I found this today from Minesite.com Minesite.com September 30, 2008 Times May Be Tough, But The Tough Team At Focus Minerals Are Steaming Ahead By Our Man in Oz There’s nothing new about Focus Minerals, and in a market shell-shocked by the antics of 20-something rocket scientists trying (and failing) to run investment funds, that’s actually a compliment. The mines, and the management, at this small Australian gold and nickel explorer, have seen tough times and know exactly how to survive and prosper. Back to basics is one way of describing the Focus formula. Preserving cash and growing from internally-generated funds is another. Whatever terminology is used Focus is an explorer/producer from the old school: first snatch a strong land position, then produce gold at low cost, and then use the proceeds to expand gold output. In the meantime the company will work up a matching nickel strategy. Two assets lie at the heart of Focus. The historic Coolgardie goldfield which has been a prolific producer since 1893, and the Nepean nickel mine which has close parallels to the nearby, and better-known Flying Fox and Miitel mines of Western Areas and Mincor. In the case of both Coolgardie and Nepean Focus is re-visiting mining areas with proven track records that are crying out for the application of modern exploration tools, and deeper drilling. Nepean will be tested later this year with a series of deep holes to locate ore below a barren pegmatite intrusion which stopped mining there more than 20 years ago. Coolgardie will also see deeper drilling in what appears to be a re-run of the Avoca example at nearby Higginsville. Higginsville is frequently named as Australia’s first “new” gold mine for years, but is actually a prime example of how drilling deeper can pay handsome dividends. Focus chief executive, Peter Williams, says the key features of the company are that it has “tremendous exploration potential” and that it is also in a cash positive position and would be “funding all future projects from cash flow”. At a time when banks are frozen solid and equity investors nervous, that is an encouraging sales pitch. More encouraging is the project pipeline that Williams proposes to work up, which includes the potential to prove that Coolgardie is one large gold system and not a series of independent mines, and that Nepean holds large-scale mineralisation at depth. It’s the Coolgardie gold vision, a result of Focus being the first company to have sole title to the area, and the potential to “join the dots” left by older miners, which prompts Minesite's Man in Oz to ask whether Williams is trying to do there what was done at Kalgoorlie 20 years ago. “I’m not going to say it,” is his reply. “Say what?” asks Minesite’s Man, knowing perfectly well that the magic word is “superpit”. Williams shudders at the suggestion, but anyone who knows the Eastern Goldfields region of Western Australia is familiar with the way Kalgoorlie, just 40 kilometres up the highway, has a similar history to Coolgardie with multiple owners, multiple pits and no cohesive approach to creating a single big mine until the 1980s. Currently, Focus has one operating mine at Coolgardie, called Perseverance. Production re-started there in April and a second mine is currently being brought on line. The target is to be producing between 80,000 and 100,000 ounces a year within three years. But, to best understand what Focus is doing at Coolgardie it’s best to stand back and look from a great height, say from a passing satellite. It’s from far above Coolgardie that you see a long line of old gold workings with one seven kilometre stretch running from the Tindals mine to Lindsays, and incorporating the Perseverance, Brilliant and Bayleys mine areas.“None of those areas have ever been in a single set of hands before,” Williams says. “We have the chance to systematically explore what could become a world-class mining centre.” After your trip into space to see the vast surface area controlled by Focus, it’s time to go underground, but to also stand back. This time, the illustration that best shows the message from Williams is that which shows the amount of diamond drilling along that seven kilometre section. Parts are like a pin-cushion. Others almost devoid of drilling. But the real message is that only a handful of holes have gone beyond the 200 metre level. “The future of Coolgardie lies at depth,” Williams tells Minesite on the fringe of a mining investment conference at the Royal Pines Golf Resort on Queensland’s Gold Coast (note to editor: this is not a hardship posting). It’s at this moment that Williams breaks out a biro and starts to draw a semi-circle on an area of a map which shows the potential for the project to become a large open-pit development, and that the word “superpit” springs into the conversation, complete with Williams’ refusal to say the word. “What we have at Coolgardie is a series of lodes, not a series of separate mines,” Williams says, choosing his words carefully. If consolidating Coolgardie is the primary attraction to Focus for gold investors, then Nepean is the nickel cherry on the company cake. Discovered and worked by the old Metals Exploration in the late 1960s, Nepean was a nickel mine slightly off centre from the famous line of mines developed by Western Mining Corporation to the south of Kambalda, and now operated by Mincor. Remnant ore remains in the mine, which produced 32,303 tonnes of nickel in its earlier life. Focus has conducted trial mining to test the remnants, but the real values might lie under the pegmatite which stopped Metals Ex in its tracks at a time when the nickel price was in one of its doldrum periods. “We can see a series of high priority exploration targets at depth and along a 30 kilometre line of strike,” Williams says. The first test of those theories should come in November when the company starts sinking the first of four 1000-metre deep diamond drill holes. There are two other points for investors who might show an interest in an emerging gold and nickel producer. The first is that Focus will be a very conservatively run company, a point exemplified by work at another old Coolgardie gold mine called The Mount. Worked by a lone miner for many years The Mount routinely made the same owner around A$1 million a year. As the new owner Focus is keen to find a way to expand production, but knows that the geology is tricky, containing as it does some 25 parallel gold lodes grading up to 10 grams a tonne, narrow and beautifully suited to a few men with picks. The Focus plan is to stand back and drive a three metre by three metre drive directly across the lodes. “That way we get a really good look at the lodes and the exercise pays for itself because we will mine the lodes as we cross them,” says Williams. “We estimate that we’ll recover A$1.5 million in gold from a A$1 million exploration project.” Waste not, want not. The second point takes us back to the beginning and the remark that there’s nothing new about Focus. The Coolgardie and Nepean mining examples are part of the “old is new” story, but so is management. A man who describes himself as a simple miner, Williams actually has a lifetime of hands-on experience at mines as diverse as Bougainville Copper, Tom Price iron ore and Peak Hill gold. “I actually retired a few years ago, but this opportunity is too good to refuse,” says Williams who turned 62 today on Tuesday. His fellow directors are also getting on. Phil Lockyer has more than 40 years of mining experience, and the executive chairman, Don Taig, served 11 years with Rio Tinto’s Australian predecessor, CRA as well as being a director of Metals Exploration. Times might be tough, but this is when the tough steam ahead.
FML Price at posting:
2.8¢ Sentiment: Buy Disclosure: Held
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