Out and About

Opening the recent Paydirt Magazine gold conference in Perth, Western Australian Minister for Mines and Petroleum Norman Moore said gold was one of the state’s stronger mining sectors.

“It is fair to say that for many investors the name Western Australia is synonymous with gold,” Moore told the conference.

Moore presented a raft of statistics, which he said demonstrated the strength of the WA resources industry.

“In 2010 the value of this state’s mineral and petroleum production was $91.6 billion and that was up from $71 billion the previous year, an increase of some $20 billion.

“Of the $91.6 billion minerals accounted for $70 billion.

“When I was minister last time in 2000 the value of minerals and petroleum in Western Australia was $21 billion dollars.”

In the last 10 years the value of minerals and petroleum production in Western Australia has increased more than fourfold.

Last year alone the value of Western Australian gold production was a record at $7.8 billion dollars, reflecting an increase of 35% on the previous year.

Moore attributed this result to the recent strength of the gold price, which averaged $US1224 during 2010.

Gold production in WA during this time increased by 25% to 5.9 million ounces with the state accounting for some 71% of the total Australian gold production from the 166 gold mines that are currently operating throughout the state.

“The rebound in the gold price has also flowed through to the exploration sector,” Moore explained.

“Exploration expenditure for gold across Western Australia was worth $412 million in 2010. This was an increase of close to 50% on the 2009 level.
“It represents about 30% of the total exploration expenditure of Western Australia.”

Recent exploration activity within WA has been fruitful to say the least with a number of significant discoveries including the Tropicana and Doolgunna gold deposits.

The Doolgunna discovery of Sandfire Resources in particular has reignited a great deal of interest in WA’s gold potential with any number of emerging companies looking to replicate its success.

The project’s location straddles the Great Northern Highway, which has become something of a divining rod for potential miners when targeting gold mineralisation.

One such example is Doray Minerals, which in March last year made the high-grade Andy Well discovery adjacent to the Highway 40 kilometres north of Meekatharra.

“If you look at Australia’s total exploration expenditure Western Australia has gone from 49% five years ago to 57% last years,” Moore said.
“That demonstrates companies are taking a much greater interest in Western Australia.”

Closing his opening address Moore took aim at the federal government’s Mining RR Tax stating the WA government continues to oppose its introduction.

Moore labelled the MRRT a tax on Western Australia, which he said would result in about $8 billion a year leaving WA and heading straight into the federal government’s coffers.

“Probably 60% – 70% of the tax will come out of Western Australia,” Moore said.

“We believe it will place an unfair burden on developers of our resources. It simply ignores the risks, the significant risks, associated with exploration and mining anywhere in the world.

“In addition, a federal tax may compromise the Western Australian community’s right to a fair return of royalties from resources, which Western Australian taxpayers legally own.”

If one tax to rail against wasn’t enough to rail against Moore then reloaded to fire another shot, this time across the bow of the federal government’s proposed carbon tax, which he said, “Poses a threat to all miners, not just coal and iron ore producers.

“We will continue to fight for the best outcomes for Western Australia on both fronts, including a careful assessment of the constitutionality of the federal government’s proposed mining tax.

“The more I look at it the more I see it as a rent or a royalty and that is not something, in my view, the federal government is entitled to access.
“In the meantime the improvements we are making to our exploration and development environment will, we hope, ensure we remain an attractive destination for exploration and investment dollars.”

Western Australian minister for mines and petroleum Norman Moore

Mark Fraser – Karratha in Political Void

Despite being at the centre of what is arguably the country’s largest resources hub – a situation it has been in for over three decades – the Western Australian Pilbara town of Karratha still does not have a political presence. (read more)

This strange fact of life was recently highlighted by Future Directions International’s Gavin Briggs, who raised the fact that the town did not a permanent electoral office.

This, he noted, was in a period characterised by the political speak of a “new political paradigm”, and language that emphasised “regional Australia”.

Meanwhile, the other economically significant town in the local government municipality which oversees Karratha – the Shire of Roebourne – is Dampier.

Situated on the Burrup Peninsula, it is home to the Dampier Port Authority (DPA).

By tonnage, the DPA is responsible for one of Australia’s largest ports, shipping from its two terminals at Point Parker and East Island Intercourse, and Withnell Bay, commodities such as iron ore, liquefied natural gas and salt.

In the WA parliament, Karratha is located within the electoral district of North West

Its current Member of the Legislative Assembly is Vince Catania, who was originally elected to the Legislative Council in February 2005 before running for the newly created seat of North West at the September 2008 state election (as a representative of the Australian Labor Party).

