Mining Minerals & Metals Share Discussion Threads

[amt] 20/2/2008 18:58

Ok thanks 1waving, thats 100 * the current share price Looks like some upside here then !

[1waving] 20/2/2008 18:18

Dr Fillip, one thing that I meant to mention that falls within my system is the potential for major upward surprises, hence the mention of a possible takeover.


amt. - read this extract from a Jim Sinclair letter and determine your own base figures to find how much per ounce value there is:-

Dear CIGA Hardrock GH,
The hedge funds are long the Barricks of the world and short ALL the juniors. The hedge funds have over-priced the big guys and under-priced the juniors.
Here is the question that needs to be answered:
With gold headed to $1650 what do you think your junior with 1,000,000 ounces of 43-101 compliant reserves and a deposit strike length of at least 4 kilometers would be worth? Here's a back-of-the-envelope estimate:
1,000,000 times $1650 minus a $300 total production cost per ounce.
In ground value: $1,650,000,000 (not including recoveries)
Cost of extraction: $ 300,000,000
Amortization of plant and equipment over say a 10 year mine life: $200,000,000
Value:
Value of the asset $1,150,000,000.
Now let's say the deposit goes to 5,000,000 ounces contained. In this case five times $1,150,000,000 is the value - all things being equal.

[amt] 20/2/2008 18:03

Any idea what sort of value the gold might be worth at say £900 per ounce?

[dr fillip strange] 20/2/2008 18:00

1 Waving, yes that is very helpful, much obliged for your time and effort.

External factors do seem to be lining up in GEX's favour. They seem to be piecing together a commercially viable mining resource at Komana (East and West), not forgetting their other prospects. Share Price now at a two year low is certainly enticing.

One of my worries would be that the length of time to production may be greater than the length of Gold's bull run..

Thanks again,

DFS

[1waving] 20/2/2008 17:14

Dr Fillip,

Just as I was tapping my previous post out, look at what was posted by Haydock.
Now that is coincidence.

[1waving] 20/2/2008 17:09

Dr Fillip,
For investing in gold Juniors, ( which I interpret into small miners or explorers ), I look to the two phases which create the greatest %age gains, they are discovery together with the substantial increase of resource ounces, and coming into production. Glencar is discovering new strikes and increasing resource ounces so can look forward to both these phases. They are also building a major resource in one location, i.e. would you rather have a 5m oz resource in one location or 5 separate 1m oz resources geographically spread.

The reason I point this out is to give a brief insight into the overview of my own investing system / criteria. It is important to develop your own system / criteria. Your time frames are important for your own investing. You need to ask yourself a lot of questions which only you can answer to arrive at your system / rules and be comfortable with it.

I am very comfortable with Glencar for two overriding reasons.

1. Glencar is building a very major resource in one location, a 'store of value' in the ground.

2. Gold producing majors, particularly those with dwindling reserves, are looking to increase those reserves and will look for the larger deposits coming through. They will have an eye on Glencar.

I would expect a JV in about a year from where I would expect rapid progress towards production, so looking for production within a year is overly optimistic. The more Glencar proves up now, the better any JV deal will be.
There is also a possibility of a bid for Komana, or a remote chance of a bid for Glencar itself. When they have maybe 2m JORC resource ounces and additional strike length of about 2kms I suspect there will be strong competition for Komana. I have come to this view as a result of my own research.

So I think the final thing to mention is research. Have a healthy cynicism for brokers and tipsters, they can have extremely nefarious motives.
Try and do your research with a view to your system and take away the information that is useful for you. Follow your rules but also learn to have flexibility when the situation demands. There are always risks and rewards, doing your research thoroughly will give you the advantage. Be selective, if you think something is dodgy or questionable, it is. Leave it and move on.

Hope this answers your questions and is helpful.

[haydock] 20/2/2008 17:04

Article on www.mineweb.net emea

Gold output falling at Africa's No. 3 producer
Mali, Africa`s third largest gold producer, expects production to fall sharply again in 2008 according to government forecasts

{Several majors needing new sources of Gold soon???}

[haydock] 20/2/2008 15:02

lwaving,
I have spread your cheerfull article, good find around to HIF, SER to cheer them up a little.
It's a long haul on those sites & confirms the gist of the article re price falls, as does GEX.

HIF seemed to perk up today as if it had hit a bottom. Perhaps with articles like the above this will be the case, as there is usually a mass tipping point at which the market says too cheap.
Even without the hoped for transformation point appearing.

[1waving] 20/2/2008 09:16

Dr Fillip, will get back to you later today on that.

[dr fillip strange] 19/2/2008 22:47

1 waving can GEX be considered a junior?

how far off production are GEX, is 1 year being overly optimistic?


Going to make a decision soon whether I'm going to top up my GEX holding, or buy into something else. I'm reading a Seymour Pierce report on Cluff Gold at the moment, I guess they would fit into the junior class better than GEX

I'm new to mining stocks, so just feeling my way...

