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Tagged with: 2006

Jul 2006 - Bioxidation

Is bioxidation the only acceptable way to treat refractory gold ores ?

Refractory gold from a western viewpoint usually means where the gold is associated with arsenic, whereas its more general definition (at least in China) is any ore that is not free-milling. This hence includes by-product gold being produced with other base or precious metals, or when gold is associated with pyrite and floated to produce a concentrate that is leached as shown in Figure 1 of the concentrates waiting to be processed at Michelago’s (becoming Golden China’s) BioGold plant in China’s Shandong Province.

Jul 2006 - Avoca Resources

Avoca Resources Limited (AVO) –Becoming a >100,000ozpa ~US$300/oz Cash Cost Gold Producer, initially with Trident

  • Avoca has significantly advanced its understanding of the gold mineralisation at its Trident mine at Higginsville, clearly delineating the 3 main ore types of Athena, Western and Eastern. The current mining plan focuses on building up the Western Zone to a sustainable production rate of >100,000ozpa, and taking ore in the “gap” area while declining both towards the Western Zone and down to Athena.
  • It appears that a production rate of >100,000ozpa can be achieved by 2008 through bulk mining the central area of Trident’s 20m - 25m thick Western Zone using Kanowna-Belle style (sub-level open) stoping while bench stoping the ~5m thick Athena for a combined production rate of >700,000tpa @ >6g/t (>125,000ozpa at a 93% recovery).
  • AVO is taking the short-cut to production through toll-treating its ore in a number of nearby plants, but such expected production rates soon place a strain on regional plant availability. Consequently, AVO appears likely to construct its own 1.0mtpa to 1.5mtpa plant by 2008, especially if Trident continues to grow, and its regional ore sources are treated (such as Fairplay, the Palaeos, and possibly Erin).
  • Trident appears to be a combination of Norseman and St Ives-type mineralisation, with thicker, more continuous and better, steep dipping ultra high grade Athena veins, linked by flats, abutting the Western Zone.
  • Just what production rate can be achieved (potentially >170,000ozpa) and at what cash cost appears to be something that can only be delineated through mining from the Western Zone at possibly >5g/t and Athena at potentially as high as 20g/t. While the initial production depends on what can be mined from the “gap” area.

Aug 2006 - AIM or the TSX

Is it better to list on AIM or the TSX ? (from an Australian company viewpoint)

Australian companies looking to raise finance, potential share price appreciation and international exposure are often faced with a choice between listing on AIM (the Alternate Investment Market of the London Stock Exchange) or the TSX (the Toronto Stock Exchange). This column has been based on our observations to date, since the early 1990’s.

Aug 2006 - Kingsgate Cons

Kingsgate Consolidated Limited (KCN) – Expanding to ~300,000ozpa gold and ~2mozpa silver from 2008

Aug 2006 - Marengo Mining

Marengo Mining Ltd (MGO) – Delineating their Copper-Moly-Gold Orebody at Yandera

  • In early 2005, Marengo switched from exploration in WA to establishing an orebody at Yandera in PNG. Yandera had been explored by BHP in the mid-1970s at the same time as BHP farmed-in to Ok Tedi (and delineated the gold cap over the orebody) which caused Yandera to drop onto the back burner. A number of companies have since looked at Yandera mainly from a large company viewpoint but failed to take it any further until Marengo acquired the Project.
  • Yandera is a classic large company target with a copper geochem anomaly ~8km long by 2km wide averaging 0.5%Cu with 5 identified phases of porphyries containing grades up to ~1%Cu (plus Molybdenum and Gold credits), which may include some higher grade zones. MGO started their drilling campaign at the end of May 2006 on their main Gremi Zone target aimed at establishing continuity for a recognised JORC resource by December 2006.
  • As we have seen with other Australian junior companies, the large mining company approach is not necessarily always the way to develop these orebodies, and geological techniques and technology have advanced considerably since the 1970’s. A greater understanding of Yandera is expected after MGO brings in structural geological consultants to delineate the main controls of the copper-molybdenum-gold mineralisation, and identify how best to proceed forward.
  • Although Yandera generally appears to have an overall low grade signature for Molybdenum (~150ppm or 0.015%), we encountered a number of samples of visible Molybdenum, including rocks that appeared to be riddled with it (as shown in Figure 6b on page 4 of this report).
  • Gold appears to have not been a separate consideration as a individual entity when Yandera was being explored, despite the presence of pin-head sized visible gold, and alluvial workings (that are still being worked). Reputedly there is gold in quartz veining too, which requires further follow up and investigation.

