Quite a lot to read, but well worth it! the management have been getting a bit of flack here of late, when you look at what they are paid I'm not at all bothered by the options! The more motivated they are the better I say and you'll know when they sell them!
Regards
Metals Australia Limited
Excellent Zinc Discovery with Great Upside Potential
25 January 2007
We have commenced coverage of Metals Australia Ltd (MLS) with a BUY recommendation for its exposure to the Manindi Zinc Project which sits on a granted mining lease, located 500km NE of Perth in the East Murchison region of WA. The current resource base of 1.05Mt @ 7.64% Zn is forecast to increase based on a successful drilling programme. In addition new EM exploration targets within the project area have been identified for evaluation and drilling. Project development options are being investigated including bioheap leaching and electrowinning Zn metal from solution. The trials achieved excellent results recovering 97% of contained zinc within solution after leaching for 73 days. We are of the view that MLS has significant potential to grow its resource base and develop a medium sized mining operation.
Key Corporate & Financial Highlights
• Company name – changes its name to Metals Australia Ltd from Australian United Gold on 24 Sept.’06. • Cash – $6.6M as at 30 September 2006. • Value – resource valued at A$400M at current zinc prices. Key Project Highlights
• Manindi – located 500km NE of Perth and 20km SW of the closed Youanmi Gold Mine. Project area covers 1580Ha. • Resources – 1.05Mt @ 7.64% Zn, hosted within four mineralised zones: (i) Warabi (Zone A); (ii) Mulgara (Zone B); (iii) Kowari (Zone D Sth); and (iv) Kultarr (Zone D Nth). • Deposits – are shallow and amenable to open-pit mining methods. • Mineralisation – Volcanogenic Massive Sulphides (VMS), similar to Golden Grove and Jaguar deposits owned by OXR and JML respectively. • Drill targets – 9 EM targets to be tested close to existing deposits. • Drill results – Warabi zone MNRC008 – 5m @11.80%Zn from 44m & MNRC014 – 18m @ 14.96% Zn from 43m. Mulgara zone MNRC012 – 5m @ 7.40% Zn and MNRC013 3m @ 16.90% Zn from 89m. Kultarr zone MND005 – 10.2m @ 12.6% Zn from 172m. These results are not part of the existing resource base. Upgrade in resources is forecast. • Ore treatment – options include: (i) bio-heap leaching of crushed ore; (ii) conventional sulphide concentrate production; (iii) toll treatment; and (iv) selling ore to a third party for processing. Bio-heap trials recovered 97% of Zn metal within 73 days of leaching. • CAPEX – project development cost forecast at A$25-30M. MLS $0.08 BUY
Company Data Number of shares 669.6M Market capitalisation $50.9M 12 month high/low $0.10 / $0.02 Average monthly turnover $14.8M All Ordinaries Index 5626
Directors / Company Secretary Chairman (Executive) Mr Hersh Solomon Majteles Director Mr Alexander Clemen Director Mr David Nathan Zukerman Company Secretary Mr Norman Grafton
Top 10 Shareholders (30 October 2006) Shareholder Shares % Pan Pacific Mining Pty Ltd 35,000,000 5.23 Icerig Nominees Pty Ltd 30,383,551 4.54 D & D Nominees Pty Ltd 25,000,000 3.73 Heaver Group Limited 19,750,000 2.95 Pio Services Limited 18,750,000 2.80 I-CAN Limited 17,000,000 2.54 L C Asia Limited 14,220,000 2.12 Corridor Nominees Pty Ltd 12,500,000 1.87 ANZ Nominees Limited 9,940,992 1.48 Anne-Maree Rice 9,880,323 1.48 Total 192,424,866 29.0
MLS versus ALL ORDINARIES Index $A/share
0.20
0.15
0.10
0.05
0.00 Jan 06 Mar 06 May 06 MLS (LHS)
% 580 460 340 220 100 Jul 06 Sep 06 Nov 06 Jan 07 MLS Rel to ALL ORDINARIES (RHS)
This report may contain general securities advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. Before acting on any advice or recommendations, a person should contact a BBY adviser to determine whether or not the recommendations are appropriate; or should form his/her own view given the person’s investment objectives, financial situation and particular needs. Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by BBY, its associates, officers, directors, employees and agents. A full international disclaimer is contained on the final page of this report.
METALS AUSTRALIA LIMITED b
Old discovery with excellent resource upside
Significant EM targets identified for drill evaluation
Excellent drilling results achieved around all known zones of mineralisation
Manindi zinc project (MLS 80% interest)
Project geological setting is excellent for further discoveries
Manindi Zinc project is located 500km NE of Perth in the Murchison District of WA, 20km SE of the closed Youanmi gold mine. The project comprises a series of VMS deposits. Geological characteristics are similar to other deposits found in the Yilgarn Craton of WA including Golden Grove located to the SW of Manindi and Yalgoo and the Teutonic Bore / Jaguar deposits in the Eastern Goldfields. The Manindi deposit was previously discovered by CRA Exploration in the late 1970’s and was named Freddie Well. The geological setting in the region bodes well for further discoveries.
