WSJ : Mining stocks flying under the radar
Source : The Wall Street Journal
Published on : 13th April 2011
NIGERIA, thermal coal gains, a lucky dip in the Pilbara - all stories to keep an eye on.
Each week, stories by the bucket load never get an airing because there’s information overload. And, each week, Pure Speculation is penitent and contrite about the things we should have told you about but which - somehow - just got crowded out.
So, here and now, we make amends. Or, at least, in part. There are still plenty of companies struggling - and failing - to get their stories noticed.
Africa’s most populous country has long ignored mining simply because it was awash with oil revenue. Sure, not all of money found its way into the right hands or did much to improve the life of the average Nigerian, but that’s another matter.
But the Nigerian government is now pushing mining in a bid to diversify the economy by encouraging metals exploration and production, and a few brave Aussies have ventured in. There have been some disappointments, with earlier forays into molybdenum and iron ore ending up being abandoned.
Last week, though, Australian Mines (AUZ) said it had begun soil sampling and mapping on its Nigerian gold tenements. One of the areas under application includes old British workings not touched since Nigeria was given independence in 1960. Now the whole hillside is being transformed by a mass of artisanal workings.
Meanwhile, Energio (EIO) is picking up iron ore targets in Kogi state. The market didn’t think much of it last week and the stock has retreated since the announcement, today trading at 3.7c.
The iron ore was explored by the British 50 years ago but they pulled out at about the time of independence. Then, before the collapse of the Soviet Union, the Russians were going to finance a steel industry in Nigeria, but that plant has been lying idle for 20 years or so. There is also an unused railway (built as part of the steel plan) running close enough to Energio’s ground to allow trucking of ore to a siding.
The other problems is getting your hands on a drilling rig in Nigeria.
Well, if the company can overcome the problems of working in Nigeria and someone can get both the steel plant and the railway back into operation and build a steel industry that exports to other countries in West Africa, not to mention proving up the resource, then Energio might have it made. But it’s certainly at the more extreme end of the high risk-high reward scale.
THERMAL coal prices are on the up, reports Brendan Fitzpatrick at Deutsche Bank. His latest report says the recent $US130 a tonne contract exceeded expectations and is now predicting $US140 a tonne for the beginning of 2012.
Events in Japan, and de-stocking in China, may have led to weaker pricing but an ongoing supply deficit has created pricing pressure, the report continues. La Nina still affects Australian exports and reduced use of nuclear power in Japan and Germany means increased thermal demand.
Yesterday, Endocoal (EOC) announced its “three product” coal strategy - developing the Orion Downs thermal coal project, confirming the Rockwood PCI coal discovery and exploring its Talwood-Pretoria Hill coking coal ground.
For the thermal coal project in Queensland, it is planning to complete pre-feasibility studies next month. It is expected the capital cost will come in at $100 million and production will be between 2.5m and 3m tonnes a year. The plan is to transport the coal on QR National’s Rolleston-Blackwater railway line to the port of Gladstone.
Today, and citing what it calls recent record prices for thermal coal, Realm Resources (RRP) has picked up a 75 per cent stake in the Katingan Ria coal project in Indonesia’s province of Central Kalimantan. For those who may not have heard of Realm, it is the renamed former hotel owner Morning Star Holdings and is now investing in South African platinum and operates an aluminium dross processing plant at Pietermaritzburg.
SINCE, in our print edition of January 31, we drew attention to Amex Resources (AXZ) and its Mba Delta iron sands project in Fiji, its share price has more than doubled. The company has now sent its first trial shipment of irons and concentrate to potential Chinese customers. The shipment averaged 58.5 per cent iron ore and 0.65 per cent vanadium.
But there has been another development: it has won a ballot for the Paraburdoo South tenement in the Pilbara ahead of a number of high-profile iron ore companies. The ground covers 20sqkm and is immediately south of the Paraburdoo open pit iron ore mine.
What investors may not realise is that Amex’s non-executive chairman, Dudley Kingsnorth, was one of the originators of the plan to build a third iron ore force in the Pilbara and acquiring some tenements. He and his associates were instrumental in putting the tenements into a company called Allied Mining & Processing which became - wait for it! - Fortescue Metals Group (FMG).
Amex is also acquiring the Mt Maguire iron ore project, just south of the Channar iron ore mine.
It’s not exactly the fourth force in the Pilbara, but it is a start on building an iron ore story.
AND all those gold stories.
Crescent Gold (CRE) reported some strong intercepts at its Laverton project including 12.1m at 12.58 grams/tonne. Thor Mining (THR) completed its 66-hole drilling at the Dundas gold project in Western Australia and reported copper and gold mineralisation, but the drill testing was into the top of the bedrock only so there is plenty more work to be done.
And Uramet Minerals (URM), one of two Australian explorers working in the South American country of Guyana, has produced another round of interesting drill results. The best intercepts at its Ianna gold project were 50m at 2.47 grams a tonne, 16m at 2.75g/t and 12m at 3.99g/t.