Having won that seat, he quit the ALP within a year and changed his political allegiance to the Nationals WA in July 2009. His electorate office is located in the Gascoyne town of Carnarvon.

Further north, at Port Hedland, the MLA is Tom Stephens. A long-serving member of the WA parliament and former state minister, his parliamentary electorate office is in South Hedland.

In the case of Federal parliamentary representation, Karratha is within the seat of Durack held by the Liberal Party’s Barry Haase.

Durack covers an area which sits between Kununurra in the north to Geraldton-Greenough in the south.

The world’s largest electorate, its population centres include the City of Geraldton-Greenough as well as the towns of Broome, Carnarvon, Dampier, Derby, Exmouth, Kalbarri, Karratha, Newman, Port Hedland, Wiluna and Wyndham.

To cover this enormous area, Briggs noted, Haase had two electorate offices located in Geraldton and Broome.

“For those with larger seats, such as Durack, MPs are entitled to two parliamentary electorate offices which ultimately better serves the interests and needs of its sparsely spread electors who would otherwise have even less contact with an MP or their office,” he explained.
 
“Many State and Federal MPs are tireless in their advocacy for the people they represent,” Brigg said.

“This report does not seek to question their ability, commitment or dedication.

“It is more about questioning their choice of location when it comes to providing a direct political presence for their constituents.

“Furthermore, any one of WA’s 12 senators could locate their electorate office anywhere in the state.

“All, however, can be found within the Perth metropolitan area. Only two are located further than a 10 minute drive from Perth’s CBD – the ALP’s Senator Glenn Sterle (Canning Vale) and Greens Senator Scott Ludlum (Fremantle).

“Politics dictates that these senators also have a party-political role that includes ‘duty-Senator’, which has them involved in representing, holding or winning marginal lower-house seats.

“While the public remains loathe spending more funds on electorate expenses, its remains to be seen why there is no permanent electorate presence in Karratha within current resources.

“The question remains – are adequate resources being provided to the state’s regional MPs?

“Also, is enough really being done for an on-the-ground electorate presence for the North West?”

Although it is one of Australia’s most strategic regional hubs, the people of Karratha have no direct political voice.

Peter Hayes – Investment Veracity

Often I am asked by clients, family and acquaintances, how’s the market today?

The immediate answer to that question is that I haven’t looked at it. This could be at 8am, 10am, or 12.30pm.

The reason for this is my life as a stockbroker is not ruled by the market indices. My life as a stockbroker is ruled by particular stocks, and usually small resource companies based in West Perth or Subiaco.

These stocks aren’t even considered in the ASX, and are part of what Alan Kohler on ABC news might call the small ordinaries index. In fact, the stocks I’m interested in aren’t even in the small ordinaries index. At least, I don’t think they are. In fact I couldn’t care what index they are in, just as long as I can ring up the MD (managing director) and do DD (due diligence) on what is happening with the company.

The sharemarket is a lot of different things to a lot of different people. There are the self funded retirees who are in the market for dividends, and a bit of capital growth. There are the executives that are running companies to earn a living, and there are day traders playing the market for trading profits amongst others.

I’m an investor, and because of this I have clients that tend to invest in the same stocks as I do. Makes sense really, and generally I only invest in things that I am involved with.

Last calendar year, the ASX 200 was down 2.6 per cent for the year, but a lot of the penny dreadfuls I was “full to the gills” in outperformed most other investments. I was long thermal coal, rare earths and a bit of gold. At the start of last year I didn’t know what rare earths were, but I bloody well do now!

Apparently, the small ordinaries index rose 10.2 per cent in 2010, and the top 10 performers were all resource stocks. Resources make up some 45% of the small ordinaries. Indeed, since the absolute bottom of the market in March 2009, the small ordinaries is up over 100 per cent, and in the same time frame the ASX 100 is up by 45 per cent.

Most of my colleagues had some of the best calendar years that they’ve had in the ASX last year, and the general market was down 2.6 per cent. So statistics are best left to statisticians and actuaries, they are very misleading when coming to investing both in property and equities. Best used as a guide, not a rule.

So when considering a position in a particular investment, it’s a good idea to ask a number of people their opinions and act only once you are comfortable you have done the required “digging”. And then sometimes it can just be pure “arse”.

A very brief introduction to the JORC Code

Mining and exploration companies listed on the ASX are required to report in line with the JORC code, but what is the JORC Code?