Aug 2006 - DnD - IGO

  • McLeay grades are higher than expected (7%Ni in development, 20%Ni in face)
  • McLeay South (beyond the Goldfields extension) may extend SE parallel to (and East of) East Alpha under Lake Lefroy (if it does, it has the potential to significantly enhance IGO’s value).
  • Anglogold stated they are starting a PFS in 07 & then BFS in 08 on Tropicana.
  • This comment is in response to a number of queries we have received in which we rate IGO as an ACCUMULATE (Hold, Buy on weakness), based on our previous reports, a group visit to the mine (mainly McLeay at IGO’s Lightning Nickel during the recent Diggers and Dealers Conference in early August 2006, and the presentation made at Diggers by Anglogold in favour of Tropicana).
  • McLeay is the extension of the Gibb-Victor channel, beyond Victor South. At this stage it is not clear whether it is faulted south of the Goldfields extension (based on the TEM plate boundary, whether it is a faulted extension of Silver Lake (Lunnon, seems too far) or if it is a separate channel that extends southeast parallel to East Alpha (and outside of CSM Ni) as shown in Figures 1a and 1b.

Sep 2006 - WMC

Did WMC sell one of the jewels in its crown ?

It is well known that the sale of WMC’s Kambalda nickel division (encompassing the Kambalda and Widgiemooltha regions, Lanfranchi and Carnilya) has been very lucrative for WMC (now BHPB’s Nickel West). However, with the market caps of the small companies operating those mines now totalling ~A$1bn (and rising), a spate of new and ongoing discoveries by them and reputed problems in the Nickel West’s remaining nickel division, did WMC in fact sell the jewel in its nickel crown ?

Oct 2006 - Chicken Littles

Chicken Littles heading for a headache

Don’t you tire of the Chicken Littles predicting doom and gloom that the commodity cycle has to have ended and hence the “sky has to fall” or in this case, commodity prices have to collapse back to historically low levels ?

Oct 2006 - Sally Malay Mining

Sally Malay Mining Limited (SMY) –Increasing After-tax Profits to >A$60mpa

  • With nickel averaging ~US$28,300/t in SQ06 (US$12.87/lb or 40% higher than JQ06 in A$/t terms at A$37,400/t), and copper ~US$7,640 (US$3.46/lb), SMY may have had a spectacular quarter, easily the best so far. Even providing for hedging, in SQ06 SMY may have exceeded last years’ NPAT of ~A$16m. Significant after tax profits are being generated at these nickel prices, if nickel averages US$20,700/t in 2008 (in line with its forward price), SMY’s after tax profit could then be >A$110m.
  • Sally Malay recently gave a production forecast lasting 10 years based mainly on its namesake mine of Sally Malay which according to our modelling is the main profit driver behind the company. However, the forecast does not take into account the lower orebody or extensions on strike along the boundary of the intrusion, that could extend SMY’s life well beyond 10 years.
  • Sally Malay expects to use the spare capacity in its mill to treat ore from Copernicus (in JV with Thundelarra) and from Panton (in JV with Platinum Australia). However, the additional profits from these two satellites are relatively small compared to Sally Malay using our current price profiles, grade and cost estimates, and have been excluded from our total modelling.
  • Lanfranchi’s current estimated life at ~10,000tpa nickel production is about 5 years. However, it has the potential to be significantly longer since there appears to be little difference between the mineralised lava channels at Lanfranchi and the lava channels at Kambalda and Widgiemooltha that have been found by the other small nickel sulphide producers to extend on strike for many kilometres.
  • Production at both of SMY’s WA nickel mines, being the 100% owned Kimberley Nickel Mines (KNM) and 75% owned Lanfranchi Nickel Mines (LNM) has settled down and blossomed, and could achieve an attributable ~13,500tNi in the year to June 2007 and ~18,000tNi attributable in 2008 according to our (ERA) estimates.

