Good to see some discussion on this one. I bought a while back...

Good to see some discussion on this one. I bought a while back following a friend’s recommendation and have bought more since. Seems like easy money on offer but, of course, its all in the figures that we’re looking at here.

Rosco suggested comparing with King Island Scheelite so I’ve just had a look into that.

An KIS investor presentation back in December talks about a Geopeko estimate potential for approx. 14 mill. tones @ 1.0% WO3. Their pre-FS in Dec.04 was based on 4.1 mt (measured) @ .91% and they’re talking about 400K tpa production over 10 yr mine life at this stage with the larger ore potential able to stretch it even further.

QOL’s figures are only 400K at present (half measured/indicated and half inferred) with potential to increase that to 2-3 mt. Certainly not in the league yet of KIS although QOL’s is shallow depth (60m) so will be low cost mining. Also production is planned for early 2007 so well able to take advantage of current high spot prices for tungsten.

Capex for QOL’s initial production plans of 100K tpa is estimated at a measly $8.5m – I guess subject to verification in the FS to come out in April or thereabouts. Estimate of $14m annual net cash flow so payback of capex in approx. 6 mnths.

KIS production is also due to commence in early 07. Capex is estimated at $25m with payback over 2-5 yrs depending on WO3 price. I gather they’re using US$75 commodity price which is low on current spot prices (over US$200mtu) but maybe understandable given long term nature of their project. Some suggestion of long term price around $100-120mtu.

According to CommSec, KIS market cap. is $35m based on 25m shares approx. but the December presentation states 52.7m shares fully diluted following recent share placement, etc. so at last price of $1.40 that would be a market cap. of $73.8m.

QOL’s market cap. is currently $7.6m based on 44.8m shares. I think there’s about 5m options. Bear in mind they’ve also got about $3.2m in cash. Annual cash flow of $14m makes for a good return in the beginning but the key will be proving up further reserves. Still they’ve got the cash to do it.

Of course, haven’t even mentioned QOL's copper project yet.

Anyway, its getting late and I can’t be bothered with this anymore at this time of night. Guess I’d have to say that QOL looks like good value to me based on low share price (offset too by cash held). Reasonable cash flow not too far away but the key will be in extending the reserve and increasing mine life.

Cheers, Hal