The Joint Ore Reserves Committee (JORC) Code sets the minimum standard for public reporting of Exploration Results, Mineral Resources and Ore Reserves in Australia and New Zealand.

Also known as the Australasian Code for Reporting of Exploration Results, Minerals Resources and Ore Reserves, the JORC Code provides a system for classifying resources and reserves.

It does this in terms of tonnage/grade estimates according to geological confidence and technical/economic considerations that are subsequently published in reports prepared by companies to inform investors, or potential investors and their advisors.

JORC was originally established in 1971 and several reports containing recommendations for the classification and public reporting of ore reserves were published until the first edition of the code was eventually published in 1989.

The main purpose of the Code was to establish consistency in reporting of the resources and reserves of Australian projects.

According to the 2004 edition of the Code it has been, “Adopted by The Australasian Institute of Mining and Metallurgy (‘The AusIMM’) and the Australian Institute of Geoscientists (‘AIG’) and is therefore binding on members of those organisations.

“It is endorsed by the Minerals Council of Australia, and the Securities Institute of Australia as a contribution to good practice.

 “The Code has also been adopted by and included in the listing rules of the Australian (‘ASX’) and New Zealand (‘NZX’) Stock Exchanges.”

The JORC Code is used by mining companies to tell the market place what they have been able to find out about their respective projects in a uniformed manner.

As a company carries out any exploration activity that provides it with any bearing as to how it may be progressing, it must continually disclose any knowledge it learns concerning what may or may not be held in the ground within its tenements.

“Public Reports concerning a company’s Exploration Results, Mineral Resources or Ore Reserves should include a description of the style and nature of the mineralisation,” the Code says.

“A company must disclose any relevant information concerning a mineral deposit that could materially influence the economic value of that deposit to the company.

“A company must promptly report any material changes in its Mineral Resources or Ore Reserves.”

For the purposes of this reporting Mineral Resources are divided into three different categories according to their geological confidence, which is based on the location, quantity, grade, geological characteristics and continuity.

Once this geological evidence and knowledge has been ascertained a Resource can be estimated or interpreted to be classified to be in either the Inferred, Indicated or Measured category.

Each of these categories pretty much live up to their titles.

An Inferred Resource, for instance, is exactly that. It is a resource that infers a company is reasonably certain mineralisation exists, but it has yet to do enough drilling to obtain the appropriate information to be able to say how big it is or if it is economically viable to justify the construction of a mine.

“An ‘Inferred Mineral Resource’ is that part of a Mineral Resource for which tonnage, grade and mineral content can be estimated with a low level of confidence,” the Code tells us.

“It is inferred from geological evidence and assumed but not verified geological and/or grade continuity.

“It is based on information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes which may be limited or of uncertain quality and reliability.”

The next target for a mining company is to take its resource from the Inferred stage to become an Indicated Resource.

After enough work has been carried out on the Inferred Resource a company reaches a point where it has a much better idea as to the nature, quality, amount and distribution of whatever commodity it may be looking at.

At this stage the company is able to confidently interpret the geological framework of the project and perhaps to also be able to assume continuity of the mineralisation.

The company should now also be able to apply technical and economic equations to the resource to provide an evaluation of its economic viability.

“An ‘Indicated Mineral Resource’ is that part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a reasonable level of confidence,” according to the Code.

“It is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.

“The locations are too widely or inappropriately spaced to confirm geological and/or grade continuity but are spaced closely enough for continuity to be assumed.”

When the company is finally reaches the point where there is “no reasonable doubt”, in the opinion of the Competent Person [Another article for another time], overseeing the project that the nature, quality, amount and distribution of the data means the tonnage and grade of the mineralisation can be estimated to within close limits without any slight variations affecting its potential economic viability, it may then be categorised as a Measured Mineral Resource.

“A ‘Measured Mineral Resource’ is that part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a high level of confidence,” the Code says.

“It is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.

“The locations are spaced closely enough to confirm geological and grade continuity.”

Of course this is just the beginning of the reporting process. Ore Reserves, “the economically mineable part of a Measured and/or Indicated Mineral Resource”, are also subjected to stringent reporting parameters.

Understanding the difference between Indicated, Inferred, and Measured Mineral Resources, is vitally important for any investor but it is just the tip of the iceberg when it comes to fully understanding what companies are reporting and what it actually means.

