RIU Sydney Resources Round-up

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The eighth annual RIU Sydney Resources Round-up kicks off at in the salubrious surroundings of the Sofitel Sydney Wentworth this week with the three day conference promising to provide investors with the opportunity to meet the people behind some of Australia’s leading exploration and mid-tier mining companies.

The Resources Roadhouse has driven the company ute across the Nullarbor to be at this event in order to press some serious mining industry flesh as well as providing its readers with up-to-date daily commentary from the conference.

The RIU Sydney Resources Round-up has earned a reputation as the principal East-Coast Australian forum for the small to mid-cap resources sector.
This year more than 65 companies will be represented at the convention running from Wednesday 11 to Friday -13 May.

As well as being in the best place to hear the latest commodity market updates, visitors to this year’s round-up will also gain a close-up look at some of the external factors currently affecting Australia’s exploration and mining sectors.

These include such facets as the state of the global economy, the impact the economic meltdown has had on the different countries around the world as well as the expected introduction of a national mineral resources rent tax.

“Savvy investors are picking up some real bargains in buying companies with a solid business strategy, experienced management team, and near term production – particularly in the iron ore, coal and uranium sectors.” Stewart McDonald, managing director of event organisers, Vertical Events said.

Some of the key presentations at this year’s conference include: Chris Reed of Reed Resources, Chris Bonwick of Independence Group, Steve Parsons of Gryphon Minerals, and Mike Young of BC Iron.

Zamia Metals scores healthy molybdenum hits.

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Australian exploration company Zamia Metals has announced some encouraging RC drilling results from the northern zone of its Anthony molybdenum discovery in central Queensland.

The latest drilling program came on the back of an announcement by the company in February of an increase in the Inferred Resource in primary (sulphide) molybdenum mineralisation to 173 million tonnes at 430 parts per million molybdenum, including 20 Mt at 810 ppm molybdenum.

The total Inferred Resource including oxide, transition (partially oxidised) and sulphide mineralisation was reported as 233 Mt at 420 ppm molybdenum including 26 Mt at 780ppm molybdenum.

Since the February resource upgrade, Zamia has drilled a further 18 RC holes to depths of up to 250m to test the lateral extent of the deposit as well as an extra six diamond tails to between 400 and 500m to test the depth of the deposit.

Most of this drilling, however, was focussed on the high-grade Western Zone and the Eastern Zone with limited drilling carried out on the Northern Zone.

Zamia drilled a further three RC holes (RC90, RC91 and RC92) in the Anthony Northern Zone, all to a depth of 246m and all resulting in substantial molybdenum intersections.

Hole RC90 assayed 665ppm molybdenum in the sulphide zone from 87m to 246m, including 1000ppm molybdenum from 189m to 195m, 1045ppm molybdenum from 222m to 231m and three other separate 3m intersections assaying over 1000 ppm molybdenum.

In the partially oxidised zone, this hole assayed 794ppm molybdenum from 51m to 87m including 1021ppm molybdenum from 63m to 84m.

RC91 averaged 350ppm molybdenum over the full length of the hole down to 246m. A 12m interval towards the bottom of the hole assayed 636ppm molybdenum.
RC92 assayed 435ppm molybdenum for the first 78m from surface, including 607ppm molybdenum from 9m to 18m.

According to Zamia, “These results clearly indicate the potential for significant resource expansion in the Anthony Northern Zone.”

Indeed the company has indicated its intentions to test the extent of the Northern Zone laterally with further RC drilling planned.

Besides trying to find out how wide the zone is Zamia also intends to find out how deep it is by drilling a number of diamond tails, as most of the holes in the Northern Zone have only been drilled to less than 250m vertical depth.

 

Blackham Resources receives further positive drill results from Scaddan.

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Blackham Resources has announced further positive drill results from drilling at its Scaddan and Grass Patch projects near Esperance, Western Australia confirming coal intercepts outside the existing resource model.

A recently completed air core and diamond drill program was aimed at upgrading the coal resource category within the mining pit area and test the coal seam extensions to the north of the deposit.

Results from the drilling have demonstrated the coal seams extend at least six kilometres north of the planned mining pit. The seam extensions remain open to the north with GPA 3 intercepting 13 metres of coal.

Earlier reported results from exploration holes in the coal inventory to the north of the pit area returned intersections larger than the average seam width.

