Gold and base metals explorer Laconia Resources (ASX:LCR) has added some Latin-American rhythm to its portfolio of advanced domestic projects.

Laconia recently reached an agreement to acquire the Rasuhuilca gold-silver development project in the South American country of Peru.

The project, located 500 kilometres south east of the capital Lima, in the Andean volcanic arc, is an advanced high-grade development, which Laconia considers to hold significant near-term development potential and major exploration upside.

 “We are very excited about getting a foothold within Peru but we are also determined to maintain a tight focus on our projects here in Western Australia,” Laconia Resources managing director Ian Stuart told The Inside Story.

“Exploration work at both Lennons Find and at 701 Mile has achieved some extremely encouraging results.

“The drilling program we completed at Lennons Find last year achieved a number of high-grade hits in holes outside the previous Hammerhead Resource and on two other prospects, Bronze Whaler and Tiger.”

Laconia completed a 42-hole, 1,939 metre RC drill program at Lennons Find project that consistently intersected high-grade silver and zinc mineralisation.

Results from Hammerhead included: 4 metres at 174 grams per tonne silver, 0.23 grams per tonne gold, 2.35 per cent zinc, 0.08 per cent copper, 1.04 per cent lead from 150 metres.

At the Bronze Whaler prospect, high grade silver mineralisation was intersected near surface and along strike, including: 5m at 117g/t silver, 0.66g/t gold, 0.67 per cent zinc, 0.23 per cent copper, 1.52 per cent lead from 10m.

Results achieved at the Tiger prospect, included: 2m at 232g/t silver, 0.56g/t gold, 0.07 per cent zinc, 0.08 per cent copper from 15m.

Lennons Find Resource location plan. Source: Company announcement

The success of the drilling enabled Laconia to release an updated Mineral Resource for Lennons Find, which now stands at 1.85 million tonnes at 11.4 per cent zinc equivalent .

The upgrade represents a 37 per cent increase in contained zinc metal equivalent from the previous Resource estimate.

It also represents a 117 per cent increase in total tonnes from the company’s previous Resource released to the Australian Securities Exchange in March 2011.

Laconia also announced a new oxide Resource at Lennons Find of 197,000 tonnes at 89 grams per tonne silver, 0.37 grams per tonne gold, 0.2 per cent copper, 1.2 per cent lead and 1.4 per cent zinc.

The company now has further drilling planned for Lennons Find that will test for additional resources at depth at the Hammerhead deposit and to target further oxide resources within the project area.

In addition a program of RC drilling will target a potential shallow supergene enrichment zone below the current drilling being undertaken at the Tiger and Bronze Whaler prospects and other mineralised prospects – Mako and Grey Nurse.

Auger drilling and soil sampling at the 701 Mile project also returned encouraging results.

The 701 Mile project lies approximately 80 kilometres southeast of Newman, within the north eastern portion of the Collier Basin, formally known as the Bangermall Basin, and is transected by a regionally significant structure called the Tangadee Lineament.

The area has been subjected to little previous exploration, although project scale aeromagnetics has indicated a north easterly trending structural grain, which has been interpreted to be a continuation of the Tangadee Lineament.

One inconvenience Laconia has encountered at 701 Mile is a lot of superficial ground cover, which has made soil sampling difficult.

“701 Mile remains to be something of an enigma at this stage,” Stuart said.

“We conducted an Auger drilling program over the entire tenement just to get through that cover to obtain some solid geochemical samples.

“What resulted from that was a 15 kilometre long anomaly that is high in silver that is telling us that 701 Mile is potentially prospective to be a precious/base metal deposit.”

Laconia has been fortified by the early results from 701 Mile and intends flying a further aeromagnetic survey over the prospect in order to ascertain the make-up of its structures.

“We always considered it to be exceptionally prospective and now we are thinking it is really, really prospective to be something large, Stuart said.

“It is still an exploration play, but, it is a bloody good one.”

With much promise on offer domestically Laconia considers the Rasuhuilca project to be a bolt-on endeavour to complement its existing portfolio rather than a new key focus for the company.

Laconia reached an agreement to acquire the Rasuhuilca project from Perth-based exploration company Gold Mines of Peru.

The company will pay a consideration of 42 million Laconia shares, 14.5 million performance shares and a cash payment of $120,000 paid over six months to a third party.

As part of the deal Laconia will also acquire Gold Mines of Peru’s other Peruvian projects, the Motil and Porcuchia gold-silver tailings projects.

Laconia has recently raised $1.34 million through the issue of 33.6 million shares at $0.04 per share to advance work across its new Peruvian purchases.

The Rasuhuilca project comprises four concessions, labelled Patacancha No. 1 to 4, covering an area of 2,765 hectares.