Welcome to the Resources Roadhouse

Located on the Information Superhighway, on the outskirts on Mining
Town, the Resources Roadhouse is a popular hangout for members of the
resources industry community.

All roads leading to all the mining projects scattered around the
country pass by our front door making the front veranda of the Roadhouse
the perfect position for visitors to sit and observe all that is
happening in the resources industry.

The main feature of the Resources Roadhouse is The Inside Story, which
offers our loyal regulars a comprehensive look at a particular resources
company.

The Inside Story provides visitors to the Roadhouse with an insightful
snapshot of what that company is up to and where it is in regard to
developing its project be it greenfield exploration or redevelopment of
an existing project.

Many small-to-mid market cap companies tend to sneak under the radar of
the Australian Securities Exchange market place and subsequently can be
overlooked by potential investors.

The Inside Story provides readers with an introduction to these
companies from where they can, and should, begin their own homework to
decide whether or not they may be a good investment fit for their
portfolio.

The Roadhouse provides the ideal place for industry-people-watching with
its clientele including a veritable mining who’s-who either in
clandestine conversation at its many tables and booths or propped up at
the bar enjoying a cold beverage Off the Wood, ready to tell anybody
who’ll listen all about their recent activities.

The ethos of the Resources Roadhouse is sharing information. Roadhouse
regulars include an assembly of respected analysts, brokers and
journalists from around Australia who will be providing coverage of all
aspects of the resources industry from the first rocks kicked in
exploration anger, through feasibility studies and construction to the
point of production.

Other regular contributors include our own galloping gourmand Sir Lunchalot.

There’s an old adage that says, “The quickest way to a journalist’s
notebook is through the door of a good restaurant”, and Sir Lunchalot is
never shy of climbing aboard the gravy train to bring his readers the
latest crumbs on offer from the junior mining sector.

The Roadhouse also encourages its journalists to get Out and About to
bring you all the latest news from conferences around the country as
well as getting On the Ground to visit different exploration plays and
mining operations.

The Resources Roadhouse is brought to you by the team from Word 4 Word
Media, which is led by experienced resources sector journalist Wally
Graham.

Wally has written for some of the resources industry’s leading
publications including Australia’s mining Monthly, PetroleumNews.net,
MiningNews.net and Mining Journal.

He has most recently been editor of Australia’s foremost resources
investment magazine RESOURCESTOCKS where he built an industry-wide
reputation as a respected journalist.

Step inside the Resources Roadhouse take a seat and have a god look around. You could be here for a while.

Silver Bullets by Gavin Wendt

Silver was one of the best-performing commodities of 2010, so let’s take a close look at the reasons behind it all and where things might be headed during the 2011.


To put things into perspective, just six months ago there were brave predictions that silver could surge to as high as US$23 per ounce during 2011.

Well, it didn’t take nearly that long, with the metal surging past the US$30 per ounce mark during late 2010 and currently settling around the US$28 per ounce mark.

Silver really has been an amazing performer in the precious metals space, with a strong outperformance of gold, particularly over the past half year or so. Spot silver surged by 80% during 2010 to a peak of US$30.50 an ounce, its highest price since September 1980.

This easily beat gold’s 24% increase to a recent peak of US$1,424.60 per ounce. And the metal has also outperformed most of the base metals, with the exception of tin’s 60% surge price surge during 2010.

What’s been driving silver? Silver’s attraction is best summated by this description we came across: “You buy gold when you think the world is going to hell in a hand basket. You buy copper when the economy is booming. In between those two, if you’re a bit confused, you buy silver.”


 
Figure 1: Courtesy of Kitco

The same key factors that have seen the gold price surge to record levels this year – weakness in the US$ that shows no sign of easing, combined with investor nervousness related to the ongoing ‘quantitative easing’ taking place in the US, are also driving silver. (‘Quantitative easing’ is a modern euphemism that refers to the money-printing, low interest rate-spending spree currently being encouraged by US authorities).

With money being pumped into the system, the inevitable questions that follow are how and when all of this ‘free money’ will be repaid. The answers are just too horrible to contemplate, with mammoth inflation being just one of the uncomfortable likely consequences.

As a result, many sensible investors have been loading up on gold since the GFC. But this is only part of the picture, as there were other sensible investors that saw the writing on the wall long before 2008’s meltdown. In actual fact demand for gold has been rising since 2000, which helps explain why gold recently registered its 10th consecutive year of price gains.

