Albidon Limited (ALB) – An Advanced Nickel – PGM float in Southern Africa

• The IPO Offer : Albidon Limited (ALB) offered a subscription of 20m shares at 50c to raise up to A$10m in an AIM listing and an additional 10m shares at 50c to raise up to A$5m in an ASX listing at the same time (the minimum subscription is 20m to raise $10m). ALB’s IPO is to develop its existing portfolio of relatively advanced nickel - PGM exploration projects in Eastern and Southern Africa, and copper-gold & zinc-oxide projects in North Africa.
• Albidon have delineated an “S” shaped Ni-PGM sulphide trend through Eastern and Southern Africa which can be correlated with the global “Grenville Trend”. The “Grenville Trend” is based on a comparison with the host rocks of Voisey Bay in the Middle Proterozoic – a geological era well known for hosting a number of the world’s famous metallogenic provinces. ALB’s Ni-PGM sulphide trend starts at Barrick/Falconbridge’s Kabanga Nickel project in Tanzania, and passes through Malawi and Zambia before reaching the Tati area of Botswana.
• ALB have established a number of projects along the trend and explored them to some degree since 2000 to result in projects that range in maturity from delineated resources through drill-ready to almost virgin ground. The most advanced project is Munali, about 60km south of Lusaka in Zambia which has an existing resource over its SE corner, (that may still require further interpretation) with encouraging intersections such as 15.5m (~7m true width) at 2.1%Ni and 2.6g/t PGM.
• There are three joint ventures namely with Gallery Gold in the Tati Ni-PGM region of Botswana (which has aeromag completed and delineated targets), with WMC Resources over Mpemba Ni-PGM in Malawi, and with BHP Billiton over Trozza (Zn) in Tunisia. Munali Ni-PGM has also been a joint venture, with the Lion Selection Group’s African Lion Limited, who is the major shareholder in Albidon.
• ALB also has a copper-gold project and zinc project in Tunisia, which like the other targeted project areas was delineated on the basis of adequate infrastructure, relative political stability, attractive fiscal regimes and demonstrated geological prospectivity.

Pan Australian Resources NL (PNA) – Starting Gold (and later Copper) Production in Laos from March 2005

• PNA is still relatively on-track for the targets it gave in July 2003, with the BFS on the Phu Bia Gold Project expected to be completed in July 2004, and 1.5mt to 2.0mtpa heap-leach initial production from the Phu Kham (PK) gold cap targeted to commence at 50,000ozpa to 70,000ozpa during the first quarter of 2005.
• For the Phu Kham copper-gold orebody, the current concept is to complete the BFS by mid-2005, for a 9mtpa to 12.5mtpa operation producing >60,000tpa copper and >50,000ozpa gold or so in concentrates, starting possibly by mid-2007.
• Both Projects have the capability of producing higher grades in their initial years, which could result in higher production, improved cashflows and lower pay-back times.
• The Phu Bia Gold heap-leach plant is expected to be located between the PK gold cap and the Long Chieng Track (LCT) gold deposit. LCT is expected to be treated after the gold cap, followed by Ban Houayxai (BH). Gold resources as at 4 June 2004 are 570,000oz, and are expected to be upgraded further from the current drilling of the gold cap resulting in revisions to the BFS in July, and ahead of final pit designs in September 2004.
• Construction has been timed to occur between the “wet” seasons. With all approvals expected to have been received by mid-October 2004, so that main construction can occur from October 2004 to January 2005, stacking of heaps in February 2005, and the first gold pour in March 2005.

Heritage Gold NZ Ltd (HTM) – Recently Completed Scoping Study Highlights the Viability of HTM’s Karangahake region

• Heritage have recently completed a scoping study which focused on the mining viability of the Talisman mine within the Karangahake Project, and resulted in a conceptual relatively small underground operation treating ore at an average grade of 13g/t and producing 50,000ozpa from late 2006 / early 2007.
• Heritage have made significant progress in the past year and recently announced initial indicated and inferred JORC gold resources of almost 110,000oz (335,400t @ 10.2g/tAu & 40.7g/tAg) in the old Talisman mine, as part of the completion of Phase 1. HTM have already started on their Phase 2 aimed at defining a 300,000ozgold equivalent resource on which to base a preliminary feasibility study.
• Consequently HTM are in the process of refurbishing part of the old Talisman mine and have focused on the adit accessing the 8 Level Maria Lode (and extension on strike to the BM37 cross-cut), with its link through a main cross-cut into (and on the same elevation due to a different numbering system) 5A Level Crown/Welcome Lode. The main cross-cut also passes through the Mystery Lode, which has little historical record, but also appears to contain mineable resources.
• The BM37 cross-cut was renowned in the early 1990s because of its intersection of 1.8m @ 682 g/t gold and 2,094 g/t silver, with grab samples reputedly up to 1.4% (13.8kg/t) gold. It had been overlooked because it lies in the Dubbo shoot or section which was historically regarded as unpayable. While the BM37 area has been partly “grab-mined” before the previous mine closed in the early 1990s, it appears to have been barely touched from a mining viewpoint.
• Apart from the old Talisman section, there appears to be a number of potential ore sources within Karangahake and its adjacent region, based on the examination of the mine plans, extensions on strike north-east beyond Taukani Hill to Rahu, and south-west into the Dominion Knoll region.
• At Rahu (north-east on strike from Karangahake) and following a conceptual downthrown model, HTM are drawing parallels between the similar geological setting, geophysical resistivity anomalies and delineated vein structures of the Favona discovery near the Martha Mine, to the geological setting and resistivity anomalies at Rahu. Some initial drilling has found encouragement.

