Mining Minerals & Metals Share Discussion Threads

[serpicouk] 26/10/2008 16:22

Seems a rather muted response from all regarding the JORC RNS and the share price keeps drifting ever lower.

I thought I would take this opportunity to sum up my thoughts (apologies for the length of this post!):

My initial reason for invested in GEX was to balance out my other gold juniors who were mostly taking the 'dash to production' route. I had planned on hold here for 5+years while GEX proved up what could be a substantial multi-million oz deposit.

So several years down the line how are things panning out? Well, I have a number of concerns that I'd like to air (may be others could comment and provide insight).

Resource:
I'll start with the jorc resource note that came out a few days ago. 1.25Moz @ 1.6g/t. Even with Hugh's warning comments that the revised jorc would be lower than many were predicting, for me, its still too low:

One way to look at it is how many oz could we attribute to GEX a year ago?
Komana W initial jorc contained 520,000oz. SRK stated that some quick infill drilling would add a further 200,000oz. Randgold had demonstrated that Komana E had 280,000oz. That lot adds up to 1.0Moz. A year on GEX have given us a further 250,000 new ounces - albeit to jorc.

In addition, the grade has continued to be low with only a modest increase from 1.4g/t to 1.6g/t. Had the grade been higher then my concern over the relatively small increase in resource base would have been offset. However, if GEX plan to open pit mine this deposit then ounces have to be added at a faster rate than is currently being accomplished.

If they were looking at producing 100K oz pa then assuming ~90% recovery they'd need 110K Au which would be contained in some 2,100,000 t of rock. That's some serious processing volumes and the associated costs will be significant. Hugh alluded to this fact when he referred to gold staying above $700 as a key factor in the success of this venture. With oil taking a dive from over $140 to just $64 I would expect the total cash costs to be considerably reduced. However, this isn't looking like a cheap mining operation by any stretch of the imagination and the associated risks should the price of gold dip at some point in the future will be high.

One aspect I can't help but wonder about is why the drill reports seem to be of reasonable quality, with reasonable grade and width in plenty of holes, but aren't quite being translated into proportional jorc ounces. may be this is just a misconception on my part.

Financing:
The article posted a few days back suggested they have plenty of money – I beg to differ and still expect the coffers to be refilled by the end of the next quarter. I can't see a JV being done on Komana with the current jorc – the terms would most likely be unacceptable to GEX. That leaves going to the market to get bridging capital (a million?) until the next jorc (and subsequent JV). Whilst the economy is taking a dive the credit markets seem to be easing so acquiring this funding should be possible although at the current (and ever decreasing) share price this will still represent a dilution of note to existing shareholders.

Other areas of concern:
Do we have a good appreciation of the drill season? What's been drilled, when , how many meters by how many rigs and at what costs? The latest RNS suggests drilling started with only 1 rig at Komana with a second joining soon. Might exploration be scaled back to conserve funds until future funding has been guaranteed?

What were the results of the metallurgical tests?

Also confused by the posted article that initially suggested they would progress with increasing the resource rather than making the dash to production – however, in the same article it suggested Hugh's game plan was to use the next monies to start the feasibility study. As previously stated, unless they are throttling back the exploration rate they'll need new monies Q1 next year so is half of the next drill season going toward activities to support a komana feasibility study?
Do GEX feel they will be in a better JV situation with a smaller resource + feasibility study rather than just a larger oz base?

Also curious that he says the market won't support taking Komana past the exploration stage – does this suggest Goldfields won't be financing Komana?
The article also raises the spectre of a management buy-out should the share price fall further.

I feel there are quite a few concerns that could be addressed by an investor presentation detailing GEXs plan - or a brokers note. Something to de-risk the unknowns in the eyes of potential investors.

If they are struggling to build a sizeable resource base what will differentiated GEX from other juniors? Many have 1.25Moz, quite a few even have 2Moz, some have 2Moz and an open pit mine already operational and Market caps not that far above GEX.

Also some opportunities present:

Goldfields seem interested in Sankarani – although I suspect that as a major they won't jorc to confirm say 500,000oz as a junior would so it will be hard to attribute fair value to GEX for some time.

