I feel a bit guilty about not reporting back from the VRE...

I feel a bit guilty about not reporting back from the VRE meeting of a week or two ago. I’ve been a bit distracted to say the least.
This info below has largely been in the public domain for some time but there may be some points that are worth repeating.

The Carnilya project.
The original operation closed in 1998 when the price of nickel dropped to $US2.00 and the operation was no longer economic. That figure brings the current gloom of a 'depressed' price of $US12.4556 into perspective.
As the previous operation was a joint venture neither party was prepared to advance further capital for exploration – especially with the lack of profits. As a result there had been no exploratory drilling deeper than 300m when View purchased the mine in 2003. The management were confident a sizeable resource was there to be found and fortunately their first exploratory drill produced a positive result. Like most of the nickel mines in Kambalda this ore body was at such a depth that they were faced with raising a large sum for further testing or, find a joint venture partner who was prepared to quickly advance the project – hence the arrangement with Mincor. Tim Gooch emphasised the great relationship they have with MCR and what a good operator they are.
You’ve no doubt seen the diagrams of the main ore body and the discovery of a separate channel – TG is confident this will continue at depth so we can expect reserve upgrades.
As I’ve also got a small holding in IGO I’ve been searching background info about nickel ore bodies – to make sense of 'channels' etc. Came across the following PDF file. [PDF] *Issue 4FINAL-working17
(damn it! I can't make that PDF address into a link on this site)

I expect that once the Carnilya operation becomes cash flow positive (mid 2008) we’ll hear of a move to underground drilling. With IGO I often read postings critical of the size of their known resource (too small to bother with). Having attended all their meetings here in Perth I’ve come to understand how such a resourceful company can continue to keep a steady 24+ month programme of rolling reserves once they understand the ore body (and almost instinctively where to exploratory drill ahead of the current operations).
One of the things that attracted me to this management is their attention to keeping costs down. While the present ore body may continue to greater depths we were assured that both companies are aware of the importance of grades. With an average incline of 1 in 7, a mine face 1000 metres below surface makes for a 7km expensive haul.
These first weeks of the operation will be restoring the incline down to the first ore.
Total costs are expected to be $A6.50 ($A5.00 cash costs before admin. costs, environmental bonds, tax etc.) Friday’s nickel price in Aus dollars $15.07.

Bronzewing
Everyone investing in explorers in transition to becoming operating miners will have heard repeatedly how difficult this is. If there’s a history of those difficulties imagine how hard it now is with W.A. having a 3.3 unemployment figure. At Bronzewing WRE is somewhat fortunate in having top class facilities – not only the processing plant but more importantly in these labour shortage times, an excellent accommodation complex. When Joe Gutnick set this mine up after paying Mark Creasy $100m for the tenement he then spent another $100m on plant and accommodation blocks. (VRE paid $9m)
In answer to my question about the difficulties in attracting a new workforce TG admitted that it had been hard but the winning factors were the knowledge of top quality living quarters and the fact that this is a small operation – an acknowledgement that workers welfare is paramount on such a site.
As I mentioned previously, I was attracted to this company when hearing of their concern in reducing operating/start-up costs and limiting their exposure to unexpected blowouts. Having a fixed cost of diesel and downside protection with the gold price seemed an eminently sensible policy when starting up a mine. I was also pleased to learn that the management team have had previous experience in mine start-ups.
I had also asked what the company intended doing to with the excess plant capacity on site. Evidently there are a number of small explorers within a 50km arc of the Bronzewing site. Although the company has been focused on ramping up to full production by the end of this quarter they have also been in talks with some of these small operators – both their approach and a VRE approach to these discussions. With small resources there is little likelihood that they could profitably establish their own crushing plants and hence the interest in VRE’s over capacity. Joint ventures are probably their only way ahead.
Finally, we heard once again the usual ambition of a mining company wanting become a mid tier operation. As the managing director pointed out unless a miner has critical mass it is difficult to survive in the longer term. You need size for fund raising, to attract publicity and to become attractive to a skilled workforce.
Hope some of that gives more confidence in WRE’s future share price movements.
James.