re: Ann: FURTHER EXCELLENT DRILLING RESULTS F... "Had a closer...

re: Ann: FURTHER EXCELLENT DRILLING RESULTS F... "Had a closer look and at the risk of upsetting the faithful, my thoughts are as follows. I don't usually do this because I stand at a hiding to nothing but as PP asked nicely you got it."

Appreciate the effort 2ic. Its a mistake to be too faithful to any stock imo, so skepticism is welcome (hotcopperites generally seem to have become more interested and tolerant of dissenting opinions if they are thoughtful).

As you point out the size of the resource hinges on your view of what an economically recoverable cut-off grade may be. My back of an envelope calculation for resource size was many times higher than yours but assuming lower cut-offs.

Using Au equivalents is a handy short-cut as they're familiar but the correlation between gold and the PGM metals seems to be in terminal decline so perhaps they ought to be treated individually. For many years platinum traded at almost a fixed premium to gold of about 1.8:1 (see chart below). Currently Pt is undervalued relative to that "normal" ratio but to me the long term fundamentals are very different and the ratio may not only correct, but move higher. By moving the economic cut-off grade down say another 20%, your resource size will no doubt increase substantially and your view on the economics of underground mining may also.

Platinum is not only far more scarce (less than 5% of gold reserves and production) but largely consumed in industrial applications, rather than conserved as bullion like gold. The likely longer term outcome is that its price will need to rise enough to allow the mining of lower grade deposits. In addition the geographic concentration of deposits in South Africa (80-90% of global reserves) adds plenty of scope for short to medium term supply shocks (evidenced by the spike in the chart in early 2008 where the ratio went close to 2.5:1) and supply issues are likely to increase the marginal cost of production. Perhaps platinum will correct to something like this ratio in a more stable economy - or perhaps just do its own thing from here on. Intuitively I would rather have a resource of the equivalent size and grade PGM, than gold no matter the current prices.

Given the commodity price volatility, a better way to evaluate TBN may be to compare it to other recent discoveries and see how it ranks. Unfortunately not so easy because there very few (particularly ASX listed) and there are obvious differences in the other factors affecting the economics. I give a lot of weight to the Anglo investment, they are experts in PGM and they were happy to invest on the basis of geological evidence at the time rather than the blue sky that has opened up from recent surveys. No doubt they would have been aware that the funds were to be primarily spent defining the existing resource and, as the chart shows, it was not an especially bullish time for platinum. Another attraction for Anglo may be that the deposit is not in South Africa, with its electricity supply problems, potential for strikes and civil strife. It will certainly make it more appealing to financiers and investors than a similar project in Africa.

I thought Blythefan may have lobbed an opinion by now - just noticed he's been temporarily suspended. Oh well, when he returns I'm sure..