[1waving] 19/2/2008 21:25

Very good article by Eric Hommelberg indicating the bottom for gold juniors may be in.

Juniors ---- Buy of a lifetime ----- Part II

[spaceparallax] 19/2/2008 09:59

If production costs end up c.$300/oz, I'll be more than happy. My earlier post simply reflects a healthy cynicism when dealing with all of the unpredictables of mining.

[haydock] 18/2/2008 16:12

Not me old pal, just quoting the above.
I think that CEY will have a $300 production cost , but agree that few others may have.
Still all figures are north, it just needs the first pebbles in the water.

[spaceparallax] 18/2/2008 15:12

Haydock,

I suspect that you're being far too generous on the production costs i.e. with the modest g/t figures involved, I suspect they would be much higher.

How about instead using a profit of say $200 per oz?, which even then would give a $200M figure. Significantly higher than our Mcap.

[1waving] 18/2/2008 14:08

Haydock, I ( walden ) posted that note over the weekend and was going to post it here today. An additional very important part of that Jim Sinclair letter follows:--

The hedge funds are long the Barricks of the world and short ALL the juniors. The hedge funds have over-priced the big guys and under-priced the juniors.
The hedge funds can play all the games they want but they will fail on valuations as gold goes to and through $1650. My personal money is wagered on my words. So those that are demoralized should sell and stop the pain.

I am significantly committed and intend to continue my commitment with every cent I have, no margin.

Regards,
Jim

An easy, or back of an envelope view, to putting a valuation on Komana.

Haydock, in answer to your earlier question, GF website says they have done further RC drilling at Kabaya South in late 07, Glencar said they were also doing geochemical drilling at Bokoro, I suspect Sanioumale West may also be drilled. Don't forget airborne survey over all 5 licenses, that is extremely important. Suppose will see results soon but got to take into account mining support services / analabs generally snowed under therefore taking time.

[haydock] 18/2/2008 12:33

A very tasty little extract from the bb on Glencar accessible on Minesite.
Calculation by Jim Sinclair,in answer to a poster.You have to be a believer of course but even at half the price?

Here is the question that needs to be answered:
With gold headed to $1650 what do you think your junior with 1,000,000 ounces of 43-101 compliant reserves and a deposit strike length of at least 4 kilometers would be worth? Here's a back-of-the-envelope estimate:

1,000,000 times $1650 minus a $300 total production cost per ounce.
In ground value: $1,650,000,000 (not including recoveries)
Cost of extraction: $ 300,000,000
Amortization of plant and equipment over say a 10 year mine life: $200,000,000
Value:
Value of the asset $1,150,000,000.

[haydock] 18/2/2008 08:48

It seems a while now since GF recorded any activity on the j/v,is it so far a viable project?
If I recall correctly the drill figures were low but solid.{I thought it looked in the balence}
What needs to happen on that site to make the production decision, a forgone conclusion?
{I m ounces i suppose?}
What are they actually doing? Do we know when to expect some results?

Thanks for research & the sheer hard work of late folks.

[1waving] 16/2/2008 12:02

Held back on commenting on Solona so far although it is very much in the frame as far as the geology is concerned. The whole Birimian Greenstone belt that all the license areas fall into has proved very productive.

I would like to see Dr Drill give his initial diagnosis on Solona before getting too excited. That initial extensive RAB drilling is happening now so not long to wait for that diagnosis.

[bongo bwana] 16/2/2008 11:34

Another thought for very serioius consideration over and beyond the weekend.

Tono almost beat me to this but GEX's acreage at Solona appears to have the potential to be the African Star of GEX's crown jewells.

[1waving] 15/2/2008 21:44

Tonudiki, you make some good and very relevant points.
I believe it has already been pointed out in an article on or release by Glencar (can't remember which one ) that Komana East, for instance, would feed any processing plant at KW if KE were to remain a small deposit. I believe it is possible that any relatively nearby Sankarani smaller strikes could be processed at Komana West whichever JV partner comes into Komana in the future. I appreciate the loyalty point on GF and I think that any parties involved in the future would settle on a commercial/economic logic.

The ideal would be that GF discovers a strike that warrants it's own mine and processing plant on Sankarani, and ditto at Komana. It is obvious to me that KW warrants it's own mine/plant already.

I do believe there will be strong competition by majors with dwindling reserves for Komana, particularly when it gets to 2m oz resource and further strike length to prove up. That really is'nt too far away. It does make sense that GF would jump into the ring if an outright bidding war broke out.

There is still a long way to go and lots of metres to drill before the answers become more obvious.