And as gold has become more expensive, investors have looked for cheaper alternatives, including gold’s relatively poor cousin, silver. For guidance we can look at the gold-silver ratio, or simply how many ounces of silver you can buy for each ounce of gold. Growing investor demand for silver over recent months is reflected in a decline in the gold-silver ratio.

An ounce of spot gold currently buys around 48 ounces of silver, which compares with the decade average of 62 ounces. Many investors obviously like the leverage factor that silver offers compared to gold, believing that any future gold price movements will be magnified in silver.

And it’s not only investor demand, but also an expected recovery of industrial demand for silver, with the metal used in solar cells, mobile- phone covers and photography, which underpins 80% of demand. Silver is a great investment because it doubles as a store of value for buyers concerned about the economy and as an industrial material for those bullish on growth.

New applications such as plasma screens are compensating for a drop in demand for film, now 9% of usage down from 24% in 2000, data from GFMS shows. Eastman Kodak Co said last year it would stop making Kodachrome film after more than seven decades.

Nevertheless, whilst we’re hugely positive on gold and as a consequence silver, we’re not as wildly bullish on price as some of the silver pundits out there. Price calls of US$400 per ounce in the near future by some wild silver bulls are quite ludicrous and impossible to justify, merely setting some investors up for inevitable disappointment.

Silver’s fundamental demand (excluding investment) should continue to rise this year, chiefly due to gains in industrial uses. However, this will be outweighed by gains in total supply as mine output rises (both scrap and government sales are projected to fall). Nevertheless, with key supports such as ultra-low interest rates, a weakening US$ and a buoyant gold market, we are confident that investors will be of a mood to absorb the resultant, growing surplus.

We believe that gold will comfortably surpass US$1,500 per ounce during 2011 and that silver has every chance of stabilizing around US$30 per ounce and perhaps pushing higher.

Sir Lunchalot

At a recent lunch briefing Sir Lunchalot was entertained by the very English and extremely well mannered team of GGG Resources.

London-based AIM-listed GGG Resources recently decided that if its main project was located in Australia it might as well “Australianise” itself by listing on the local bourse.

The company’s major focus is on developing the Bullabulling gold mine located just outside Coolgardie in Western Australia with its 50:50 joint venture partner Auzex Resources.

The current JORC compliant inferred resource at Bullabulling is 41.5 million tonnes at 1.48 grams per tonne gold, for 1.98 million ounces of gold.

“The project has gone up now to (almost) two million ounces,” GGG Resources managing director Jeff Malaiholo told a table of hungry journalists.

“It was 400,000 ounces when we picked the project up initially.

“Two million ounces really covers the southern, 2.5 kilometre strike, of a six kilometre strike zone.

“It is artificially cut off at 120 metres depth simply because the density of historical drilling is not there.”

A lack of quality assurance or quality control data for historic drill holes meant GGG was unable to estimate the resource with any higher degree of certainty.

A current drilling program including some 5,000m of twin drilling parallel to the historic drilling is hoping to validate the historic data, which the company hopes to use in order to upgrade the current inferred resource to measured and indicated.

Three drill rigs, one diamond rig working on metallurgical testing and two RC rigs infill drilling to the east of the existing Bacchus and Phoenix pits, are currently operating at Bullabulling.

The RC drilling is testing the limits of the resource to the east as well as following up high-grade intersections that have shown up in the historic drilling.

Results of the drilling so far have corresponded with the historic data.

The joint venture is confident of being able to announce an updated JORC compliant measured, indicated and inferred mineral resource in the first half of 2011.

“The key thing about it is that it is a brownfields project,” Malaiholo continued above the clinking cutlery.

“It was mined before by Resolute Mining, which mined the oxide too.

“They took out about 350,000 ounces and effectively have pre-stripped the fresh material.

“The fresh material is at least 90% recovery, from historical data. It was mined for two years, so we know what the recovery is.

“We’re doing some additional metallurgical test work to check that – to check the variability, if you like, along the ore body.”

By listing on the ASX GGG hopes encourage Australian shareholders as well as providing access to two capital markets should it ever need to rattle the tin in order to raise additional funds.

“We are going to be a dual listed company,” Malaiholo said.

“The reason for that really, is that we want financial reach, both into London and into Australia.

“Obviously Bullabulling is a large low-grade deposit. It is already at two million ounces and we can see that expanding considerably.”

The company is expecting that in order to reach a satisfactory level of economies of scale the building a fairly large throughput plant will be required.

“At the moment we’re talking three million tonne per annum,” Malaiholo explained.