Potential at other targets present on alternate concessions.

Head grade could be controlled with selective processing resulting in a possible increase in resource grade to 2.0g/t with minimal loss in Au.

Komana remains open in all directions. Particularly interested in what lies beneath 150m.

Last year's drilling will have significantly improved the modelling of this ore body – this should result in more accurate drilling which could translate into a faster rate of addition for further oz.

Expectation that grade will be increased when off-shoots are drilled.

Large number of targets identified from the airborne study – could result in some positive drill reports.

Market cap only £10.6M. You can buy in ground gold here for less than £8.50 an ounce. Current gold price £460 per ounce.

[share_shark] 26/10/2008 16:03

.










.

[bongo bwana] 26/10/2008 15:28

Yep U sure do. Its the lack of predictability which unsettles me most. The market by comparrison is a doddle.

[bongo bwana] 24/10/2008 17:52

SS any chance U'll be in Dublin for the 2009 GEX AGM?

[share_shark] 24/10/2008 17:15

space.........we truly do live in interesting times and with that view point in mind I have, at long last, joined gamblers anonymous,five minutes ago. Should have done it years ago.(i jest of course).

[share_shark] 24/10/2008 15:27

More interest/coverage?

[spaceparallax] 24/10/2008 13:05

BB,

Don't doubt your sincerity, but unfortunately the Mkt'g goalposts keep moving.

We live in truly interesting times.

[bongo bwana] 24/10/2008 08:54

In my honest opinion the time to accumulate GEX has been with us for a while and the current market environment represents a very decent opportunity to accumulate their shares at prices which help manage the risk of losses and possibly increase the probability of making a very good profit when the Komana license area yields its first mine.

There is little doubt that JL at Davy's (GEX's own Dublin broker) has been "gilding the lily" with his lazy assessments and analysis of GEX's prospects in Mali and Ghana during the past 18months - and Im sure it hasnt escaped Hugh Mc's attention but then Hugh strikes me as a patient man not given to throwing the head, even when exasperated. 1W Im sure you will draw Davy's lack of professionalism to Hugh's attention during your next communication with him. I know I will. BTW- Willies are GEX's London based brokers and it would be nice to see them producing an update on their research now years out of date!!!!

Did you know that GEX has the technology to manage and oversee the various drilling programmes in Mali from their office in Dublin. They can manage on the field drilling operations and make decisions to guide drilling action whilst sitting in the comfort of their offices - not that Hugh Mc or KH will spend that much time warming their posteriors in Dublin during the coming drilling season in Mali.

[share_shark] 23/10/2008 17:38

BB .......... Lying toerags , in my opinion(that management I mean). They should be hanged, drawn and q........... AIMHO of course.

[bongo bwana] 23/10/2008 17:17

Well done SS.

I see the boys in trenchcoats have been creating a stink around RGT.

[share_shark] 23/10/2008 17:04

Well we are getting a little coverage/PR.

Here is more of the same.

[valentine] 23/10/2008 16:48

Sitting tight..can't add if I wanted to!

[1waving] 23/10/2008 16:45

October 23, 2008

Glencar Proves Up Well Over A Million Ounces Of Gold In Mali And Looks Set Fair To Increase Its Resource Still Further

By Alastair Ford

"It's unfortunate to be reporting good news in such weak markets", says Hugh McCullough. On the other hand, he adds, rather philosophically, "it's better to be reporting good news than bad news". GLENCAR MINING has just delivered an updated resource estimate for its combined Komana East and Komana West project in Mali. The numbers, well worked over by SRK, come in at a healthy 1.25 million ounces grading 1.6 grammes per tonne. SRK also reports that selective mining could push the overall grade up to two grammes per tonne, so Hugh McCullough has plenty to feel good about, even if the share price bounce isn't quite what he might have hoped for last year on delivering the same news.
Conceivably the company could switch off the exploration rigs now and move straight into feasibility on a projected 10 year mine life producing over 100,000 ounces per year. That's not the plan, though, for a couple of reasons. The first is that in terms of rating, Hugh doesn't reckon Glencar will get any more support from the market if serious feasibility work starts at Komana. "I don't think we'll be stopping now and going to feasibility", he says. "We know what the potential of this is. The market probably does know too, but isn't interested. Other companies out there are interested too". Which brings us on to the second reason why Glencar isn't pushing the button on a feasibility study just yet.