The concessions partly cover an extensive high-sulphidation alteration system, which in turn, contains a number of gold-silver mineralisation zones.

Gold-silver mineralisation appears at the project as a high-sulphidation epithermal style mineralisation.

The most advanced mineralised body in the project is the Rasuhuilca zone, which has been subjected to underground development over its central 250m long portion.

Within this section a vertical extent of some 180m and reaches a thickness from 17m to 40m in a steeply south-plunging shoot.

Average grades from underground channel sampling have returned around two grams per tonne gold and 185 g/t silver.

“It is an acquisition that makes extremely good sense for a company of our size,” Stuart said.

“It is an advanced project with a modest resource in place at present of 350,000 tonnes at five grams per tonne of gold with enormous exploration potential.

“We are confident that with a bit of practical exploration work we can develop some upside at Rasuhuilca very quickly.”

The Resource, although modest, was the initial aspect of Rasuhuilca that captured Laconia’s attraction.

The project had also undergone some development work carried out, including a Feasibility Study that was completed in 2008.

Having compiled all the available data it has from the historical work Laconia considers it may be able to bring the Rasuhuilca project into production within the next 12 to 18 months.

If this can be achieved Rasuhuilca has potential to establish early cashflow for the company, which could then be used to explore the many potential targets scattered across the tenement.

“We’re approaching things with fresh eyes as far as exploration goes,” Stuart said.

“The mindset of the previous owners’ appears to have been to recognise the existence of  high grade  gold and silver veining so understandably that was where they put their efforts.

“We will explore for more high grade vein systems but we are also stepping back and saying you don’t get such tell-tale signs such as an alteration halo like the one we have without having a porphyry system sitting in the middle of it, so let’s go and find it.”

Laconia Resources Limited (ASX:LCR)
…The Short Story

HEAD OFFICE
Level 1, 41 – 43 Ord Street
West Perth WA 6005

Ph: +61 8 9486 1599
Fax: +61 8 9486 7899

Email: info@laconia.com.au
Web: www.laconia.com.au

DIRECTORS
Michael Sharwood
Ian Stuart
Matthew Howison

MAJOR SHAREHOLDERS
Independence Group NL             8.65%
Pandell Pty Ltd                            8.32%
Ian Stuart                                     5.79%

SHARES ON ISSUE
81.9 million

MARKET CAPITALISATION
3.8 million (at 1 Feb 2012)

Normally the title is a spam email from our national carrier Qantas but now it is all about our junior mining sector.

I can’t blame speculators and those in the industry for their slow return in 2012 because let’s face it after a brilliant start 2011 will go down as a real bitch of a year.

It was the first time our market had fallen two years in a row since 1981/1982 and with 15 per cent of the broader index I would imagine even some quality speculative portfolios came off anywhere between 25 to 60 per cent.
 
I don’t see it as a waste of a year but rather another challenge to keep the faith in what you are doing before the onset of dare I say it, “upside”.

I am calling the sector the cheapest I have seen it since the “Asian Crisis”.

I remember the days of the teletext TV that would run through the mining companies and thinking just how undervalued the sector looked.

I have spent hours tapping through stocks I cover and am interested in and wish someone would present me a $100,000 scratchie.

The market depths are similar to tax loss selling and although buying support appears thin it would not take much buying interest to see 30 to 40 per cent recoveries for starters.
 
Even though the GFC was brutal, some stocks had fallen from higher levels with fear providing a catalyst for a recovery as it then became “The fear of missing out” and 2009/2010 were quite good years for the juniors.
 
Market Observations:
 
Australia has been in a “cider bubble” (apple, pear and exotic mixes) which is a welcome relief after sports betting, insurance, and funeral plans were allowed far too much airtime. Between now and the next cricket test in Adelaide it will be all about surviving the Christmas hamper commercials and avoiding getting hooked into a five set tennis match.
 
An Australian company has just won the right to call itself “Nuckin Futs” after a year battle and this is going to up the box factory. This might finally lighten things up here as even at times you would think the Kiwi’s and Canadian’s are more open to advertising humour.
 
Hotcopper daytrading forum and market activity is now dominated by the micro-cap biotech stocks. In the run up the Christmas traders were all over junior explorers in the one cent to five cent range and the move towards biotech stocks reflects a slowdown in news flow in that sector.
 
The trading activity is reminiscent of 2001/2002 when the speculative market was dormant and it was the steady increase in daytrading that led to a recovery and mini-bubbles.
 
Quality juniors during late 2011/early 2012 were sold off at the worst possible times when buyers were scarce and this appears to have affected confidence despite a stronger market.
 
Pleasing to see some strength in our mid-cap mining sector after some stocks were punished. Hopefully some of this buying interest will start to flow through to the juniors.
 