[tonudiki] 15/2/2008 21:04

1waving

The exact wording in the RNS of 13/2/06 re komana within the gold fields agreement was:-

"This Agreement does not affect the ownership of the Solona concession or the
Komana concession, upon the latter of which Glencar has recently completed a
drilling programme which encountered bonanza gold grades. Glencar will continue
to work independently on these concessions which will now be referred to
collectively as the Yanfolila Project. The Bokoro, Sanioumale and Farasaba
concessions will now be referred to collectively as the Sankarani Project. The
Agreement anticipates that Gold Fields may be given first refusal on the Komana
concession, should Glencar in the future wish to bring in a major to assist in
the further development of the Komana project."
-----------------------------------------------------------

So, it's officially a "may be" rather than a "were" given right of first refusal, but this does not of course invalidate your discussion point re potential control of much of Glencar's assets by GF.

Firstly, it will be a nice conundrum for Glencar to consider before the end of 2008 when Komana's JORC compliant resource is at a level that overwhelmingly demands a banked feasibility study and mine development plan. (shameless ramp!!)

More seriously though, one might normally think in terms of (say) a minimum of 1 million ozs for a commercially viable separate mine and processing plant at Komana. However, both the Sankarani and Yanfolila concessions are geographically within a pretty compact combined area. Do you think that this therefore opens up the possibility of a number of sub 1 million oz. mines feeding a centralised ore processing plant? In these circumstances, and if the Sankarani project also comes up with some mineable ozs., it may be compelling economic logic for Glencar to go solely with Goldfields if they offer to fund such a central ore processing facility?

If, however, GF's Sankarani concessions don't yield commercial mineable quantities even with a shared ore-processing facility, or Komana West & East + Solona (Yanfolila) are so big that Glencar could choose another Major partner if they wished, then in principle it would seem to be better to have Glencar's eggs in more than one Major's basket. But it would also seem to be disloyal to GF to go that route and it could rebound on Glencar sometime in the future.

It's very nice for Glencar to have a Major partner right now when they need one to share in exploration costs, and if the exploration funded by the Major draws a blank, it's then saved a small company and it's shareholders a lot of money. But I'm an optimist and I don't think GF would have struck a deal with Glencar on Sankarani if they weren't optimistic too. So, chances are that Glencar will have a decision to make on this in the next 12 months or so.

Finally, there is always the possibility of a bid for Glencar if they keep addding to the Komana resource...... would GF then jump into the ring????

p.s. Thank you for the sheer quality of your posts on this board.

[1waving] 15/2/2008 18:36

Thought for the weekend.

When the agreement with Gold Fields on Sankarani was completed I believe they wanted the Komana area but this was not to be for GF with good reason, Komana is the star now, however, I do believe they were given the right of first refusal when Komana is JV'ed out. A recent minesite article hinted that this may be another year.

The question is, would you be comfortable with Gold Fields farming into Komana and in effect having control over the vast majority of Glencar's assets, or would you prefer another major to be involved ?

By the time it comes to farm out there will be a very substantial resource and asset value.

Have a good weekend.

NB Have been advised of a very good way of calculating asset value on gold juniors, will post soon on that, the figures for Glencar are pretty hefty.

[bongo bwana] 13/2/2008 21:01

1waving - Hugh Mc has referred to this characteristic on more than one occasion during his 2006 AGM presentation. I missed the 2007 AGM and am so looking forward to this years AGM as Im certain that the 3D model of the mineralised zones at Yanafolia will reflect these most recent drill results.

Im hoping that the possibilities of 2006 and 2007 will have become JORC status probabilities in the 2008 AGM report.

Well done on your work plotting the recent results and adding to our undeestanding.

[1waving] 13/2/2008 16:17

Is there a NW- SE overall geological trend rather than just the N-S trend that we are seeing down the West side of Komana ? This is something that I have been meaning to mention for a while so straight into it.

We seem to have been looking at the 'string of pearls ' series of strikes in a N - S alignment down the West side of Komana but this may have obfuscated the bigger picture. When you look on the Glencar website, click projects, Yanfolila, at the bottom of the page there is an image of all 5 license areas with strikes overlaid. You can add the recent Soloba and Kama strikes to this, 3.5kms and 9kms respectively to the South of Komana West.

The overall alignment from the strike at Sanioumale West through the Komana area and to the Kabaya South strike on Farasaba gives a NE - SW trend of strikes. The implications of this are very strong should this be proved up. It is possible that where any veins in the NE - SW trend occur and cut through the Komana West strikes this will cause very high grades to be found, as in the Bonanza grade zone at Komana West. It is also interesting that the recent drill results found additional orezones to the NE and SW of the NS trending Komana West.

The Komana East non-JORC 280,000 oz resource was drilled by the previous license holder on the understanding of a NS alignment. The one recent Diamond drill hole to test the geology of Komana East found mineralisation to the Eastern side of the main structure. The 13 RC holes drilled there recently may shed a bit of light on this.

A little speculative at the moment but the overall series of NE -SW trending strikes looks right, coupled with hints from recent drill results, imply it is quite possible.