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Gold/Mining/Energy : Mining News of Note -- Ignore unavailable to you. Want to Upgrade?

To: LoneClone who wrote (45629)	10/21/2009 10:34:37 AM
From: LoneClone	Read Replies (1) \| Respond to of 193816

Baobab's Tete Iron Ore Project In Mozambique Is Starting To Show Potential For Serious Tonnage By Alastair Ford minesite.com If you’d bought and sold Baobab shares at the right times this year it would have been possible to have made more than ten times your money. Even now, after the exuberance of a 16.5p share price following a resource upgrade has worn off, the company is still trading at a healthy 11.5p per share, more than double where it was 12 months ago, and around five times the price of just six months ago. Such have been the vagaries of the market during this recent period of financial uncertainty. If you take a slightly longer view of Baobab, then the company’s shares are now trading at roughly the middle of the 9.5p to 15p range at which they traded in 2007 after listing and into 2008 before the financial crash sent everybody’s shares off a cliff. So not much long term damage has been done to Baobab by the financial crisis. The value destruction was temporary, and the bounce back has been satisfying. Indeed, technical director Ben James is very pleased with what he calls the “quite fantastic liquidity” that has recently been in evidence as the company’s shares have responded to various positive news releases relating to work on the ground on the Tete licence in Mozambique. News of a 47.7 million tonne iron ore resource certainly generated plenty of interest, as did a subsequent announcement that the company is now targeting an overall resource of between 400 million tonnes and 700 million tonnes on Tete. All of that will come from what is called the Massamba Group area to the north of the Tete licence, meaning that there’s likely to be further upside from the mineralized areas to the south of the property, known as Singoya. But working out how Singoya will shape up is one for futurologists at the moment. The immediate matter in hand is Massamba Group, and, as if to underline this point, only a few days after the market was told of the company’s aspiration 400 to 700 million tonnes, Baobab issued a scoping study that gets most of the way there. According to Coffey Mining, mining what it calls “a notional mineralised tonnage” of 300 million tonnes at 10 million tonnes per year at Massamba would produce high quality magnetite and ilmenite concentrates, with financial modeling pointing towards “positive project economics”. Findings from Coffey carry some weight, even if a lot more drilling is needed to deliver the resource to support such an operation. Coffey recommended that work on Massamba continue, but added that key sensitivities now include the strip ratio, resource base, grade, and access to credit amongst other things. With that in mind, Baobab’s Ben James and Jon Crowe are currently a few days into a roadshow, touring London’s investment community, and benefiting from new introductions courtesy of new brokers Astaire Securities. Ben and Jon plan to raise between £2 million and £3 million in new money, in order to allow Baobab to keep drilling towards its 400 million to 700 million tonne target. Recent market reaction to the company’s newsflow has provided a positive context for the meetings to take place in, though the money’s not in the bag yet. But aside from Coffey’s recommendations, Tete has several other selling points that could tempt in potential investors. There are two dams nearby, so any mining project at Tete is likely to have access to low-tariff hydro-electric power. As if to emphasise that Tete is not completely off the beaten track, Ben James also highlights that on the other side of two parts of the company’s licence boundaries lie concessions granted to Vale and Riversdale. Perhaps a more tangible endorsement of Tete itself, though, is the investment the World Bank has made in the project, both directly and through a 10 per cent stake in Baobab itself, undertaken through its finance arm, the IFC. “The IFC”, says Ben, “are one of the best possible partners a project like this could have”. Not only does the IFC bring credibility, but it also brings clout. Acquisitive bureaucrats will be given pause for thought with the IFC on the register of any project, though it will be interesting to watch whether the IFC can wield any effective influence over the government of the Democratic Republic of Congo (DRC), which has just dispossessed it of a major copper-cobalt asset. Still, the DRC is a law unto itself, and so far Mozambique has been a very receptive place for miners to do business. Baobab has certainly hit the ground running, and, with a little bit more cash to keep the drill rigs turning and undertake a bit of metallurgical work, it ought to be able to deliver further grounds for encouragement sooner rather than later.