At 4p per share, Glencar boasts a market capitalisation of a mere £11 million. That's a level that's just about beyond the reach of Hugh, and any merry band of fellow travellers he may care to gather together, taking it private. On the other hand it's plenty cheap for a larger cashed-up miner that's all of a sudden feeling predatory. Glencar is vulnerable in two ways. First, larger gold miners have been coining it in with gold up at between US$800 and US$1,000 for most of the year, but they haven't in any serious way replenished their reserves. Hugh estimates that in total the big boys are taking 80 million to 90 million ounces out of the ground every year, and there's no way reserves are being replaced at that level. On the other side of the same coin, recent deals in Burkina Faso were done on the basis of an average gold in the ground valuation of around US$60 per ounce. But Glencar's current market valuation gives its own ounces a valuation of just US$13 each. That's cheap enough to attract some predatory interest, although obviously Glencar's shareholders, who are generally supportive, would have something to say on the matter if any bid came in. Taking the Burkina Faso deals as a benchmark, then Glencar's shares ought to be worth 18p each.

Perhaps more significantly, Komana is by no means drilled out, and Glencar is by no means running out of money. Taken together, those two factors mean that Hugh is going to keep punching holes into the ground until well into next year, with a view to pushing the resource base up to the two million ounce mark. He feels that the more ounces he can get under the company's belt, the more value he will force out of anyone who comes at him with a bid. Whether that turns out to be the right decision, or whether a hell-for-leather dash for production might have been a better choice, only time will tell. But in any case the company won't drill forever. At some stage next year it will need new funds, and the new money will, says Hugh, be deployed into a feasibility study. The world may be a very different place by then, but one way or another, gold will still probably be strong relative to most other metals. Whether that means it will be at US$1,000, or US$500 is another matter, but either way with any luck Glencar will be one step closer to building a mine.
_____________________________

A reminder there is more than Komana -- from the interims:--

"We are also delighted to have demonstrated the presence of a significant mineralized zone over strike lengths of up to 1,200 metres at each of three targets that we have drilled so far on the Solona Concession. Taken together with the very exciting recent results returned from Glencar's adjoining Komana Concession, this area as a whole has emerged as a highly prospective one, which has delivered significant intersections wherever we have drilled. The Sankarani Project joint venture with a subsidiary of Gold Fields is also moving into an exciting phase. Gold Fields has already completed expenditures on this project which earns it a 51% interest in the project."

.

[spaceparallax] 23/10/2008 13:29

The resource upgrade is good news, but I had hoped for a more substantial increase in the mean grade. In the current Mkt, I suspect that we're going to struggle to find sensible funding.

Sitting tight, but not adding.

[wispaman] 23/10/2008 13:25

when the 250k went though at 4.125, I tried a 100k fill at same price and it was filled within 10 minutes, so I asked for a further 100k at the same and as you can see it was filled.

[wispaman] 23/10/2008 13:08

deka1 - 23 Oct'08 - 09:58 - 3728 of 3731,
I bought the 2 X 100k yesterday and I can assure you I do not have inside info, I was merely topping up at a price I though was good.

wispa

[share_shark] 23/10/2008 13:05

More of the same news.

[deka1] 23/10/2008 12:06

hi wave , the more rigs they use the more it costs, they will need funding early next year i think 4 months time maybe, should be moving on it now, gold fields another deal??

[1waving] 23/10/2008 10:26

Hugh said the new jorc would be a multiple of the old one but I think even he was looking for more, however he did strike a cautious note in a release a month or two ago. 1.25m needs improving on very strongly this season.
Not clear how many rigs are/will be in operation from the release -- just hope they are using 4 rigs, but it does look like they have more than last season.
Need to get a move on to drive the Komana project forward.

[bongo bwana] 23/10/2008 10:07

Now! Which way will the share price go?

Down of course!

Keep buying!