MLX (ASX) TAM Investment Research- re MLX investment.

Originally posted by hightrax: ↑

There has been occasional discussion of MLX's little $1.5 m investment in Tanami Gold.TAM. Its only minor, but decided to have a look.
Got a bit of a surprise. TAM is run very economically, and does not do the usual self promotion. Reports are those required and unemotionally factual with few colourful adjectives. It is selling a bit above 3 cents which is what MLX paid. This capitalises it in the 3 -4 million dollar range.

Normally these penny stocks are mostly hopefuls and pie in the sky, but not this one. It has gold, over 2 million ozs of it, in a number of close deposits in the middle of the great Tanami Desert in the NT. Close-ish to the WA border. Half the ore is in the main pit called Groundrush. This pit averages at 4.2 g/t and there are 1.1 m ounces proved up here, going down to 600 m. The first 200 or so can be extracted by opencut, the rest by underground mining. It has been mined before between 2001 and 2006, and there is a standing maintained plant and a village (in use for drillers etc) plus an airstrip. The mill was fed from Groundrush which has so far produced 600,000 oz. The mine is about 50 k up the Tanami road from the big FIFO Granites underground gold mine owned by Newmont, which has produced 10,000,000 oz. over the past 20 years and is expanding to extract the same again in the next 20, going down to 2000 m and beyond. This one has an airstrip big enough for a jumbo.

A fair bit of drilling has been going on at all the spots, so there is a pretty good degree of confidence now. The GR pit is about 45km from the plant.
Intitially the TAM management idea was to put in a new $250m plant. I could not imagine how any little penny could ever get this kind of money. However, TAM has sold a half interest in the operation to Northern Star, the owner of the super pit at Kalgoorlie, whose stock sells for $11-$12 just now. The consideration was about $35m including 500,000 shares in NStar worth around $6m and paying a regular fully franked dividend. I think if they must have a good view of the future of the Tanami Gold holding. A JV now exists which is conducting operations at the mine. It has$6.5 m in working capital which will be 50:50 topped up as required.

Sensibly the plan now is restoring the existing plant to fully operational condition. Consultants have provided a report on what looks to be required and this is now being costed. You can view the plant if you go to Google Maps on the Tanami Rd, Granites site and go about 50 k NW up the road to the Central Tanami operation. Having the very big Oz miner N. Star as a partner is a big plus in that there is a wide range of expertise and staff on tap, rarely available to a small miner.

Granites are mining an average of about 2.6 g/t fr and Northern Star and Westgold also. The TG average is well over 3g average all up, (3.2-4?) The only holding I have with bonanza gold is Spartan, with its Never Never find, but even this averages about 5.4 g/t from memory, and their overall average including the existing low grade pit is only about 2.6g. They too have a plant but it is a bit more ready to start up. The TG site therefore has very attractive gold and the more so because it can be run as an open cut for the first few years at Groudrush and thus have lower costs. The ore is very free milling, without complex chemicals and pressure etc and the plant has yielded about 95% recovery which is about as good as it gets in gold mining.

There is a new 8 inch gas pipeline a spur from the main NT N-S pipeline running 450 km to the Granites mine, operated by a separate provider which is powering a third party electricity generator which feeds the mine plant, which they say is saving them $50+ oz in costs.
It comes from gasfields south of Alice Springs but is also connected to the offshore fields in the Bonaparte Gulf off NT. Perhaps they could provide power to the Tanami Gold JV mine too? Not too far.

There is plenty of sub-artesian water there, which can be seen from the big lake at the Granites mine and the amount of water currently in the Groundrush pit. Mines need to be pumped, believe it or not in the middle of this very barren desert. It would be run as a FIFO operation of course, maybe from Darwin?

I only included this because MLX has bought a holding in TAM, and there has been some bagging of the management for doing so. I now own TAM shares, but not a huge number, but a bigger holding in MLX.

Expand

Thanks for detailed outline. I agree it may not be a bad investment. But the way it was done in case of MLX had a lot of procedural and compliance red flags. As Rusty from Nero pointed out, it was a silly move. The right way of doing it would have been to declare a well formulated capital allocation strategy and then act on it, which may or may not include an investment in TAM. But informing MLX shareholders of a related party transaction where APAC is materially involved on both sides is just a terrible look - again irrespective of the investment merits of TAM.

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(20min delay)
Last 43.0¢		Change -0.010(2.27%)		Mkt cap ! $385.5M

Open	High	Low	Value	Volume
44.0¢	44.0¢	43.0¢	$429.8K	988.6K

TAM Investment Research- re MLX investment., page-3

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