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Tagged with: 2009

Aug 2009 - DnD - NGF

Spec Buy Norton Goldfields (NGF)

  • 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 edge to fall from.
  • We were part of a group that visited Norton Goldfields’ operations at Paddington on the Sunday afternoon (2 August 2009) before the conference. This review is based on that visit and NGF’s presentation at Diggers.
  • Norton Goldfields (NGF) - Spec Buy at A$0.19
  • NGF appears to currently be a high cost operation producing ~35,000oz per qtr at a total cash cost of A$955/oz in JQ09, that is only expected to materially improve in early 2010 as the new Homestead underground comes into production. We notice that the individual mining companies are beginning to diverge again when it comes to including what costs in the total cash costs, especially as regards the woolly areas of royalties and capex. NGF’s operating cash cost method is possibly on the conservative side as they were A$720/oz including royalties in JQ09.
  • NGF were applying a number of measures aimed at reducing their cash costs such as the 3 methods of reducing overburden removal costs shown in Figure 1a. Norton estimate that the use of these techniques has reduced their usual costs of up to $9/bcm down to $2.50/bcm to $6/bcm, and have a target of reducing their costs to $5/bcm (divide the bcm by the SG to get tonnes).

Aug 2009 - DnD - NGF, SLR

Spec Buy NGF ; Buy 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 & large international fund managers at this years’ Diggers, possibly because the performance by the major gold stocks (apart from Anglogold) has been so poor. The mood was certainly more upbeat, possibly due to the higher share and commodity prices compared to last years’ approaching cliff edge.
  • We were part of groups that visited Norton Goldfields’ Paddington before the conference, Silver Lake’s Daisy Milano during the conference (during most of Tuesday – the 2nd day) and Catalpa’s Edna May afterwards. Catalpa is our next report and is hence not included in this review. You do wonder though whether the group members on the visits do realise what they are seeing on a visit, especially in the case of Silver Lake’s further new additional mineralisation underground at Daisy Milano.
  • We did not attend all the sessions, and there were many rumours and comments, and some of the perceptions have already affected share prices as in the case of Magma Metals (MMB) and Troy (TRY). The following is based on general comments that we encountered and perceptions that we made :
  • Who appears to be doing well : Silver Lake (SLR) stands out, followed by Avoca (AVO). Most of the nickel plays seemed upbeat as in Panoramic (PAN), Mincor (MCR) restarting Miitel and Western Areas (WSA), with Independence (IGO)’s lower guidance of 8kt to 8,4ktNi for 09/10 possibly recovering back towards 9ktNi as Moran was currently expected to be developed from JQ2010, and of course IGO has its 30% of Tropicana.
  • Pan Aust (PNA) referred to a possible new drill-ready discovery called Ban Phonxai about 20km from Phu Kham (PK’s grades were expected to increase due to the infill drilling) and the 33% expansion of PK was to be made at the end of 2010 for commissioning in JH2012, with the feasibility study on its ~A$130m >100kozpaAu/>700kozpaAg Ban Houayxai gold project due in MQ2010, ideally producing in DH2011. Terry at OZ Minerals (OZL) thought that a deficiency gap was approaching in copper and most projects needed US$2.50/lb to justify approval. Terry rated OZL’s current strategy as probably 1 copper, 2 gold, were recommencing underground studies at Prominent Hill, were keen on junior JVs and was undertaking a 100-day strategic review, with more details to come.

Sep 2009 - The Last Shoe

The Last Shoe to Fall

Its finally happening, the “last shoe” appears to be falling, the IMF are going to sell 403t of gold. The IMF have been threatening to sell gold for many years. Maybe it will be the last major “central bank” sale, but this time round, it may be taken up by other central banks (that have previously sold gold), or China or other Asian banks seeking to diversify their US$ currency.