“That may increase as our drilling goes forward but at the moment our working hypothesis is three million tonnes per annum.

“To build that we are going to need financial reach…so it is important to get a few shares into a few institutions and that is why we raised $9 million in Australia and why we raised just over ten million pounds in the UK; to get set to take this project forward.”

GGG is eyeing completion of a feasibility study at Bullabulling by the end of this year.

Should that indicate the project to be economically viable the intention for GGG is to then push on in order to get into production as soon as it is able.

The Big Article

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CORAZON MINING

We’re Talking Nickel – Are You Listening

The story of Perth-Based Canadian-focused nickel exploration play Corazon Mining Limited may not be widely known but it is one the company’s shareholders are eager to see through to the end.

Corazon Mining listed on the ASX in 2005 as Graynic Metals, an exploration company with a focus on base and precious metals, predominantly in Western Australia.

For a brief moment the company changed its name to Xanadu Resources and ventured off in search of nickel laterites in Guatemala.

Another change of name, this time to Corazon Mining, resulted in a subsequent change of focus to nickel sulphides in Canada.

“The board came to the decision that nickel laterites were probably not a right fit for a junior company,” Corazon Mining managing director Brett Smith told The Inside Story.

“Nickel laterites require an enormous amount of capital to develop, so we pulled out of the Guatemalan opportunity as the Canadian opportunity arose.

“This new project is unique in that we have inherited part of an old mining area, in which we see there is still a lot of potential.”

Corazon’s key focus is the Lynn Lake project located in the Canadian province of Manitoba.

The Lynn Lake project is located in the Lynn Lake nickel camp, Canada’s third largest nickel mining region.

 “The current board is very value focused and we are all of the opinion that this project and nickel sulphide is the right option for us at this stage,” Smith continued.

“It is something we are familiar with and this project is something we believe we can add value to quite easily and its real potential has yet to be realised.

“It is a brownfields nickel sulphide play and our strategy is to define the remnant resources around the old mine we have inherited and to discover new deposits.”

Corazon has an option to acquire 100% equity in the Lynn Lake nickel sulphide project by spending CAD$3 million on exploration over 3 years, followed by a CAD$2 million vendor payment.

“Besides the regional prospectivity of the project, the main aspect that attracted us to the project was the EL Mine,” Smith said.

“The EL Mine is a mafic/ultra-mafic plug containing massive sulphide, nickel, copper, cobalt that historically has only been mined down to around 200 metres in an area where surrounding mines have been mined to a depth of around one kilometre.”

Corazon holds the largest land holding within the Lynn Lake region, which incorporates the historic EL Mine and an exploration land holding covering several drill-defined base and precious metal prospects, including six drill-defined VMS deposits, as well as numerous untested geophysical targets.

“We think we are a unique play in that we are a nickel junior with a sub $10 million market cap and nickel sulphide resources,” Smith said.

“Generally, if you are thinking nickel and nickel sulphides you have to go to mid-tier production companies or grassroots explorers. There’s no-one in between those two levels.

“We want to show there is an exciting path towards production by demonstrating the upside of the project and get some momentum – a base level of resource from which we can fly.”

That momentum began to take shape in October when Corazon released a maiden (inferred) resource for the EL Mine of 1.8 million tonnes at 1.0% nickel equivalent (0.6% nickel equivalent cut-off).

The resource included 14,000t nickel, 9,000t copper and 400t cobalt and was regarded by the company at the time to be a significant step towards determining the development potential of the project.

“We have defined a resource for the top 600 metres that is an interim resource,” Smith explained.

“We have been very conservative and have only included holes we have drilled, holes we can sample and holes on which we have survey information.

“We have discarded a lot of historical information; however we feel we can add a lot of value with a minimum of drilling in that resource above 600 metres.

“We don’t believe the resource we announced late last year truly reflects the exploration potential so we also put out an exploration target (3.5Mt to 4.6Mt at between 0.8% – 1.45% nickel, 0.4% – 0.7% copper and 0.01% – 0.03% cobalt) down to around one kilometre deep.”

Historic mining at Lynn Lake ran for 23 years with a run-of-mine grade of 1% nickel, 0.5% copper.

Although the EL Mine was the highest grade mine in the district (+2.5% nickel), these grades appear low when compared to the Kambalda styled narrow high-grade nickel sulphide deposits Australians are more familiar with.  However, the Lynn Lake project hosts a very different style of deposit; one that is a large tonnage, low grade, low cost style of mining.