Seam thickness through this region has been estimated to be in the range of 2‐8m from historical drilling.

“Drilling within the resource area continues to add confidence to the existing resource model,” Blackham said in an announcement.

“The current drilling program has confirmed the coal seams are thickest in the centre of the coal deposit.”

Blackham said that as all the drilling results from this current campaign have been received. a new resource statement is expected to be finalised within the next three to four weeks.

Feasibility study gives thumbs up for Richmond Mining’s Buena Vista iron project.

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The recently completed feasibility study carried out on the Buena Vista project, located in Nevada, USA, has, according to the company, confirmed the project to be, “an economically robust, long-life iron project which will generate substantial returns for the company and deliver significant benefits to local Counties and the State of Nevada.”

Perth-based Richmond had a weekend as good as its AFL doppelgangers with highlights from the study including applying a conservative 10 year average Freight On Board concentrate price of US$110 per tonne the project Net Present Value, after tax and capital expenditure is US$133 million with an Internal Rate of Return of 33%.

Free cash flow after tax from the first 10 years of operation is US$478 million.

A JORC standard Indicated Resource of 65 million tonnes, with an initial Probable Ore Reserve of 59Mt has been achieved, which Richmond said is, “sufficient to underpin the initial 10 year production profile.”

The study was based solely on accessing ore from the West deposit, for an initial output of 1.75 million tonnes per annum of concentrate, to be produced on site.

Ore will be directed via a 40 kilometre slurry pipe to a rail siding at Colorado Junction, from where it will then be transported to a port located in the San Francisco/Delta region of California.

Richmond is confident of the project’s ability to push on past the current life indicated by the study.

“The existing resources and known exploration targets have the potential to significantly exoand the project’s life past the initial 10 years,” the company said.

“This potential should underpin a long-life operation at Buena Vista.”

Over the coming months Richmond will be focusing on securing necessary approvals for the project and to get all the funding for its development in order.

Richmond expects the project to deliver its first ore for beneficiation by the fourth quarter of 2012.

 

 

 

 

No Logie but plenty of Gold

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Gold is never far from our centre of attention these days and neither are the companies that are, or are about to be, producing it.

Subiaco-based Crescent Gold recently came in from a 21 day ore processing campaign through Barrick’s 3.8 million tonne per annum Granny Smith gold processing mill.

The ore is being mined by Crescent from its 100% owned Laverton project located north of Kalgoorlie.

It is then delivered to Granny Smith for processing under an Ore Purchasing Agreement where Crescent transports ore to the mill in a 50 day processing cycle per quarter.

The current campaign, which began in April, over 253,000 tonnes of ore has been processed at an average grade of 1.61 grams per tonne with recoveries of 91%.

This has resulted in 11,929 ounces of gold being recovered in the first 21 days of the current cycle putting Crescent on track its forecast quarterly equivalent gold production of 22,000oz for the April 2011 quarter.

“We are very pleased with the production results achieved to date under the current campaign, which is supported by the continuing strength of the $US gold price (above US$1,500oz),” Crescent Gold managing director Mark Tory said in an announcement.

Tory went on to say the company is moving forward with its revised production schedule.

“Initial pit optimisations from the recent drilling results at Apollo indicate five pits are likely to be mined, with average grades of over 2 grams per tonne.

“A reserve update will be made once further work is completed.

“The progressive re-establishment of multiple ore sources at Laverton and increased mining flexibility should see production rates progressively increase over the course of the year, associated with increasing grade profiles.

“Forecast production for the full year to December 2011 is between 80,000 and 90,000 ounces.”

Meanwhile over at Meekatharra Reed Resources continues to yield positive results from its evaluation of its recently acquired Meekatharra gold project.

The company announced significant Resource increases at three deposits within the Project, pit optimisation completed at three deposits and progress towards resumption of mining activities occurring ahead of schedule.
 
Reworking and remodelling of the existing known ore bodies, has enabled Reed to announce significant increases in both Resources and Reserves at the Meekatharra mining centre, and release the first Reserve Statement at Reedys since mining ceased in 1997.

This comes after only four months of reviewing the assets.

“The Resource and Reserve review is progressing exceptionally well with the geological team now in place and an underground planning engineer due to start in a month,” Reed Resources managing director Christopher Reed said in the announcement.

