AUSTRALIAN EXPLORERS REVIEW
Tony Locantro
2004 thus far has already provided a number of promising exploration results, along with silver coming perilously close to my upside target of $6.80 (peaked intra-day at $6.74). Whilst base and precious metals prices remain volatile the sentiment remains positive in the speculative sector, although expanding trading ranges are starting to take their fair share of casualties. Traders are seeking positive news in which to launch raids on any sector of the market, and the for the junior resource sector to move to the next level a "Minotaur" style intersection would be the obvious catalyst.
On a recent visit to the greyhound track with an overseas relative, after purchasing the formbook he then launched into a frantic search for the weight sheet, which was eventually found without a trace of grease or beverage on it. "This is the most critical guide to how a dog could run tonight, yet not one person at this track seems remotely interested". This could be applied to the junior resource sector has we have undergone an ever increasing number of share purchase plans, private placements, and once stocks hit their two-year listing anniversary date the issued capital blows out considerably as the key to the founders/promoters stock is handed to them in a market that has improved considerably since the stock was locked away. Numerous stocks are struggling under the weight of the selling pressure, however there has been another period of perfect conditions for collecting cheap paper.
"At the start of the resources bull market we have all the paper and they have all the money. At the end of the resources bull market they have all the paper and we have all the money." Anon resources insider.
PORTFOLIO NEW ADDITION
I provided a list of nine explorers in December 2003, and with the vacant box have included one more for a field of ten. There has been considerable exploration success across a number of the companies, whilst exciting programs are due to commence in the near/short-term.
Tri Origin Minerals Ltd (TRO) 24c… Gold, Silver and base metals
What initially drew my attention to TRO was the 350,000oz of gold and 18m ounces of silver at Lewis Ponds, which the company affectionately refers to as being "Half a mine". In order for the economics to be enhanced significantly TRO are due in February to embark on the task of doubling the known resources at Lewis Ponds, which is located in the Lachlan Fold Belt of NSW. (App 200kms West of Sydney). TRO are hardly a junior cashing in on the improving sentiment towards IPO's, as they have worked the Lachlan Fold Belt for the past ten years and have spent $9m thus far with more than 20 advanced priority targets in regional landholdings. In the base metals complex TRO have 200,000t zinc, 100,000t lead, and 10,000t copper which complements the indicated gold/silver resources at Lewis Ponds.
A champion team or a team of champions?
A rugby league team can have a star studded backline, yet the team fails to gel as each individual attempts to push the envelope and instead of being patient errors start to creep in and the attacking unit fails. Other teams may have an average pair of centres, yet the five eight is able to put them through gaps with deft passing and they are able to exploit the opportunities availed to them with a minimum of fuss. When reviewing the management biographies of Tri Origin it was apparent that for a junior resource company, I have never seen such a star studded array of resource professionals assembled in a junior exploration company. At an early stage it would appear that Tri Origin has the pedigree necessary to graduate through the ranks of Australian resource companies, however will depend on how the various talents of the managerial team re exploited to their full potential.
John T Shaw (Chairman)
- Director Kingsgate, Gallery Gold, and Chairman Lodestone Exploration.
- Ex Vice President of Australian operations Placer Dome Asia Pacific.
- Ex Managing Director Kidston Gold Mines.
Robert Valiant (Managing Director)
- Previously Vice President of LAC Minerals LTD prior to takeover.
- As per the prospectus it was indicated that Robert would step down as Managing Director of the company and would continue on in a technical role. (Currently Managing Director of TOE Canada).
Bruce Kay (Non-Executive Director)
- Ex Manager of worldwide exploration for Newmont and previously Normandy.
William Killinger (Non-Executive Director)
- Six-year term as Managing Director of Minproc Engineers Ltd.
Gregory Martyr (Business Development)
- From 1994 to 2003 was involved in growing the global asset base of Normandy.
Further information can be located at www.trioriginminerals.com.au
TRO was the second stock I purchased for my 6mth and two-year old, without the pressure of worrying about the daily share price movements. During the period I also increased their holdings in Herald Resources (HER) and added Arafura Resources (ARU) as a longer-term play for the rare earths project.
