Mining Minerals & Metals Share Discussion Threads

[bongo bwana] 09/5/2007 07:48

Roobi,

Thanks for that but Ur still a young pup, LMAO!

Let me recommend a slow more careful reading of the announcement - I dont interpret it as confirmation that the orebody resource announcement will be made in June.

Im erring on the side of caution - a skill learned from listening to and studying Hugh Mc. It has served me well with GEX, which like a pint of plain, is yer only man!

[tsmith2] 09/5/2007 07:33

cleo1601 - gold plays - archipelago resources

[robbi123] 08/5/2007 23:18

No worries Cleo...all the best

[cleo1601] 08/5/2007 23:07

thank you robbi and tsmith2. I do want to add another gold play or 2 and will keep a close watch on this in the coming days.

[serpicouk] 08/5/2007 22:07

From rns:
'We expect that a resource estimation for part of the Komana West gold deposit will be completed before June 2007.'

Depends what they mean by completed. But I'd be amazed if they get the initial jorc estimate out this month...i.e before june 2007.

But lets not get ahead of ourselves. Assay results by Friday first.

[tsmith2] 08/5/2007 21:20

Just for those lazy bods who cant be asked to click on the link re TW's initial write up:

I cannot pretend to have known Glencar (GEX) from its birth. The Dublin based AIM listed explorer is in fact just three years younger than myself and to date I have come closer to making a profit out of operating a gold mine than it has. It really has travelled a long and winding road. I remember going to Dublin a few years ago to meet the company only to discover on my arrival that its shares had just been suspended pending clarification of its financial position. At that point it had been holed beneath the waterline by technical problems at its -then - flagship project, a gold mine it was trying to bring into production at Wassa in Ghana. To be honest I thought that Glencar itself would have been sunk by Wassa but I met up the long serving CEO Hugh McCullough last week and with a new country focus Glencar is very much alive and kicking.

Shares in Glencar have trebled since last November but at 10.5p it is still only valued at 20.5 million pounds. Yet it has rights to five exploration blocks in Mali (Africa's fourth largest gold producer) and has already achieved some quite stunning drilling results on one of those blocks and it has also signed a joint venture with industry giant Gold Fields which will see the giant invest up to $12 million in drilling up this territory over the coming years. The rainy season has temporarily brought drilling and newsflow to a halt and that has seen the shares drift off their highs. But the action kicks off again in October and so you should take advantage of that lull to buy the shares now because they are just far too cheap (a reflection one suspects of Glencar's colourful past). Based on the evidence from just one of Glencar's 5 blocks in Mali this stock could easily be worth 36p per share - and my numbers are very cautious both in terms of how I value what is thought to be in the ground and in terms of allowing little for exploration upside. My initial 12 month price target is 18p but that could easily be just the first station on a long line. With a 12p limit buying price, at 10.5p Glencar Exploration is a buy.

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Management & Politics

Let us first deal with two usual spoilers for any exploration story: management failings and African politics. On the latter, Mali is relatively stable and is the fourth largest gold producer in Africa. In terms of stability I concede that this is not Co. Donegal - for starters, the politicians are far less corrupt. Ho. Ho. Ho. There clearly are political risks anywhere in Africa so one must factor that in when using a discount factor. But I do not feel too terrified by Mali.

Glencar's management did not cover itself in glory, trying - and failing - to develop Wassa. But they are no cowboys. Hugh McCullough is a relatively sober and sensible man who knows this industry backwards. Hugh has seen the downs and the ups of this industry over three decades. He clearly has learned from the Wassa experience that a small explorer should not try to take on too much. It is clear that if there is a commercial resource proved up in Mali he will job it on or joint venture it so that there is no operational risk to his company. McCullough has been around long enough to have made mistakes from which he has learned. To my mind the only real blemish on McCullough's CV is that he trained as a lawyer.


The Assets & Gold Fields

Glencar still has the odd non-core asset for its past. Forget them. Focus on Mali where it owns exploration rights on 5 blocks covering more than 1,250 square kilometres: Bokoro, Sanioumale, Farasaba, Solona and Komana. Three of these blocks (Bokoro, Sanioumale, Farasaba) are the subject of a joint venture with Gold Fields signed in February of this year. Under the terms of the deal Gold Fields earns a 25% stake in the three blocks by spending $2.5 million before the end of calendar 2007. That stake rises to 51% if an additional $1.5 million is spend during 2008. If Gold Fields then spends a further $8 million on exploration or a feasibility study by June 30th 2011 its stake rises to 65%. If Gold Fields funds Glencar's costs should any mine be built it will earn a further 5% stake and can reclaim those development costs from the proceeds of production.