“A key aspect in de-risking this project is being able to incorporate multiple sources from multiple locations, which is something we have primarily focussed on.

“The increase to the Resource at the Prohibition deposit represents the second milestone (after the Resource increase at the Bluebird deposit) to potentially create another base-load feed for when operations recommence at the Meekatharra Gold Project. In addition, the delineation of the first open pit Reserve since mining ceased at the Reedys deposit in 1997 is very important.

 
“Once the optimisation of the Prohibition deposit is complete we will be undertaking intense evaluation work at the Mickey Doolan deposit, which hosts over 600,000oz in Resources.”

To BUY or not to BUY?

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A recent communiqué to hit the Roadhouse telex machine informed us that Shaw Stockbroking had reduced its recommendation for Exco Resources from BUY to ACCUMULATE. What does that mean?

There was some consternation amongst Roadhouse staff at this particular recommendation as we weren’t entirely certain how it would be possible to accumulate any particular stock without, in fact, buying it.

The people at Shaw Stockbroking were extremely helpful when answering our enquiries.

“Thank you for your email,” Shaw responded.

“Our recommendation definitions are:
 
BUY: Can be added to the portfolio immediately
 
ACCUMULATE: Can be added to the portfolio immediately although we believe time exists to finesse entry
 
HOLD: Fair value at current price or for dividend yield
 
REDUCE: Reduce holding at current price although we believe time exists to finesse exit
 
SELL : Divest as fundamentally overpriced, or risk profile outweighs potential reward.”

Although this response did manage to clear some confusion the terms, “time exists to finesse entry” and “time exists to finesse exit” did leave a few furrowed brows.

A further enquiry solicited another response, this time from Martin Crabb head of research at Shaw.

“In simple terms, the difference between an ‘Accumulate’ recommendation and a ‘Buy’ recommendation is simply about timing,” Crabb explained.

“‘Buy’ suggests you buy the stock today, whereas ‘Accumulate’ suggests that you can take your time to do so. For example we might consider a company undervalued, but no catalyst may exist in the short term for that value to be realised – we would use an Accumulate recommendation in that context.

“Similarly ‘Reduce’ suggests you can take your time to sell the stock whereas ‘Sell’ suggests selling immediately.

“I hope this helps.”

What this exercise did prove to us at the Roadhouse was two things. One, that it is possible to learn something new every day; and two, when you are unsure of any investment advice you should always obtain professional guidance of some type.

Karoon Gas eyes semi-submersible drill rig for Brazilian program.

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ASX-Listed Karoon Gas, operator of five blocks in the Brazilian Santos Basin has signed a letter of intent to contract with Dolphin Drilling, for the “Blackford Dolphin” semi-submersible drilling rig.

The final drilling agreements are subject to final negotiations, which Karoon expects to be completed by the end of June.

The letter of intent covers drilling of three wells in Karoon’s Santos Basin blocks, to begin in the first half of 2012, which will be located about 280km off the coast of the State of São Paulo in water depths of approximately 400m.

The “Blackford Dolphin” is a Semi-Submersible Drilling Rig, and was the preferred drilling rig for Karoon’s upcoming Santos drilling program.

Karoon will be targeting several prospects in this drilling program as well as satisfying second period work commitments.

Prospects within Karoon’s Santos Basin blocks contain several large drilling targets that will be announced once it has completed seismic interpretation later this year.

Preparations are currently being carried out to obtain all necessary regulatory and other approvals, long lead items have been ordered and a specialist team of drilling engineers has commenced well planning and pre-drilling engineering.

ASX conditionally approves GGG Resources listing

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 AIM-listed Western Australian-focused resources company GGG Resources has received formal conditional approval to be admitted to the Official List of the ASX.

GGG closed its Australian share offering on 2 May 2011 having accepted applications for just over 20 million shares at an issue price of 40 cents, raising $8.03 million.

The company is currently in the process of fulfilling final listing approvals. Subject to receiving the ASX’s final approval, GGG anticipates ordinary shares to be issued under its Australian share offering (in the form of CDIs) will commence trading on the Australian bourse by mid-to-late May under the code GGB.

“We are delighted with ASX’s decision after some unexpected delays,” GGG Resources managing director Jeff Malaihollo said in an announcement.