“We believe there is good potential for about 50,000 tonnes of nickel, with copper and cobalt credits, grading around 1% to 1.5% nickel,” Smith said.

Ironically this great potential is hindering Corazon’s share movement with the current shareholder base reluctant to sell. Around 50% is held by the top 20 shareholders.

“What we have been doing lately is getting out there and letting new, prospective investors know about the company, get more interest in the stock and be active in the field,” Smith said.

“Eventually if we’re out there drilling holes and people are buying and selling the stock then our liquidity should improve.”

Corazon is about to embark on an intensive exploration program it hopes will advance both the project and its share price.

The proposed work programs include 5,000 metres of drill core and down-hole EM geophysics, 420 line kilometres of aerial VTEM and magnetic geophysics, 40 line kilometres of ground IP geophysics, project coverage with detailed ground gravity geophysics and preliminary mining studies on the EL Nickel sulphide deposit.

The EL Deposit will be a major focus for this upcoming raft of exploration activity as it undergoes resource up-grade drilling at shallow depths, drilling and down-hole EM surveys of extensions to the mineralisation as well as mining/engineering studies of the resource.

The program will also test other nickel sulphide and zinc-copper-sliver VMS targets within the project.

“This area hasn’t really been extensively explored since the 1970s and we believe there is plenty of upside with good modern exploration techniques,” Smith said.

“It is a metal-rich project and we are proposing a very active exploration program for the next 6 months.

“Our main aim with our exploration strategy is to increase this resource. We are hopeful that, with this round of drilling, we can underpin some certainty in our exploration target for the EL Mine.

“What we would also like to achieve is the discovery of another nickel sulphide deposit.”

Corazon considers the place this is most likely to occur is directly beneath the EL Plug.

Indications that have boosted these hopes include improving grades and faults that have been mapped

“We think these faults are very good places to explore,” Smith continued.

“Want we will be doing is drilling one or two deep holes down to about 1.2 kilometres then perform downhole electro-magnetic surveys which will accurately locate massive sulphide targets for follow-up resource drilling.

“The previous exploration carried out at Lynn Lake was old-school. Nothing like we are capable of doing now with the processing and modelling of information.

“These days we can put exploration data into 3D packages and identify anomalies and drill targets that were missed back then.

“There’s a different level of investigation we can perform now, compared to what was done before.”

A recent successful fund raising means Corazon will be financially well placed to do what it has said it wants to do.

“We’re going to be hitting areas where we know there is mineralisation or a geophysical target that looks just as good as the area where we know there is mineralisation,” Smith said confidently.

“A coincident EM with a magnetic anomaly could be another EL Plug with sulphides or it could be a VMS. Either way we would be very happy.”

Corazon Mining Limited (CZN)
…The Short Story

HEAD OFFICE
Level 1
350 Hay Street,
Subiaco  WA  6008

Ph: +61 8 6364 0518   
Fax: +61 8 6210 1872

Email: admin@corazon.com.au
Web: www.corazon.com.au

DIRECTORS and MANAGEMENT
Clive Jones, Brett Smith, Jonathon Downes, Adrian Byass, Rob Orr, Andy Thompson

MAJOR SHAREHOLDERS
Board 10%
Dr AR Brown 6.5%
Merrill Lynch (Aust)  3.9%
Bullseye Geoservices 3.4%
UBS Wealth Management (Aust)  3.3%

SHARES ON ISSUE
78.52 million

MARKET CAPITALISATION
$9.42 million (at press)

TRIANGLE ENERGY (GLOBAL) LIMITED

 Junior gas Producer Works the Angles

A change of name and project-focus saw Perth-based Triangle Energy transform from a company with promising exploration interests to become a gas and condensate producer generating cashflow.

At an AGM in November 2009 shareholders of Maverick Energy Limited voted in favour of acquiring Triangle Energy Limited and changing the company name to Triangle Energy (Global) Limited.

Triangle Energy had already secured the 100% ownership of Triangle Pase Inc (TPI) in June 2009.

TPI, in turn holds 100% interest of the Pase Production Sharing Contract (PSC), located in Aceh province, North Sumatra, Indonesia.

The Pase Field covers an area of some 922 square kilometres that was originally acquired by ExxonMobil, which had carried out limited exploration on the acreage specifically targeting gas supply for the Arun LNG plant.

“It was a field that had been closed because it wasn’t seen as a viable opportunity for a major oil and gas company,” Triangle Energy Executive Chairman John Towner told The Inside Story.