Sep 2009 - Catalpa Resources

Catalpa Resources Limited (CAH) –Bringing Edna May into Production at ~100,000ozpa from June 2010

  • Catalpa Resources (CAH) has started construction of their refurbished ~3mtpa ex-Big Bell plant that is expected to start production from June 2010 and ramp up to ~100,000ozpa production at cash costs of ~A$640/oz. The expected production is based on an initial throughput rate of 2.8mtpa that increases after ~2 years to 3.2mtpa, processing ore at a grade of ~1.2g/t with a ~92% recovery.
  • The host rock is the Edna May Gneiss which contains broad low grade gold mineralisation reminiscent of Kidston, Mt Leyshon or Mt Rawdon, except that it is enhanced by higher grades within the gneiss itself and by arcuate, high grade, generally laminated quartz veins, often containing visible gold and ranging at average values of up to ~1oz/t (30g/t) or so.
  • The production forecast does appear to be conservative as historical grade reconciliations were up to ~20% or so higher (due to the extensive often higher grade mineralisation) and historical recoveries appear to have been mostly in the 93% to 95% region in the harder sulphide rock. Catalpa are using a gravity circuit which increased recoveries in the 1980s, but was not used in the 1910’s or 1940’s.
  • Most of the previous production periods stopped producing at about the 1090m RL or 245m Level below surface due to a combination of water inflow and an extensive pegmatite unit, despite drilling showing that the mineralisation does continue with grade below this zone. Catalpa’s open-cut shell goes down to the ~1150m RL, with underground stoping a possibility at depth (not yet modelled).
  • CAH is in the process of undergoing a merger with its major shareholder Lion Selection Ltd (LST, 47% of CAH) that is expected to be completed in Nov/Dec 2009 and results in Catalpa owning 30% of the Cracow gold mine in QLD, and no major shareholder. The other Lion assets go into a separate Lion vehicle, with CAH receiving gold (less costs and capex) from Cracow from August 2009.

Oct 2009 - What Slowdown?

Slowdown...what slowdown?

As one of the ~3000 delegates commented at the recent China Mining 2009 Conference held in Tianjin TEDA in October 2009, “it’s as if 2008 did not happen, China has just carried on from 2007”. An understandable comment having attended an extremely bullish second opening session in which China’s GDP was expected to increase to 9.5% in 2010, and the third quarter numbers to be released later this week (ending 23 October) were expected to beat analysts’ expectations.

Oct 2009 - NQM

NQM Limited (NQM) – Aiming to IncreasePajingo’s Gold operations to >100,000ozpa

  • Formed largely of ex-Normandy personnel, the management and advisers of North Queensland Metals (NQM) Ltd envisage applying their expertise to build NQM into a major 300,000ozpa to 500,000ozpa gold producer through exploration and the acquisition of overlooked/defunct/brownfields and recognised operating mines.
  • NQM’s current main operating asset is a 60% holding in the Pajingo Gold Mine in Queensland (Heemskirk [HSK] have the other 40%). The Pajingo mine is expected to potentially build up from underground and open-cuts to production of >100,000ozpa with Dotswood by the end of 2010, increase with Twin Hills to >120,000ozpa from early 2012, and head towards 140,000ozpa by mid-2012
  • Its heyday was in about 2003, after the takeover by Newmont of Normandy with high grades and wide stopes, and an expanded plant (originally for the low grade stockpiles) capable of treating ~800,000tpa. Pajingo was then producing ~300,000ozpa at cash costs of <US$100/oz at a treatment rate of only ~700,000tpa. In January 2008, NQM took it over from NEM, and reduced its throughput to ~300,000tpa, on the currently thinner ore zones, with an expected life of > 5years.
  • To fill the Pajingo plant, NQM has initially focused on two satellites, Dotswood and Twin Hills. Dotswood (previously called Far Fanning) is located NE ~180km by road from Pajingo and contains a high grade core of ~4g/t with a lower grade halo and surrounding mineralised quartz vein structures. The current expectation is production of ~60,000oz to 70,000oz over 2 years from open-cuts at Dotswood.
  • The second operation, is the old Twin Hills underground mine of BMA gold ~190km S of Pajingo that started with high expectations, but closed after ~1 year. NQM have re-interpreted the abundant gold mineralisation as a series of flats and stacked lodes, more closely resembling a stockwork with high grade shoots, lending itself to an open-cut and later underground mining concept.

Nov 2009 - China Rail Tops

China Rail Leaps to the Top League

We spent ~5.5hours (it was one of the recommended routes) going to the China Mining Conference in Tianjin TEDA from Beijing in October 2009, being bus from Beijing’s international airport to Tianjin and then a more than 1hour cab ride from Tianjin to Tianjin TEDA (the conference organisers failed to supply the detail that Tianjin TEDA was about 50km from Tianjin [near the coast at Tanggu]).