“We wish to thank our new Australian shareholders and advisors for their patience and considerable commitment to the Company’s vision of developing a major new gold mine at Bullabulling in the Coolgardie Goldfields.”

GGG Resources holds a 50% equity interest in the Bullabulling gold project located in the Eastern Goldfields of WA.

The other 50% equity interest in the Bullabulling Gold Project is owned by Auzex Resources.

GGG Resources and Auzex operate Bullabulling as a 50/50 unincorporated joint venture managed by a joint venture committee comprising two representatives from each company.

Once the Australian listing has been completed GGG Resources will become a dual-listed company retaining its AIM standing.

This will add a further string to the company’s bow in consideration to its proposed takeover of Auzex Resources.

“We will then be able to offer Auzex shareholders the choice of having the GGG shares they receive, as consideration for the off market takeover offer for Auzex, registered on GGG’s Australian share register (and trade those shares, in the form of CDIs on the ASX market) or GGG’s United Kingdom share register (and trade those shares on the AIM market),” Malaihollo said.

 

IPO Watching

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A game that is always popular at the Resources Roadhouse is one we call, “IPO Watching”.

The rules are simple enough. As each Initial Public Offering listing hits the boards we make a hypothetical purchase of 10,000 shares at their issue price, add it to the Resources Roadhouse watchlist and sit back to see how they go.

Since the beginning of 2011 there has been, at the time of writing, 34 new resources and associated sector IPOs.

Each year brings new ventures forth to provide fascinating watching as the fledgling companies strive to maintain the shareholder base momentum that raised the funds to bring them into being.

Success stories are fewer than their rivals that don’t do quite as well however, which is why IPOs are considered a more speculative rather than definitive investment strategy.

So, who is standing out from this year’s listings so far?

According to the Roadhouse watchlist Daton Group Australia has opened a substantial gap for others to follow.

Our initial, hypothetical, investment in Daton of $2500 at 25c per share in January is now worth a very tidy $7800.

Daton is one of China’s leading producers of coal-based urea, methanol, and carbon dioxide with production facilities located in Jiaozuo City, Henan Province in China.

The company’s main product is urea, which it has been producing since 2001.
Urea is the most commonly used nitrogen fertiliser in China with sales of urea accounting for approximately 55.4% of the company’s total revenue in 2009.

Daton also produces methanol and recycled carbon dioxide, sales of which accounted for approximately 34% and 10.3% of its total revenue in 2009.

A $2000 hypothetical investment at 20c per share in renewable energy company Algae.Tec has bloomed to $3750.

The Subiaco-based advanced biofuels company is focused on commercialising technology that produces algae to manufacture sustainable fuels such as bio diesel and green jet fuel.

New chums to list on the ASX this week included Nemex Resources and Polymetals Mining.

Iron Ore hopeful Nemex is focused on bringing its iron ore projects in the mid-west region of Australia and Guinea, West Africa into a resource phase.

The 20c offering’s first day on the boards was somewhat subdued listing at 21c to close at 20.5c.

The $1.00 offer price of Polymetals seemed to attract a bit more attention coming on at $1.10 to close at $1.08.

The Queensland-based company is a producer of base and precious metals with cash flow positive operations in South Australia and development projects in New South Wales and Western Australia.

Other companies waiting in the wings to list during the month of May include Kimberley Rare Earths Limited (KRE).

KRE is looking to raise up to $14.3 million through the issue of up to approximately 71.5 million Shares at $0.20 each.

The funds raised will be dedicated to advancing the Cummins Range rare earths project located around 130km southwest of Halls Creek in the East Kimberley Region of northern WA.

Subject to certain conditions KRE will acquire an immediate 25% ownership of the Cummins Range Project from its parent company, Navigator Resources, with the opportunity to earn an additional 30% interest with expenditure of $10 million in exploration over a four year period to obtain a majority 55% interest.

Sir Lunchalot – Horseshoe Metals

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Sir Lunchalot was recently paid a visit in the Roadhouse dining room by Horseshoe Metals managing director Neil Marston.

Horseshoe Metals listed on the Australian Securities Exchange in July 2010. Although its history is relatively short the company has managed to produce a good deal of excitement for investors so far.

The copper gold play has a strong Western Australian focus, where it has two projects.

The Horseshoe Lights copper mine project is the company flagship, and the Kumarina copper project, which was mined in the 1970s, provides a reliable backstop.