Current resource base is forecast to be expanded
Recent drilling of EM targets has been very successful which is forecast to lead to an upgrade in the resource base which currently sits at 1.05Mt @ 7.64% Zn. Resources lie within 4 zones of mineralisation to a maximum depth of only 200 metres (Table 2). Considerable scope exists to find additional resources along strike and depth as confirmed by downhole EM studies which indicate the presence of further mineralisation at depth.
Excellent results achieved from recent drilling
Recent diamond drilling results highlight the potential to expand the resource base. Two drill holes facilitating the down hole EM programme at Kultarr - Zone D North intersected the ore body at depth (Table 2). At Kultarr South Deeps a hole drilled between the South and North lodes intersected previously unknown zone of mineralisation (Table 2). At Warabi – Zone A, a hole drilled to the north of the known resource to test a surface EM target extended the zone of mineralisation by 25 metres (Table 2). Mulgara – Zone B holes were drilled into the known orebody to test the presence of high grade mineralisation at shallow depths which was confirmed (Table 2). A diamond drilling programme is planned for January / February 2007. A long drill hole section for Warabi & Mulgara (Figure 1) & Kowari & Kultarr (Figure 2) is shown below.
bMETALS AUSTRALIA LIMITED TABLE 2: MLS – LATEST DRILL INTERSECTIONS
Hole Intersection Comment
Kultarr Deeps
MND005 2.4m @ 12.75% Zn from 163m 25m to the north and 25m below the current resource MND005 10.2m @ 12.60% Zn from 172m
Kultarr South Deeps
MND001 1.6m @ 4.1% Zn from 254m New mineralisation previously not drilled
Warabi -Zone A
MND008 5m @ 13.3% Zn from 44m Extends ore body by 25m along strike. Also contains 0.78% Cu MND014 13m @ 19.82% Zn from 48m Extends ore body at depth. Also contains 0.58% Cu
Mulgara - Zone B
MNDRC012 16m @ 7.49% Zn from 23m Confirms high grade mineralisation MNDRC013 3m @ 15.13% Zn from 89m Confirms mineralisation grade. Contains 0.58% Cu
Source: MLS September quarterly report.
FIGURE 1: MLS – LONG SECTION AT WARABI & MULGARA SHOWING DRILL HOLE LOCATIONS
Source: MLS Release November 2006
BBY Limited 25 January 2007
METALS AUSTRALIA LIMITED b
Bio-heap leaching looks attractive given success of trials
Simple flowsheet from mined ore to metal all on sites
Conventional ore treatment options also being considered
Metallurgical test work has been encouraging
In September 2005 MLS commissioned BioHeap Ltd to undertake metallurgical testwork to ascertain the viability of heap leaching the ore using bacteria technology. Ore leaching proved to be very successful achieving 97.1% zinc recovery in solution after 73 days. Australian Metallurgical and Mineral Testing Consultants (AMMTEC) were commissioned to study down stream processing routes for the production of zinc metal using an electrowinning circuit. Study results have been sent to Outokumpu and Ecotec in Canada for conceptual design and Opex and Capex costs for an ion exchange circuit. AMMTEC is currently evaluating work completed by Outokumpu and Ecotec. Study results were also sent to manufacturers for conceptual design and calculation of Opex and Capex for an on-site electrowinning plant.
Conceptual flow sheet design incorporates three circuits
The first circuit requires Zinc ore to be crushed and placed on heap leach pads for bacterial leaching. The second circuit, requires zinc liquor to undergo ferric reduction and ion exchange to produce a pure zinc sulphate solution and final circuit is an electrowinning circuit transforming zinc sulphate solution into a zinc cathode or powder for sale on the market.
Conventional ore treatment options are also being considered
Conventional ore treating options including: (i) mining and processing on site using conventional sulphide concentrate circuit to produce a zinc concentrate for shipping and sale to a smelter, (ii) mining and toll treatment to produce a concentrate for shipping and sale; and (iii) mining and selling ore to a third party for processing.
FIGURE 2: MLS – LONG SECTION AT KOWARI & KULTARR SHOWING DRILL HOLE LOCATIONS
Source: MLS Release November 2006
BBY Limited 25 January 2007
bMETALS AUSTRALIA LIMITED This document has been prepared (in Australia) by BBY Limited ABN 80 006 707 777 (BBY), a Participant of Australian Stock Exchange Group and regulated by the Financial Services Authority (FSA) of the United Kingdom.
Analyst Certification
I, John Veldhuizen, research analyst and the author of this report, hereby certify that all of the views expressed in this research report accurately reflect my personal views about any and all of the subject issuer(s) or securities. I also certify that no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation(s) in this report.
Disclosure
BBY and its associates (as defined in Chapter 7 of the Corporations Law), officers, directors, employees and agents, from time to time, may hold securities in any of the companies to which this document refers and may trade in the securities mentioned either as principal or agent.
BBY does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
Contact with MLS has been made during the preparation of this report for assistance with verification of facts.
Disclaimer
This report may contain general securities advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. Before acting on any advice or recommendations, a person should contact a BBY adviser to determine whether or not the recommendations are appropriate; or should form his/her own view given the person’s investment objectives, financial situation and particular needs. Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by BBY, its associates, officers, directors, employees and agents.
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BBY Limited 25 January 2007
MLS Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held