost operations until the “cows come home”.

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