Asset Sales and HOA’s now the trend:

I noticed a number of straight out asset sales increasing during the latter stages of 2011.

This reflects the struggle for junior explorers to raise capital so they are forced to rationalise their portfolios and sell off the projects that they are unable to develop.
 
This trend will see bigger companies continue to grow, however it will make it more difficult for the mid-cap sector to be strengthened in Australia.
 
The larger mining companies are starting to buy ounces and tonnes rather than go through the feasibility and construction processes and if you have desperate sellers why wouldn’t they?
 
Both BHP Billiton and RIO Tinto are now getting stuck into the Gawler Craton through deals with junior explorers such as Tasman Resources and Archer exploration and I would expect this to continue as new discoveries are certainly required post Carapeteena and Prominent Hill.

It is also worth watching the activities in QLD and the juniors now surrounding Ivanhoe Australia and their Osborne Mine.

The last major regional bubble here was the Gawler way back in 1996/1997 and perhaps the majors are again assisting in the creation of another one.
 
Both WPG Resources and Copper Strike returned the bulk of their funds to shareholders and now find themselves talent rich but asset poor.

No doubt they will be looking at some of the juniors struggling to raise cash and will use their expertise to benefit from this.
 
Rational thinking in irrational times:
 
I look back at the GFC and my major regret wasn’t buying Ivanhoe for around 15 cents after they floated at $2.00 in August 2008.

Even though I didn’t benefit financially from the absurd price it has helped me to think rationally when the market is irrational.
 
When the entire junior mining sector has looked like a screaming buy as it has now with the benefit of hindsight it was always looked back on as a major buying opportunity.
 
To highlight just how “stupid” cheap our mining sector is, here are two real examples:
 
Company 1 (14c)
 
•         Market Capitalisation $14.5 million, cash position around $5 millon.
 
•         Technical team was responsible for a major discovery in South Australia that is now an operating mine in the hands of a $3 billion company.
 
•         Has just sold its 55 per cent stake in a low-grade gold resource for $6m in total (cash/stock).
 
•         Announced a 1.5 billion tonne magnetite iron resource in Australia with a scoping study well underway.
 
•         Has an industrial mineral project with a resource upgrade and scoping study to follow.
 
•         Possess investments in other ASX-listed companies and holds 22 million shares in a geothermal/alternate energy company. ($2 million value)
 
•         Major explorer in the Cloncurry region QLD for IOCG deposits.
 
•         Holds a strong tenement portfolio in the Gawler Craton and could benefit from any further interest.
 
Company 2 (14c)
 
•         Market Capitalisation of $13 million to $14 million, cash on hand reported at end of September quarter greater than $7 million. The stock is very tightly held and has recovered quickly from the occasional sell down to 11 cents.
 
•         Owns a fully refurbished gold plant that has already poured a dore bar and is ready to commence operations.
 
•         Has JORC resources and is looking to take a measured approach to mining rather than rushing into it.
 
•         RC drilling now underway on a project in Western Australia.
 
One of the barriers I have to overcome in these companies is the waiting period for others to notice.

Sure they might be cheap; however, for larger investors and newsletters to get interested the liquidity has to improve.

The flipside of this is the market cap and share price normally rises so we can get the benefit of being early even though at times you question your reasoning for staying put whilst other stocks are running.

I am happy to provide readers with some samples of my research so please feel free to send me an email or you can visit my website.
 
Looking ahead:
 
Daytrading to continue in the penny stocks, although the market is conducive to reporting a decent mineral discovery.
 
US and world markets have been cruising along nicely and perhaps we might see the odd triple digit drop as a reality check.
 
Asset sales to continue with further investment interests from Chinese and Indian investors.
 
Exploration JV’s to increase as the majors search for discoveries to replenish their precious and base metals production.
 
M&A activity in the gold sector to provide the impetus for gold equities to finally perform. Might even see the return of the “takeover premium”
 
Interest in platinum, shale gas, graphite, and zinc to increase as companies look past next week when it comes to their strategies.
 
New brand of products with “obvious spoonerism’s” to increase to at least let some Australian’s enjoy the economic downturn with a smile on their face.
 
The Kardashians popularity to continue its downtrend whilst Adam Sandler might actually come out with a decent movie and briefly dispel fears he is the next Eddie Murphy.
 
Having two negative years on the ASX doesn’t mean investors and speculators should write off the stock market has a mechanism for attaining capital gains.

Once markets stabilise (and they always do) it will again reward those who are able to discover and develop mineral deposits.

Whilst I would love to do a “Biff” and come back with the mining page from January 2014, it is all about risk/reward and market downturns are a necessary part of speculation.
 
