DOWN FOR THE MOUNT
It's a long shot, but recalcitrant mum and dad investors in MIM Holdings may have a chance to take a punt on another Mt Isa regional hopeful if their company falls to Swiss predator Xstrata's $5bn takeover bid at MIM's June 6 extraordinary meeting. At least, that is the hope of minerals economist Malcolm Maygar, managing director of the largely unknown Pegmont Mines. Readers might snigger, he acknowledges, for Pegmont is a minnow so far listed only on the Newcastle Stock Exchange. It's a well-connected minnow, however, with shareholders that include BHP Billiton and Rio Tinto, plus joint venture programs with both MIM and BHP Billiton.
Right now, in a joint venture with BHP Billiton, it's drilling on a huge but barely tested base metals anomaly with an apparent strike length of seven kilometres beginning 50km north-west of Mt Isa. Going by shallow drill results already to hand, Maygar and his team are convinced that they have found "Mt Isa-type" zinc-lead mineralisation over the long strike length within what is known as the May Downs prospect. So far, reported results from relatively shallow drill holes are certainly not of economic grade, with the best intersection being 46 metres below 52 metres averaging 0.28% zinc. The present program calls for five reverse circulation drill holes totalling 2000m.
Billiton Exploration last year subscribed for 2.75 million Pegmont shares at 10¢ to enter a jo/int venture on May Downs. In the March quarter, Billiton Exploration subscribed for a further 850,285 Pegmont shares at 12.5¢ each, giving it a 7.5% equity in the junior. Drilling was delayed until the granting of a native title agreement over the ground late last year, then the need to wait out the monsoonal "wet" season. Billiton may earn a 70% interest in the prospect through the expenditure of $4.5m, including 36,000m of drilling.
Realistically, one would have to offer country horse-racing odds of perhaps 100-to-one on hopes that the current drilling program will strike the "big one" with a large intersection of high-grade zinc-lead. But such a discovery would bring some much-needed cheer to the besieged populace of Mt Isa. For if Xstrata's bid for MIM succeeds (as appears most likely), the new foreign owner is expected to slash $50m from costs, including jobs and regional exploration.
Pegmont, in March, signed a heads of agreement with MIM Exploration whereby the major may spend $10m over 10 years to earn a 75% interest in Pegmont's Mt Kelly copper-gold prospect, 75km north of Mt Isa. The agreement provides for a minimum spend of $100,000 for MIM to proceed.
The major proposes to use its MIMDAS geophysical process to "look" down to 500m for anomalous structures to drill. That survey was due to begin in May. MIM interest is confined to anything below 100m, for any shallow mineralisation above that is under a joint venture with the unlisted International Base Metals Ltd. That company (controlled by geologist Ken Maiden and mining financier Stephen Blackman) may earn a 50% interest in the top 100m by spending $2.5m and completing a bankable feasibility study by 2006.
Apart from managing director Maygar, other Pegmont directors are chairman John Armstrong (engineer, investment banker and chairman of Drillsearch Energy) and Michael Leggo (geologist and former general manager of CSR's minerals group). Senior adviser is Bart Ryan, former managing director of Renison Goldfields.
You won't find Pegmont listed in the share tables of the daily newspapers but internet-savvy punters can check out all eight companies listed in Newcastle on www.newsx.com.au. A handful of ASX brokers are also members of the Newcastle Exchange, including Reynolds, Camerons, Macquarie Equities and several of the large foreign firms (Citigroup) now dominating the Aussie market.
Maygar says Pegmont opted for the Newcastle Exchange when it listed in December 2000 for a range of reasons, including: Newcastle requires a minimum of 50 shareholders against the ASX minimum of 400 (Pegmont has 130); 10¢ shares can be issued (ASX minimum 20¢); minimum capital raising is $500,000 (ASX $2.5m).
Pegmont now has on issue 48.6 million shares. They last traded at 8¢ with a closing market of 8¢ buyer; 10¢ seller. At 10¢, the company carries a market capitalisation of $4.8m. With about $80,000 cash remaining, it will soon have to issue more paper and down the track it may well emerge on the main board, where one can hope for greater investor attention.
In the meantime, our portfolio stock Marlborough Resources announced its foreign exchange hedge contract held with the Commonwealth Bank over the next 2½ years is now $1.7m favourable to the company. Marlborough sells $US200,000 a month of its tin concentrate in $A at an exchange rate of US55.6¢, which covers 42% of current revenue in US dollars.
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