BUSINESS AND INVESTING > THE SPECULATOR
SPECULATOR: DRESSED TO DRILL
October 2, 2002
A bit more exposure to the speculative gold stockmarket doesn't seem amiss in the present uncertain climate and I've zeroed in on Image Resources. It is a relatively low-priced counter, it has an active field program and the cash to meet its targets for the next 12 to 18 months. Image is also blessed with first-rate management. A 70-hole drilling program began last week on its promising Mt Elsie gold prospect north-east of Nullagine in the Pilbara region of Western Australia.
Image (ASX code: IMA) listed in July after a public offering of up to 20 million shares at 20¢. The issue was not underwritten, although Perth's Hogan and Partners acted as broker to the issue. In the event, $3m cash was raised through an issue of 15 million shares, taking total issued capital to 48.7 million shares. Of those, 31.3 million are listed for trading with most of the balance held in escrow for another two years.
The stock came on at 18¢ and has since traded down to a low of 11.5¢ before a recent recovery to 13¢. At the price, it carries a market capitalisation of $6.3m.
In support of that, it has $2.7m cash, 2.27 million shares (6.3%) in listed Magnetic Minerals (worth $1.13m last week) plus 15 prospects focused on gold or nickel sulphides throughout Western Australia and another at Tennant Creek in the Northern Territory.
Managing director is geologist Roger Thomson, former general manager exploration for both Delta Gold and Sons of Gwalia, while lawyer Peter Thomas is chairman (and a director of Magnetic too). Major shareholder and exploration director is George Sakalidis (also managing director of Magnetic), who holds 5.52 million Image shares escrowed until July 2004. Sakalidis is a geophysicist of more than 20 years standing who was involved in locating West Australian discoveries such as the world-class Silver Swan nickel deposit, and the Three Rivers and the Rose gold deposits, using a highly cost-effective aeromagnetic data base.
At Mt Elsie, a large and complex vein system has been identified over a 3.5km strike length. Numerous quartz veins up to 2m in width and up to 400m in length occur mostly within a 300m-wide corridor, which the company sees as comparable to the Wiluna and Jundee gold deposits.
Results from surface rock chip sampling released a week ago ranged from a sample thickness of 1.2m of 4.21 grams/tonne of gold to 0.5m of 31.18gpt. The present shallow drilling program launched last week is aimed at defining high-grade targets for core drilling. The best result from previous exploration on the southern end of the prospect was an 8m intersection of 12.8gpt from a depth of 16m. Image's interest at Mt Elsie ranges from 25% to 49%, increasing.
Meanwhile, last week's purchase, AGD Mining, is looking to get some purchase out of the antimony component of its Costerfield gold deposit east of Bendigo, Victoria. The world antimony price has soared nearly 70% since the end of June, up from a London Metal Exchange price of $US1425/tonne on July 3 to a mid-September price of $US2400/tonne. The world antimony market is by no means large at around 130,000 tonnes/year, about 80% of which comes out of China.
But floods and a mining disaster that killed more than 80 people in that country have severely reduced production, hence the rising price; a situation that is expected to persist for at least six months.
AGD has so far identified a proven and probable reserve of 290,000 tonnes averaging 12gpt gold and 6.2% antimony. A feasibility study late last year based on mining 50,000 tonnes of ore a year to produce 9500oz of gold and 3400 tonnes of gold-bearing antimony concentrate was projected to yield $3m in EBITDA per year. It was based on a gold price of $US285/oz, an antimony price of $US1350/tonne and an exchange rate of $1 to US0.55¢. Both commodity prices are now more robust and a revised feasibility study to treat 75,000 tonnes/year projects an annual EBITDA of between$7m and $8m.
New metallurgical studies have enhanced that option, hence the recent one-for-four issue at 0.7¢ to raise $1.87m. That will equate to part of the $5.3m budget to hopefully open the Costerfield mine in the first half of next year.
Declaration: The author's family has shares in AGD Mining.
Bought
40,000 Image Resources @ 13¢ = $5278
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