October 9, 2002 BUSINESS AND INVESTING > THE SPECULATOR
SPECULATOR: WORLD EXPEDITIONS
Oil junior Hardman Resources has become an investment target for institutional money following last week's placements, which raised $26.6m to pursue the company's burgeoning exploration program. The cashed-up Hardman has confirmed its 21.6%-owned Chinguetti oilfield off the Atlantic coast of the west African nation of Mauritania is commercial, with first production likely in 2005. The new injection of funds ensures the probable expansion of the company's exploration program through prime interests in tenements equal in extent to the North-West Shelf oil and gasfields of Western Australia. The tenement embracing the 200 million barrel Chinguetti No. 1 discovery is shared with Woodside (35%), Italy's ENI (35%), Fusion Oil and Gas (6%) and Roc Oil (2.4%).
The placements at 70¢ follow the listing earlier this year of Hardman shares on London's Alternative Investment Market, with London broker Canaccord placing stock in Europe and Macquarie Equities/Intersuisse placing some in Australia. Hardman now has 426 million issued shares which, at 73¢, capitalises the company at $320m. Woodside owns almost 11%, having topped up its Hardman holding earlier in the week through a 10 million share placement at 70¢. Last week the consortium was drilling on the Chinguetti No. 4-4 appraisal well, 1.5km east of the discovery well, with a target depth of 2925 metres.
Meanwhile, the Sydney Mining Club last week played host to two Australian companies with emerging mines in Laos, a country that was on the nose with investors during the past couple of years following the arrest of an Australian security manager and his wife at an unrelated gemstone mine. Both companies – Oxiana Resources and Pan Australian Resources – were at pains to assure their audience that the situation in the South-East Asian republic was now serene.
We last took a punt on PanAust two years ago (Oct 10, 2000) when we bought at 5.7¢ and sold a few weeks later at 9¢. The stock is now trading at 3.5¢, having ranged over the past 12 months between 5.2¢ and 2.3¢. It has a capitalisation of $6m, with remaining cash and short-term securities of $1m. That leaves a very modest value on the company's main projects, which include the Phu Bia exploration and mining area, covering 5000 sq km and held by PanAust (80%) and Newmont (20%). Within that area, there are several potentially valuable resources:
The Phu Kham copper-gold discovery with an inferred resource estimate of 125 million tonnes of 0.9% copper and 0.4 grams/tonne of gold, plus a 9 million tonne oxide cap of 1.1 gpt gold or 320,000 oz with a near-zero stripping rate.
Several other large but relatively low-grade near-surface gold deposits yet to be quantified but including some higher grade strikes, such as 9 metres of 7.9 gpt below 42.5m. Results are awaited from five new drill holes sunk to a depth of 100m.
In addition, the company is earning a 51% interest (with a right to go to 70%) in the Puthep copper project, 200km north-west of Kingsgate's Chatree gold mine in north-west Thailand. The Puthep copper deposit was drilled out by Phelps Dodge for a total indicated/inferred resource of 116 million tonnes of 0.4% copper. While the grade is low and copper isn't sexy now, a pre-feasibility study indicates potential for a viable heap leach and electro-winning copper mine based on part of the deposit, with a 44 million tonne potential open pit at 0.5% copper. With a 1:1 strip ratio and an annual throughput of 7 million tonnes of material, that would yield (according to the study) 30,000 tonnes of copper cathode a year for less than US50¢/pound. The present copper price is nudging US70¢/pound.
The Puthep mine would then be Thailand's first copper mine. PanAust managing director Gary Stafford says Thailand consumes more than 120,000 tonnes of copper a year, and has a ready domestic market to pay a local premium for cathode produced from the Puthep project.
The other Aussie in Laos, Oxiana Resources, carries a market capitalisation of nearly $320m (50 times larger than PanAust) and has a much larger resource, which we'll have a look at next week.
Meanwhile, last week's stock pick, Image Resources, was added to the portfolio because the company was beginning a 70-hole program on its promising Mt Elsie gold prospect north-east of Nullagine in the Pilbara region of Western Australia. Since then, the company has announced another promising target 60km east of Nullagine on its 90%-owned Mt Hays prospect. An anomaly covering 1000m has been identified through stream sediment sampling, with peak values exceeding 170 times background values of 10 parts/billion gold. There is no evidence that old timers ever tested this rubble-covered ground.
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