Oct 2006 - Platinum Australia

Platinum Australia Ltd (PLA) – Smokey Hills Production Still Expected from 2007

  • All 3 Platinum Australia (PLA) projects are now on a path to platinum production, with Smokey Hills (Eastern South Africa) expected to start production early in 2007. The Panton project in WA could be in production in JV with Sally Malay by the end of 2007, and Kalplats (Central South Africa) after the expected completion of its BFS by the end of 2007, could be in production in late 2008 / early 2009.
  • Smokey Hills received its “New Order” Prospecting Right on 11 September 2006 through the cessation (or transfer) of the New Order Prospecting Right from its JV partner (Corridor Mining Resources) to the JV company (PhokaThaba Platinum Pty Ltd) in which PLA holds 80%. Application has been made for the New Order Mining Right, which may be received by late 2006 or early 2007.
  • Should the Mining Right be received by early 2007, PLA expects to start mining and toll treating Smokey Hills’ UG2 ore through a nearby plant, while constructing its own concentrator for production of ~100,000ozpa 4EPGE (Pt, Pd, Rh & Au).
  • A “New Order” Prospecting Right was also received for Kalplats on 11 September 2006 and drilling has consequently started aimed at increasing the size of the resource, as part of completing a PFS by April/May 2007 and a subsequent BFS by the end of 2007. Production is targeted at 170,000ozpa to 270,000ozpa 3EPGE with PLA earning a 49% interest from ARMplats.
  • Both Smokey Hills and Kalplats appear to have significant upside potential. Smokey Hills could extend its planned mining west across the boundary into Modikwa ground in an arrangement with ARM/Angloplats, while Kalplats appears to have been misunderstood, with recoveries ~80% using conventional techniques, & potentially material extensions on strike and on parallel structures.

Nov 2006 - Commissioning

The Commissioning Chickens Are Coming Home to Roost

During the coming 3 to 4 months to the end of February 2007, a number of gold companies are going to experience the commissioning phase of their plants, hopefully much better than those that have gone before them so far during 2006.

Nov 2006 - Albidon Limited

Albidon Limited (ALB) – Bringing Munali Into Production at 9,000tpa Ni and ~US$2/lb Cash Operating Costs

  • In the 2.5 years since its IPO in March 2004, Albidon has significantly advanced its main project of Munali Nickel (with Copper, Cobalt and PGE credits) in Zambia. Recently completing the BFS and receiving all the required Zambian approvals for construction and production from the mine at an estimated 900,000tpa to produce 9,000tpa Ni for at least 10 years from mid-2008 at cash operating costs of ~US$2/lb (ERA’s cost estimates are : Operating ~US$1.80/lb,C1~US$1.65/lb,C3~US$2.35/lb).
  • Albidon is currently cutting the box-cut for the portal to develop the underground mine at Munali, and expected to finalise its offtake agreements and financing of the ~US$65m project capex during the current quarter to December 2006.
  • The discovery at Munali is still being extended and has almost reached 110,000t of contained nickel. Due to nearby exploration similarities and potential extensions to the existing mineralisation, Munali may become a Tier 1 discovery (the most sought after by the major companies with a potential profit of >US$1bn).
  • Albidon’s next most advanced project appears to be Njame Uranium, also located in Zambia and immediately SW of Munali. Already a resource of 2,200t U3O8 has been delineated at Njame North, and it appears to have a similar style of banded mineralisation in sandstones to Paladin’s Kayelekera Project further northeast.
  • Although the next most likely mine after Njame at this stage appears to be its Luwumbu Platinum JV with Goldstream and Lonplats, Albidon’s holding is being gradually diluted down to effectively a 3% royalty. However, Albidon does have a number of other exploration prospects that are showing potential in the East African S-shaped nickel belt that passes from Tanzania through to Botswana.