Tony J Locantro
Email: tony@locantro.com
Website: www.locantro.com

THE DRILL SERGEANT: Bauxite exploration and development company, Australian Bauxite has received results from a drilling campaign carried out in December 2011 at Taralga near Goulburn in southern New South Wales.

Project location. Source: Company announcement

Australian Bauxite claims one hole undertaken at Mt Rae has combined with several nearby holes to confirm the discovery of the company’s thickest high-grade bauxite intersection, which it considers could possibly be one of the thickest bauxite intersections in Australia.

The hole which has sparked the company’s enthusiasm returned 28 metres of continuous high-grade bauxite intersected beneath one metre of clay.

The hole ended in high grade direct shipping bauxite – deposit is still open at depth.

The company compared these results to other Australian bauxite deposits, which it said were normally are less than four metres thick, with some less than two metres thick.

“Australian Bauxite and Marubeni Corporation are currently conducting a $1.5 million pre-feasibility study of the Goulburn bauxite project, and Taralga is one of the bauxite resource study areas that continues to surprise, especially around Mt Rae, west of Taralga,” Australian Bauxite chief executive officer Ian Levy said in the company’s announcement to the Australian Securities Exchange.

Australian Bauxite said the recent discovery hole remains open at depth and laterally adding that bauxite deposits located in the district contain thick zones of premium grade bauxite, with potential for more discoveries.

The company said it intends upgrading the resource estimate for Taralga before the end of the current pre-feasibility study, which is scheduled to conclude at the end of March.

Current bauxite resources at Taralga total 25 million tonnes.

THE BOURSE WHISPERER: Perth-based manganese and base metal explorer Brumby Resources has received results from a 4000 metre RC drilling program conducted at Sixty Sixer prospect, situated within the company’s 100 per cent-owned Oakover manganese project east of Newman in Western Australia.

Source: Company announcement

Brumby said the results have confirmed its expectations regarding the morphology and continuity of manganese mineralisation at the prospect.

The 53 RC hole program was carried out late last year and was designed to test the continuity of manganese mineralisation at the prospect.

According to Brumby the results have indicated the thickness and bulked manganese grade for all downhole intervals of greater than 10m with an average bulked grade of greater than 10 per cent manganese, using a maximum internal dilution length of 2mat greater than 8 per cent manganese downhole.

Using these criteria, Brumby established 39 of the 53 total holes that were drilled contained a minimum downhole thickness of 10m of greater than 10 per cent composite manganese grade, which the company claims to indicate the continuity and thickness of the mineralisation.

Brumby Resources chief executive officer Alison Morley said the results are a significant step towards the company being able to report its first Mineral Resource.

“With mineralisation open to the east and west and only half of the original target area at Sixty Sixer having been drilled, Brumby is in a great position to determine an initial Manganese resource and with further drilling we expect this resource to grow significantly,” Morley said in the company’s announcement to the Australian Securities Exchange.

“There are also numerous other untested regional manganese targets on Brumby’s Oakover tenement that we will follow up later in the year.”

Brumby said it will now undertake an initial Mineral Resource Estimation Study for the Oakover project with results expected in the second quarter this year.

THE BOURSE WHISPERER: Mineral sands exploration-paly Sheffield Resources has announced an Exploration Target for its recently discovered Drummond Crossing prospect, located just 20 kilometres north of Eneabba in the Mid-West region of Western Australia.

Eneabba regional plan showing the location of Drummond Crossing,
Sheffield’s tenure and current Mineral Resources with respect to other
deposits in the region. Source: Company announcement

The Exploration Target follows mineral assemblage testwork (QEMSCAN) carried out by Sheffield that the company said confirmed a valuable heavy mineral (VHM) assemblage comprising 14.9 per cent zircon, 10.2 per cent rutile, 4.4 per cent leucoxene and 51 per cent ilmenite.

Sheffield has outlined an Exploration Target of 35 million tonnes to 70 million tonnes at 1.5 per cent to 2.5 per cent heavy minerals (HM) for the near-surface dunal style mineralisation at Drummond Crossing.

Managing Director, Bruce McQuitty said Drummond Crossing was a significant new discovery.

“This is a terrific result,” Sheffield Resources managing director Bruce McQuitty said in the company’s announcement to the Australian Securities Exchange.

“Twenty-five per cent of the heavy mineral assemblage at Drummond Crossing consists of zircon and rutile, both of which are currently fetching record prices.

“The high value of the mineral assemblage at Drummond Crossing adds to the significance of this discovery for Sheffield.

“We will now proceed to a resource drill out in the second quarter of 2012.”

Sheffield’s Exploration Target at Drummond Crossing follows its announcements last year of Mineral Resources for the nearby Yandanooka, Ellengail and West Mine North deposits.