broker rates avoca a spec buy

The following does read rather well in my view...

From D.J. Carmichael & Co's "Investment Ideas - May 2004", hot off the press:


Avoca Resources Ltd - SPECULATIVE BUY

The acquisition of Higginsville is a positive step for AVO and could lead into gold production in the short term. With Higginsville, Mt Fisher, Jimberlana and potentially the South Australian assets, AVO has an interesting and prospective project portfolio. The several JV projects of which AVO is being free carried provide additional upside with low risk and the decision to divest non-core projects is astute given the already significant workload. We recommend AVO as a SPECULATIVE BUY.

Highlights:

- Acquisition of Higginsville project gives Avoca the prospect of short term production and excellent exploration potential.

- Other projects such as the high grade Mt Fisher deposit, the Jimberlana Dyke and the copper-gold province in South Australia offer additional exploration upside.

- Management is very experienced in the region and has sufficient cash to mount aggressive and effective exploration program.


Investment Logic:

Acquisition of Higginsville may provide early cash flow: With existing resources of 445k oz, AVO is acquiring an advanced gold project in a highly prospective gold field. Resolute produced 613k oz between 1989 and 1999 before changing its focus to Africa. Only 25k oz were produced from one small underground mine. Previous work targeted mostly shallow deposits and AVO hope to revitalize the project with drill testing of the underground potential of several existing near-surface resources. With St Ives to the north and Norseman to the south, Higginsville is located between two world class gold producing gold fields.

Recent high-grade underground discovery at Higginsville gives AVO a head start: Following a WMC drill hole near the Poseidon South open pit at Higginsville, Gold Fields defined a high-grade underground resource of 390kt @ 7.6g/t. Not only is it open to the north and south, only one direction of veins has been targeted and modeled. Opportunities exist for AVO to drill-test for these extensions. Several gold treatment plants are within economic hauling distance giving AVO toll treatment options.

Goldfield Ltd a major shareholder: With Goldfield Ltd as a 19.9% shareholder, AVO has a very good strategic partner with a very significant gold operation within trucking distance.

Encouraging results from Mt Fisher gold project: The Mt Fisher Gold Project, located in the Mt Fisher Greenstone Belt (east of Wiluna), shows promise to host economic mineralisation following high-grade drill results released during the March quarter (5m @ 35.4g/t and 3m @ 27.5 g/t). Although continuity is yet to be established, there is hope that further drilling will allow AVO to formulate a geological model of the high-grade lode.

Drill testing of Jimberlana dyke project: AVO has a large ground holding along the Jimberlana dyke. Although an excellent target for nickel mineralisation, the first round of drilling by AVO did not return economic nickel sulphide intersections. Further EM work this quarter will help delineate additional targets for drill testing later in the year.

Olympic Copper-Gold Province drill results pending: Drilling of copper-gold targets in South Australia is ongoing this year and results should allow AVO to make a decision on the future of this project.

Management very experienced in the region: Rohan Williams (Managing Director), as former Chief Geologist at both St Ives and Norseman, is very experienced in this region and an asset to AVO as they commence exploration and development at Higginsville.