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Tagged with: 2007

Aug 2007 - DnD - SMY, AVO, CSM

Buy SMY & AVO; CSM worth >$5

  • If we had to pick two stocks, they would be our last two reports : SMY & Avoca
  • Preferred buying order for the nickels: 1. Sally Malay, 2. Indep Group, 3. Mincor
  • IGO could produce 1,000tNi above expected or ~10,000tNi in 07/08. Tropicana expect > 20moz (range is 20moz to 50moz over the 350km strike length).
  • MCR’s 50% increase to 900,000tpa treated by 08/09 appears to be >1.0mtpa.
  • CSM’s Gillet worth well above the ~$4m in the IGR (A$70m to A$95m?), Beta Hunt now improving with Vent #, New Ni concentrator at Widgie appears likely.
  • This Comment started out based on the visits we (ERA) took during this years’ Diggers and Dealers August 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 and gold favourites.
  • Our (ERA) current favourites are :
  • Sally Malay : Recent August 1 report, rose ~10% on report release, plenty of upside potential, Deacon : HUGE, maiden dividend, debt-free, hedging basically gone (actually lost $112m in hedging in 06/07 & still made ~$90m NPAT (cashflow would be even higher)).
  • Avoca : Recent August 2 report, rose ~5% on report release, market unfazed by negligible production this year, new Wills supergene discovery, potential new Chalice discovery.
  • Independence Group : Steady production from Long/Victor at probably closer to 10,000tpa Ni (quoted as 9,000tNi for conservatism). Tropicana 20moz to 50moz, other new gold areas.
  • Mincor : Significant increase in production coming and plenty of exploration upside. Thinks it should recoup its Otter Juan acquisition within one year with ~$6m cashflow just for July 07.
  • As for CSM : Wait until the last possible day before accepting, the ideal scenario is that neither offers win as in ERA’s opinion, it should not have embarked on this course of action and could have traded closer to $5/share (due to the manganese market upside). If Pallinghurst looks likely to win, then SELL : if TTY looks likely to win, then BUY.
  • There were numerous visits to choose from at Diggers, from which we visited IGO’s Long/Victor Mine; MCR’s Otter Juan, Carnilya & Miitel; and CSM’s new Gillet discovery and new open-cut mining at Armstrong & 132N. Our comment on IGO includes the presentations made by IGO and AGG mainly on Tropicana at the conference, where estimates ranged up to 20moz and beyond.

Sep 2007 - Widgiemooltha NI

The Case for a New Ni Concentrator at Widgiemooltha

In June 2007, the BHPB nickel concentrator at Kambalda reached its nameplate capacity of 1.5mtpa, only the second time it has done so (the first being in 1988/89). It has been estimated that debottlenecking of the circuit could add another 200,000tpa of ore capacity, and spending ~A$25m on the front end could increase the capacity by a further 400,000tpa to 500,000tpa, or a total of 2.1mtpa to 2.2mtpa.

Nov 2007 - Territory Resources

Territory Resources Limited (TTY) –Increasing Production Towards 2.5mtpa of High Quality (~62%Fe, ~1% loi) Iron Ore

  • On 28 September 2007, Territory Resources (TTY) made its first shipment of 67,500t of high grade (~63%Fe) iron ore from Darwin to China, sourcing the ore from its Frances Creek operation near Pine Creek in the Northern Territory. TTY envisages ramping up to 1.5mtpa, then towards 2.5mtpa and possibly later 3mtpa.
  • TTY’s Frances Creek operation has been able to start debt-free due to the cash injection from Michael Kiernan’s Crawley Resources and very low capex below A$15m (of which ~A$10m was on facilities at the port). Mine life at this stage appears to be at least 5 years based on current resources of ~10mt and achieving a production rate of 2.2mtpa (ERA’s estimate) from December 2008.
  • The Frances Creek operation appears to currently be Australia’s highest grade iron ore producer (possibly even the world’s), and aside from grade it has significant advantages over other Australian iron ore producers with the shortest shipping distance from Australia to China, and only 15km by haul road from the mine to a new railway siding ~190km south of the Port of Darwin.
  • The Frances Creek mine’s original heyday was in the 60’s and 70’s and it was forced to close mainly due to Cyclone Tracy destroying the ship loader & most of Darwin in December 1974, combined with the rail freight prices increasing by 50% to try and keep the then aging railway operational. Viability was restored with the completion of the new railway to Darwin in 2004, and the Port of Darwin injecting A$24m into a new shiploader (completed in July 2007), with greater port facilities.
  • Due to the advances in geological exploration techniques since the 1970’s and the ability to both upgrade and sell varying grades of iron ore through the Noble Group to China, TTY appears to have the potential to significantly increase its resources, reserves and possibly production at Frances Creek.