MEDUSA MINING (MML) 43.5C/30.5c +43%
MML after listing on the ASX raced to 52c from its 20c issue price (listed 23rd December 2003), and has since eased back to the low-mid 40's. The company's main project is the high-grade gold targets at its Saugon Project in the Philippines, whilst MML recently announced an option over an alluvial gold project in Tasmania (3 months). No results from exploration at Saugon have been released, whilst further reports on the Tasmanian venture are expected towards the expiry of the option period.
UNIVERSAL RESOURCES (URL) 17.5C/13C +35%
URL announced a 94m intersection at 0.94% copper at its Roseby Project in QLD. (JV with Bolnisi (BSG). A resource upgrade is expected as early as February (as per previous ASX announcement). URL and BSG are aiming for copper-gold production in CY 2005 based on considerable exploration success to date.
MALACHITE RESOURCES (MAR) 23C/19C +21%
MAR's share price rallied strongly to 28c on the back of "An exciting new gold discovery at Tooloom". Whilst the grades were generally low, it was the width and consistency of mineralisation that points to the proximity of a major gold source according to the company. Further exploration at Tooloom will be eagerly awaited through CY 2004 after the company stated in its ASX release, "The results imply that a new porphyry-related gold system has been discovered with substantial upside potential". MAR's major silver project at Conrad is still undergoing title clearances prior to the second stage of exploration.
GOLDEN CROSS RESOURCES (GCR) 9C/7.4C +22%
One December 10, 2003 GCR announced that nine drilling programs would be conducted on GCR's properties over a four-month period making it one of the most active junior explorers on the ASX. The company is currently is undertaking a share purchase plan where holders are able to purchase up to $5,000 worth of GCR stock at 8c per share.
INDEPENDENCE GROUP (IGO) $1.19/$1.08 +10%
Whilst IGO have undertaken further nickel exploration on their Kambalda tenements, the buoyant nickel price over the past 6-12 mths has the potential to provide the company with the impetus to surpass the operational targets set at Long Victor. Recent exploration success from Western Areas (WSA) halted a slide in the nickel juniors after extreme volatility on the LME with the metal trading in a $3,000 range.
HERALD RESOURCES (HER) 75C/68C +10%
HER have announced that a major gold exploration program is to take place at Coolgardie (JV with MPI Mines). The company is currently working towards the completion of a BFS at the high-grade zinc-lead project at Dairi (Nth Sumatra). (6.3mt at 23% Zn equiv).
ARAFURA RESOURCES (ARU) 18C/16C +12%
ARU announced exciting exploration results from their Mt Porter gold project in NT, which saw their share price move from 14c to 21.5c on heavy volume. Results included 22.5m @ 4.64 g/t, 1.65m @ 27.60 g/t, 12.90m @ 6.35 g/t and 27m @ 1.63 g/t. The shares have since settled on no news, however drilling at the company's Nolans Bore Rare Earths/Phosphate project is expected in the near-term. (Weather conditions permitting).
RAMELIUS RESOURCES (RMS) 13C/13C STEADY
RMS have announced a one for one rights issue at 11c per share which has been a major factor in having the shares at one stage sold down to 10c on heavy volume. RMS are soon to embark on their most ambitious exploration program yet, which is expected to target new gold zones (see previous ASX announcements) and a number of exciting nickel targets.
PLATSEARCH (PTS) 12C/11.5C -4%
PTS have just announced a successful share purchase plan where the company raised $580,000 at 11c per share. There have been no exploration results released during the period, however with the company cashed up and an array of joint venture projects activity is expected to increase significantly although the dilutionary impact could come into play once holders are offered a reasonable trading profit.
Disclaimer
I have direct/indirect holdings in the stocks listed/mentioned above. Clients have considerable holdings in each of the stocks and may change these holdings without notice. Each of the stocks listed is to be considered as speculative, and may not be appropriate for individual investors. No buy recommendations have been provided on the listed stocks, and the opinions on each are those of the author only. It should also be noted that some of the stocks may have very low levels of liquidity and may result in significant percentage rises and falls. Please conduct further research and consult your financial advisor before making an investment/trading decision.
About the Author
Tony Locantro is a Perth based Senior Private Client Advisor specialising in the junior resource market. He is the author of "The Green Room, A Guide To Speculating On The Australian Stock Market" (available on request) and presents on resource stock investment. He has been a contributor to a number of precious metals and market related forums.
26 January 2004
If you would like further information or are interested in becoming a client I can be contacted at locantro@iinet.net.au
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