aim resources moves up scale from explorer to emer, page-4

re: aim resources moves up scale.sinbin At the risk of getting pinged by Minesite Sinbin here it is.

AIM Resources Moves Up Scale From Explorer To Emerging Producer.

By Our Man In Oz

Time can move painfully slowly in Africa, as Marc Flory from AIM Resources, and Charles Kernot from the London broking house, Seymour Pierce, will have noted over the past six months. If Flory’s optimism, as chief executive of AIM, had been well placed he would have announced offtake partners before now and final funding for the Perkoa zinc project in the central African country of Burkina Faso would be well underway. If Kernot’s predictions for AIM’s share price had been correct back in May the stock would be trading a lot higher than it is now. Both men were a little premature with their optimism. But, as someone else once said, good things come to those who wait, and a fresh look at AIM reveals a company on the cusp of significant developments, including the keenly-awaited zinc offtake deals, a fresh capital raising, and perhaps a share price to bring a smile to the faces of Kernot’s faithful followers.

Driving interest in AIM is the imminent go-ahead for Perkoa and the continued boom in demand for zinc. Of secondary interest are the company’s two other African projects, the Mumbwa copper-gold prospect in Zambia, and the Mokopane nickel-platinum prospect in the Bushveld of South Africa. While the Zambian and South Africa assets might one day have their day in the sun it was Perkoa to the fore a couple of weeks ago when Flory made his sales pitch to an attentive audience in Perth, the capital of Western Australia.

Not a country which has traditionally paid much attention to things African the difference this time was that Flory was speaking at the fourth “Africa Down-Under” conference, a peculiar event which some critics thought doomed to fail. This year, however, about 500 people attended, including a flotilla of African government “worthies” who popped over the pond to visit a city at the epicentre of the world’s resources boom – a claim easily sustained by looking at Western Australia’s economic growth rate in the June quarter which “out-China-ed China” by growing at an astonishing annualised 14 per cent. The best the lads in Shanghai could managed was 11 per cent.

Perth’s hothouse environment, fuelled by booming iron ore, petroleum nickel, gold and alumina developments, brought the best out in Flory, including a prediction to Minesite on the sidelines of the conference that the keenly-awaited zinc offtake agreement was just a week. This proved to be right as the company has since announced that Letters of Intent have been signed with three parties for the off-take of Perkoa’s high grade, clean zinc concentrates as they will provide an attractive feed for zinc smelters. First is Xstrata Zinc which needs concentrate for its smelters in Spain and Germany; then comes Votarantim Metals which has suitable smelters in Brazil and Peru; and finally Louis Dreyfus Commodities Metals Suisse with extensive commodities trading and logistics expertise, particularly in West Africa.These three off-take partners will provide Perkoa with a secure, long-term market, attractive sales terms and flexibility in concentrate sales.

Perkoa is an old Billiton discovery from its pre-BHP merger days which was acquired acquired by Flory for AIM last year. A bankable feasibility was completed late last year, and it’s taken much of 2006 to get to the point where mine development can start. “We’ll put the box cut in next month, and be delivering our first zinc concentrate by early 2008,” Flory said. The project contains a tantalising 6.3 million tonnes of ore assaying an average of 14.5 per cent, making it one of the richer zinc orebodies in the world. If, as planned, the mine runs for its projected 14 years, and zinc prices stay high, it will produce more than 900,000 tonnes of metal worth US$2.8 billion at current prices. The project internal rate of return to AIM from a mine producing around 65,000 tonnes of zinc in a clean 53 per cent concentrate is a very attractive 43 per cent.

Flory said the latest mine plan was to expand the size of the box cut which would facilitate a faster than expected start on mining. There might also be a change in the actual mining method, replacing the planned sub-level uphole retreat with uphole bench stoping which could add to the capital cost. The latest cost estimate is around US$100 million which will be funded with a mix of cash from the zinc offtake agreements, debt, and a likely share issue through London-based institutions. “We will be doing a little bit of equity raising through London and I expect it to be placed fairly quickly,” Flory said.

If the various pieces of the Perkoa puzzle fall into place as Flory predicts the company will take on a totally new look from next year. Cash flow from zinc production will help pay for work on the promising, but frustrating, Mumbwa copper-gold project where the current drilling programme has been slowed by exceptionally hard rock. A second drill rig could be sent to site to accelerate work. A drilling programme is also planned for the Mokopane nickel-platinum project, but a deal could be in the wind to speed work on what is a well-located asset being immediately south of the Platreef project of African Minerals and on strike from Anglo Platinum’s PP Rust operation. Flory dropped a clue about a deal on Mokopane in his June quarter report when he wrote that AIM was “considering various alternatives to create value from the project at a time of historically high platinum and nickel prices.”

However interesting Mumbwa and Mokopone might be, there seems little doubt that they will be playing second and third fiddle to Perkoa within a matter of weeks as AIM shifts up a gear from explorer to emerging producer.

Thanks to

http://www.minesite.com

d.