Nov 2007 - China Secrets

China Starts to Reveal its Geological Secrets

At the China Mining Conference in Beijing (13-15 November 2007), China’s Geological Survey (CGS) unprecedentally made public a mass of geological data including 9 national plan releases ranging from geochem to spatial to database to age (isotopic) and ~3000 related geological reports and maps that can be accessed through two new websites, namely www.cgs.gov.cn & www.ngac.cn being the CGS and the national geological archives respectively. Some data is also available on the MLR website.

Nov 2007 - Footwall to Hanging

Grade Variability in Orebodies – Footwall to Hangingwall

The variation of grade in orebodies from higher grade footwall through to lower grade hangingwall is well-known when based on komatiite lava flows or VMS feeders, however, during the past year we have observed this phenomena where there is no clear feeder zone resulting in a subaqueous flow or classic lava flow.

Nov 2007 - Vulcan Resources

Vulcan Resources Limited (VCN) –Bringing its First Outokumpu-Ore-Style (Cu-Co-Ni) Finnish Mine into Production by 2010

  • Vulcan has made significant progress in the past 3 years’ since acquiring Outokumpu’s (OTK’s) base metal mine assets that were held by the Polar Mining subsidiary of Dragon Mining in two main regions of Finland, being the Outokumpu Cu-Co-Ni field and the Kuhmo-Suomussalmi Ni-Cu-PGE greenstone belt.
  • At Kylylahti in the Outokumpu field, VCN expects to complete its BFS during MQ08 and using monies from its recent rights issue and placement, could possibly start the decline during JQ08, with production potentially from 2010 (~100 years since Outokumpu started its mine on the Keretti orebody & became a major company).
  • The mineralisation at Kylylahti is classic Outokumpu-style with the recent deeper intersections of 5% to 9% Cu closely resembling Keretti-type ore visually, in content and in grade. Kylylahti also appears to consist of a series of lenses of ore, again similar to Outokumpu’s previous main mines at Keretti and Vuonos.
  • One of the main advantages of having Outokumpu-type ore is that a proven metallurgical route of processing the ore is already known, which VCN are modifying using latest techniques to result in higher recoveries. The roaster site which is being used to treat Kylylahti ore in fact originally treated another Outokumpu-type ore, namely that from OTK’s 3rd mine in the district (Luikonlahti).
  • The Kylylahti orebody has a 30% to 50% semi-massive higher grade keel that is to be mined for the first 7 to 10 years, followed by a lower grade disseminated hanging-wall for the mine’s probable life of 15 years to 20 years or so.

Dec 2007 - Zambezi Resources

Zambezi Resources Limited (ZRL) –Focusing on Cheowa in Eastern Zambia for its First Company-Making Project

  • Zambezi Resources appears to have at least 3 potential company-making projects in an area ~4 hours drive (or up to 200km) east of Lusaka in Zambia. The 3 projects in order of state of advancement (starting with the most advanced) are : Cheowa, Kangaluwi, and Mulofwe, with the exploration drilling currently focusing on Cheowa and Kangaluwi.
  • Cheowa is a copper-gold project located north of the Cheowa Lodge on the Zambezi River about 100km east of Lusaka. Glencore is farming-in to earn a 51% interest in the project through spending US$10m which is expected to occur by mid-2008, and has already made an offtake agreement with ZRL (should the project be viable) for the resulting copper-gold concentrates.
  • Cheowa is undertaking a scoping study focusing on initially a ~2mtpa plant possibly producing ~27,000tpa copper and ~27,000ozpa gold, completing a PFS in mid-2008, running into a BFS, and conceptual production by 2010. Revised resources to 180m depth over 1.2km (of the ~15km strike length) were reported in Dec 2007, with a further revision expected in April 2008, and indications of depth capabilities in the 400m to 800m zone being delineated in the MQ08 programme.
  • At ZRL’s 100% held Kangaluwi, having defined a possible copper-gold stacked lode system (assays pending), exploration expects to use ~ 6 rigs to drill ~50,000m RC during 2008. Kangaluwi has a number of possible orebody district comparisons throughout the world, being folded both in plan and in section.
  • Mulofwe is probably the next potentially promising project, with numerous (almost like a swarm) east-west striking quartz veins containing predominant/y copper-gold mineralisation. Mulofwe includes a number of target areas such as Mwapula (with its high lead [visible galena] values) and rock-chip samples up to 12% copper, 32% lead and 212g/t silver amongst old artisanal mine workings.
  • ZRL has a number of possible gold production areas, having undertaken most of their studies at Chakwenga which lies amongst a number of old workings that followed narrow, high grade veins. Chakwenga was initially a higher priority target but has become lesser, due to the progress at Cheowa and Kangaluwi.