Horseshoe’s first couple of months on the local bourse didn’t exactly set the boards alight with early drilling programs failing to capture the market’s attention seeing the share price waver between 26c on listing to around 30c in October.

“Then we went and did our second drilling program in November and released those results in January,” Marston said.

“The day before we released those results the share price was sitting at 22 cents. It closed the following day at 64.5 cents and hit a high of 82 cents on the following Monday morning.”

When Sir Lunchalot dined with Marston, the Horseshoe share price was trading at around 46c.

The horseshoe Lights project is located in the Bryah Basin situated partly within the Narracoota Volcanics that host Sandfire Resource’s Doolgunna discovery, located 75km to the southeast, which Marston senses was a driver behind the January rise.

“It is certainly what, I think, drove our share price in January. With the drilling announcements…people started to look at us as a potential Sandfire mark two”, he said.

“I’ll leave that for the market to judge going forward, but that is certainly what we put our share market kick down to.”

The Horseshoe Lights project was discovered back in 1946, which is quite recent compared to a lot of other WA mining projects.

A small mine operated at the site during the 1950s, however what could be considered ‘real’ mining began in the 1980s when a gold CIP plant was put in place.

At this time Horseshoe was mined down to around 100m vertical depth where the operation began intersecting a lot more copper.

A supergene zone, rich in copper and gold was located, then below that massive sulphides and lenses of +20% copper in chalcocite.

“They shut down the gold plant and put in a floatation plant and started producing a copper concentrate and as they were mining the rich chalcocite they were just crushing and shipping around a 25 percent copper concentrate,” Marston said.

The mine eventually closed in 1994 when low copper prices prevented a cutback of the pit to access the remaining ore but not before the mine had produced just over 300,000 ounces of gold and about 55,000 tonnes of copper.

“They got to a depth of 215 metres,” Marston explained. “There’s mineralisation below the bottom of the pit but on economics terms they couldn’t justify doing a cutback in 1994 so the mine was placed on care and maintenance.”

Since then global economics have changed and the copper price has skyrocketed. Not surprisingly, when it acquired the asset in January 2010, pre IPO, Horseshoe quickly engaged Coffey Mining crunch some numbers.

This resulted in an Inferred Resource 4.9 million tonnes at 1%, for around 48,000 tonnes of copper.

“Which is not bad when you consider they previously only produced around 55,000 tonnes,” Marston pointed out.

There are three zones of mineralisation at Horseshoe: the Main Zone, the Northwest Stringer Zone, and the Motters Zone

There are three lenses of mineralisation below the existing pit called the Main Zone where drilling has identified copper to a depth of 200m.
 
The Northwest Stringer Zone sits under what was the waste dump and has also emerged as a target for a great deal of the company’s attention.
 
“We devised two phases of drilling that we started last year,” Marston said.

“The first program was thirteen holes. All of the holes came up with some copper, which would have been a surprise if they didn’t.

“The best was a hole that was drilled up on the waste dump. It was drilled under an old hole that had been drilled back in 1993. It came up with 14 metres at 2.2 percent copper, including a metre at 12.3 percent.

“We were quite pleased when we received that intersection. It certainly confirmed our theory, which was the mineralisation doesn’t run up to the waste dump – they just hadn’t drilled under it.

“Then we went back on Phase 2 where we drilled another 13 holes, most of which were up on the waste dump to test around the hole from the previous program.”

Two other holes also returned impressive numbers. One with 14 metres at 3.7% copper, including 3m at 9.8% copper, while the other returned 16m at 4.8% copper, including 3m at 11.8% copper.

“We are starting to see a continuation of that twelve per cent copper zone in that area,” Marston continued.

“The Phase 3 program; we started that last month. We’ve drilled fifteen holes. Our priority, obviously, is to test up on the northwest dump and we have been drilling up there.

“We have just terminated the program and all the samples are in the labs at the moment. We should have results out by the end of the month (APRIL).”

Horseshoe is now reviewing the recent Phase 3 work and is intending to complete a resource re-estimate based on that then follow up drilling will follow these results.

“We have had some good results to date and we have other results just around the corner,” Marston said.

“We have a resource of around 48,000 tonnes that we expect to grow from the resource re-estimate and there is the potential at Horseshoe, because of the way it is, that it wouldn’t take much for us to get it back into production.”