Glencar is the operator of these three blocks but all exploration costs are being funded by its larger partner so it essentially has a free ride here. It should be noted that the first results from this joint venture were not exactly spectacular. Earlier this month the first hole at Bokoro intersected 21 metres at 1.12g/t. That is not a complete washout but you need an awful lot more metreage at better grades to get anywhere near commerciality. However this joint venture has an awful lot more drilling to go.

So why I am I excited? The real "zing" to date lies in the two blocks still totally under Glencar's control. Back in December of last year the results of a 21 hole programme at Komana were announced covering 1,942 metres. One of the 21 holes intersected 53.6g/t over 19 metres. That was a bonanza grade. But across the whole length of a 900 metre strike zone grades were detected which indicated that Glencar was sitting on a deposit which had clear potential to be economically very significant. Sitting over lunch last week the back of the envelope calculations based on the data achieved to date suggest that Komana could easily contain 2-3 million ounces of gold. In Mali that is a commercial field.

A placing earlier this year leaves Glencar with a decent cash position. I estimate that it still has in excess of $2 million in the bank to fund its own drilling commitments over the coming year and minimal central overhead. Drilling will start again in October with the stated intention of firming up an initial resource statement. Drilling undertaken in the distant past means we already have evidence of a small resource but the numbers that Glencar could deliver would immediately push this block into the league of commercial deposits.

Valuation

This is an early stage play. Those who believe that a tip from me should be 100% certain to rise should not bother with this one. Exploration is risky by its nature. However...

I am work on the basis that a sub 5 million ounce resource is worth roughly $35 oz in which case a 3 million oz resource on Komana would be worth $105 million (55 million pounds). Now I accept that the data to date needs to be risk weighted and that Mali is not Ballybofey. So for the time being I shall value this asset at 27.5 million pounds but any success in the next drilling campaign will see that number increase significantly as the risk weighting drops. To this one should add Glencar's cash and the value of its quote (say 2 million pounds) and the value of its joint venture with Gold Fields. What it sits on in this jv has potential and Gold Fields will fund an aggressive exploration programme but this is early stage stuff so a valuation of 10 million pounds is not imprudent but I admit that it is far from precise. All of this gives me a target valuation of c40 million pounds or 18p per share.

However...my valuations are - arguably - hopelessly cautious. If Komana comes up trumps it will be sold on and the most recent transactions in this industry are valuing gold in the ground at up to $80 oz. Personally I regard such valuations as teetering on the verge of insanity but I am meeting sensible men who disagree. We shall see. But if Glencar can firm up a 3 million ounce resource expect to see some people using valuation parameters far more generous than my own and this will make my price target look very cautious indeed.

I am happy to use my cautious numbers and to advise you to buy these shares before the excitement mounts with aggressive drilling this Autumn. Glencar is a speculative buy at 10.5p and at up to 12p with a one year target of 18p per share.

Key Data:

EPIC: GEX
Spread: 10 - 10.75p
Market: AIM

[bongo bwana] 08/5/2007 20:31

Yep Robbi, ye young pup ye,

lol.

Since when is the resource estimate announcement due in June ????

[davenic] 08/5/2007 16:03

M & B buys nice :-)

[bongo bwana] 08/5/2007 15:40

Thats the stuff Robbi.

These nervy new guys are beginning to make me itch and scratch.

[robbi123] 08/5/2007 15:38

No worries Gerri, just curious.

Dave - news will come when its ready, no rush, chart looking good with buying pressure continuing. Still, lets keep it quiet for now :)

[davenic] 08/5/2007 15:32

nice 100k another move up soon non the cards...news tomorrow or Thursday I reckon

[gerri-c] 08/5/2007 14:39

robbi123,

Sorry I didn't think to ask as I was more interested in catching the offer price.

[robbi123] 08/5/2007 14:36

Doesnt suprise me Gerri, they were very short last week. Do you know what price on the bid and offer? COuld be bidding above mid again...

[gerri-c] 08/5/2007 14:19

A bit of a wait for stock. Was quoted to sell 75K and buy was just 7.5K.

[spaceparallax] 08/5/2007 13:29

Up we go again.

[davenic] 08/5/2007 12:26

Nice 200k tickup soon i reckon

[bongo bwana] 08/5/2007 09:57

Thank you SS.

Hope you are drinking milk, have had a bone scan and are on track for a full and speedy recovery.

[share_shark] 08/5/2007 09:53

AND on iii.BB too.