“We came along and viewed it differently. We saw it as being extremely viable and we took up the opportunity.”

The Pase Field was discovered in 1983 with production commencing in 1998. In 2003 ExxonMobil estimated the field to contain 498 billion cubic feet (Bcf) of gas.

At the time Triangle Energy acquired the field cumulative production had totalled 183 Bcf.

Since the acquisition of TPI in June 2009 Triangle Energy has achieved the successful re-establishment of gas production at three wells: the Pase-A5 well in July 2009, the Pase A-6 well in October 2009 and the Pase A-1 well in April 2010.

“This is a big field with the potential to get much bigger,” Towner said.

“When we took it over it was pretty run-down and there wasn’t much happening.

“We have totally refurbished it to the point where it is now, once again, an operating gas field.”

The combined flow rate from the three re-established wells increased from 0 million cubic feet (MMcf) per day at the beginning of 2010 to 6.5MMcf per day at June 30.

By September the combined gas production was exceeding 10MMcf per day.

The gas from Pase is predominantly sold through the Arun LNG plant at a premium price tied to a basket of crude oil markers.  A small amount of Triangle’s gas (in 2010, less than 10% of gas sold), is sold to the domestic Indonesian market.

The Pase PSC is an arrangement between TPI and the Government of Indonesia that was originally signed between the government and Mobil Pase in February 1981 for a 30 year term.

This means the current PSC is due to expire in February next year, however Triangle Energy announced in March 2010 it had received verbal confirmation from the government’s PSC administrator, BPMIGAS of an extension of 377 days to the contract period extending the expiry date to February 2012.

TPI has applied for a 20 year renewal of the PSC, which is currently progressing through government channels including technical and commercial reviews by MIGAS and the Ministry of Energy and Mineral Resources, as well as approval from the Aceh government.

“Everything in that regard is going well so far and everyone is happy for us to be operating the project.”

The growth Triangle Energy has experienced this year has also resulted in the appointment of new personnel.

Rob Lemmey was appointed to the board as a company director in January following his appointment as country manager – Indonesia for TPI in December 2009.

Lemmey brings over thirty- five years experience and in-depth knowledge of business development of the Indonesian Oil and Gas industry.

Joseph Oravetz is a highly experienced Geophysical Engineering and joined Triangle Energy in June 2010 as exploration manager. He has worked globally for ExxonMobil, Chevron, and Premier Oil.

Triangle Energy is very conscious of its position within and responsibility to the community surrounding the Pase Field.

The company has been proactive in refurbishing two new schools and establishing a medical centre, where it is employing local people.

“We are employing more than 50 local people and are looking to employ as many local people as we can,” Towner explained.

“What people have to understand is that, unlike Australia that has many strings to its bow, these people don’t have that. They don’t share in the wealth that we and the rest of the world do.”

“We hold the view that as this is their country and their commodity they should be entitled to their share in it.”

“In return we get our share and everybody is happy.”

It is this attitude that is most likely to see Triangle Energy emerge as a preferred employment alternative for the local community.

Not only that but should another, similar project opportunity arise Triangle Energy would hope to be one of the first companies approached for its development.

“We have made for ourselves a pretty good start in the area that we can develop,” Towner said.

“We can become quite a large small company, but if we accomplish that in one region and everybody is pleased with what we do then we also develop the potential for that culture of accomplishment to spread.”

Giving back to the local community is an important cultural aspect of Triangle Energy, which was recently complemented by the company giving something back to its shareholders.

This was in the form of the payment of a maiden dividend to company shareholders in September of 0.2316 cents per share.

“We had a reasonably large amount of money in the bank,” Towner explained.

“We could have kept it but we decided to go to the shareholders and say, ‘this is our policy, that a portion of our net profit goes back to our shareholders’.”

“My view is simple. That is if you pay your shareholders a dividend they know what your policy is.”

…The Short Story

HEAD OFFICE
Unit 7, 589 Stirling Highway
Cottesloe WA 6011

Ph: +61 8 9286 8300
Fax: +61 8 9385 5184

Email: admin@triangleenergy.com.au
Web: www.triangleenergy.com.au

DIRECTORS
John Towner, Steven Hamer, Lewis Johnson, Adam Sierakowski, Rob Lemmey

MAJOR SHAREHOLDERS
Jarrad Street Corporate Pty Ltd     24.50%
Mr Kenneth John Bull             12.22%
Ucan Nominees Pty Ltd         9.39%
PT Prestige Global Petroluem     6.32%