Dec 2006 - Sino Gold Limited

Sino Gold Limited (SGX)

  • The Jinfeng plant is HUGE, SGX appear to have a ~US$250m plant at the cost of ~US$90m to US$95m.
  • Initial grades are higher than we expected at Jinfeng with the first bench showing a clump of ~14g/t values, and inferred higher reconciliations, resulting in expected initial Year 1 open-cut grades ~20% higher at 6 to 7g/t.
  • Just how much gold Jinfeng can produce annually is open to debate. Rated as 180,000ozpa based on 1.2mtpa, peak production appears to have the potential to be ~300,000ozpa to 400,000ozpa or so. (It was not surprising post the visit that Gold Fields established a new 50/50 JV with SGX targeting potential 5moz orebodies with 500,000ozpa production, & increased their holding in SGX to 17.4%).
  • This comment was written following an analysts’ trip to Jinfeng ahead of the China Mining Conference in Beijing in November 2006, at which SGX received the Mine Development of the Year Award for the Jinfeng Gold Project. The trip highlighted the size of the Jinfeng plant, its potential capacity, early indications of higher grades than expected and included a presentation on SGX’s exploration activities in China.
  • The Ausenco (AAX) built Jinfeng plant as shown in Figures 1a and 1b is HUGE with the main section about 0.5km long and the whole plant at least 800m long. It looks like it should easily achieve the usual 20% (for Australian built plants) above rated capacity, and that is before the 50% expansion. (The 20% above normal usually results from the fact that a 15% design contingency is built into the size components in Australian plants, however a 25% design contingency has been used at Jinfeng (based on accepted practice in the Asian region)). While the 50% expansion (at a possible cost of US$15m from cashflow) appears likely to occur, numerous variations are to be tried first to see what the plant can achieve before it is expanded.

Dec 2006 - Golden Tiger

Golden Tiger Mining NL (GTX) –Encouraging Intersections at Weilong

  • Golden Tiger Mining has retained its concentration on the Guangxi Province of Southern China, having moved to focus on drilling its new Weilong project in Western Guangxi, and take its other main potential projects around Huangganchong, Huangguan and Zhudong in its ~15,000sq km (~194km x 75km & ~51km x 56km) Dayaoshan JV area of Eastern Guangxi through geochem to soil sampling and drilling.
  • The latest drillhole intersection of 9m @ 5.2g/t at Weilong, is GTX’s most encouraging result in China since its inception. Lying within 48m @ 1.5g/t the WDDH 4 intersection is in line with some of GTX’s sampling in the old workings of 26m @ 2.7g/t, and supports the potential stacked lode system interpretation.
  • The next most prospective area after Weilong could be at Huangganchong, with its >50ppb gold anomaly over 1km long along a NE/SW structure. There are a number of values above 250ppb (usually classified as drill-ready) with peaks to 500ppb.
  • The third group of projects showing very early geochem promise are in the Huangguan vicinity (being Changtian and TongHe), and Fengyuan and Muyikou south of Zhudong. Higher values have been identified from stream geochem at these projects, and they are being followed up with grid soil analysis.
  • The prospectivity of Yueli may return assuming that shareholders approve the alliance with Sino Gold (SGX) that results in SGX holding 19.9% of GTX through subscribing for 15.3m shares at A$0.10/share and raising A$1.5m for Golden Tiger.