Minotaur Resources Ltd (MNR) –Prominent Hill Now in Oxiana’s Production Schedule for Commissioning in late 2007 / early 2008

• Oxiana Limited (OXR) gave a detailed presentation (which we attended) in Adelaide on 26 August 2004, on their expectations for MNR’s Prominent Hill initially averaging 90,000tpa copper and 110,000ozpa gold from 2008, and its inclusion within OXR’s production schedule on the basis of owning 100% of it.
• OXR envisage completing an infill drilling programme/pre-feasibility study at a cost of $5m within 9 months to June 2005, earning them 35% of Prominent Hill. Followed by spending $25.5m (to earn 65%) during an up to 12 month full feasibility study and then 18-month construction period leading into 7.5mtpa open-cut production for up to 5 years from late 2007 / early 2008.
• The estimated capex of A$350m does not include the potential 200,000oz (or more) gold halo surrounding, and gold mineralisation east of, the copper-gold orebody, which could reduce the outlay by at least $50m, pay for the 100m to 120m pre-strip and result in gold production during 2007. The capex may also be reduced by SA Government concessions and/or offtake agreements from China or elsewhere.
• MNR’s share price has risen close to the conceptual value of $1.65/share that was based on capex of $200m in ERA’s October 2003 report. The usual “rule of thumb” for a project’s approval is to at least achieve the required capex as the NPV (at 10% or 12% and being in Australia, there is no political risk). Consequently, capex of $350m infers that MNR’s market cap has a minimum capability of $123m or $2.35 per share, implying that it could trade between $1.50 and $2.10 per share.
• The inclusion by OXR of 100% of Prominent Hill in its new forecasts (it was included at 65% in OXR’s presentations around 5 August 2004) does enable OXR to achieve its stated 5-year targets of producing 200,000tpa of copper and 500,000ozpa in gold, and could infer that at some stage OXR may make a takeover bid for MNR. Such a bid could occur by May 2005 ahead of completion of the prefeasibility study, and possibly be in the form of scrip or scrip and cash.

Dragon Mining NL (DRA) – Bringing Scandinavian Gold Mines into Production

• Dragon are currently completing construction of their first gold mine in Scandinavia, being their 80% owned Svartliden in northern Sweden commencing in the December Quarter 2004 at an expected production rate of 65,000oz to 70,000oz and cash cost of ~US$190/oz in the first year of the project, based on treating 300,000t at 7.2g/t. Production has been estimated to average 55,000ozpa at cash costs of ~US$230/oz over the mine’s current 5-year life.
• This is expected to be followed by the wholly owned Vammala operational centre (comprised of Orivesi and Jokisivu) in SW Finland. Exploration is currently extending the reserves and resources at Orivesi, while delineating the extent of Jokisivu for a decision to mine to be made in December 2004. Should the expected approval be given, then production at 60,000ozpa to 80,000ozpa could commence perhaps as early as July 2005 at cash costs of ~US$210/oz.
• Pampalo in SE Finland could become the third operation for Dragon possibly from mid-2007 at production of 40,000ozpa to 50,000ozpa or so. Resources of almost 200,000oz (0.9mt at 6.9g/t) have been established, and deepening of the decline and establishment of the drill positions for deeper extensions has commenced. There are a number of smaller resources amongst nearby possible satellite operations.
• Our 5%NPV for Dragon is A$0.30 per share based only on the above 3 potential operations and not giving any credit for the number of other, mainly Finnish, exploration properties that could also become operations. It should be noted that the mine lives should be longer, and our modelled grades could easily be more than 10% higher (each 10% increase in realised grades currently adds A$0.09 to the NPV)

Minotaur Resources Ltd (MNR) – Just How Much Is MNR Worth ?

• This report determines a potential value for MNR of A$2.70/share according to perhaps its base case worst scenario. Applying seemingly realistic copper price sensitivities soon enhances the underlying value to beyond A$3.00 per MNR share.
• On 9 November 2004, Oxiana Limited (OXR) announced that it had reached an agreement to takeover MNR by a “scheme of arrangement” in which MNR shareholders would receive 1.85 OXR shares –for- 1 MNR share (representing the Prominent Hill assets and liabilities), and 1 MinEx (Minotaur Exploration share, representing the rest of Minotaur, at an estimated IPO of 40c/share)
• Although we do recommend that MNR shareholders vote in favour of OXR’s offer when it occurs on its expected date in January 2005, it does beg the question as to what MNR is actually worth through OXR and MNR’s remaining assets. ( Note : We have never been commissioned to visit OXR’s operations. Consequently this report is based mainly on presentations, ASX releases, a visit to Pan Australian in Laos, and general knowledge).
• MNR has been ascribed a value of A$2.29 per share in the OXR merger offer based on A$1.89 for OXR at about A$1.02 per share and 40c for MNR Exploration. However, our analysis infers that very little if anything has been included for Prominent Hill and instead the value appears to be closer to A$2.70/share.
• OXR is a growth story, which MNR shareholders can access effectively from the first day of Sepon’s new copper production building up to 60,000tpa Cu at cash costs ~US$0.37/lb and a gold expansion to 230,000ozpa at cash costs of ~US$180/oz. Excluding Prominent Hill, OXR has 5-year targets of 400,000ozpa gold and 100,000tpa copper which appear to be attainable. Hence valuing OXR at A$1.02/share just on its Sepon assets appears to be conservative, especially if copper prices >US$1.10/lb are achieved.
• Minotaur Exploration’s ascribed 40c (actually 42c) value is based mainly on its investment holdings in Mithril and Petratherm, plus the cash to be raised and net cash left within the company, hence valuing the exploration assets at a cost of only A$2.5m. Given the scope and expenditure being incurred on these numerous exploration properties, this appears to be very conservative.