cyl rogues next big one also

Ok this is the other one I love at the moment, 16mil shares on issue, $3mil in bank will start drilling on the 31/10/06 a 20 hole drill program for Molybdenum, they also are exposed to Copper, Gold, Uranium at he same target.

What really interest me was Warrick Gregor taking the tIMe to put out a report on this (read below), warrick is wel known in the industry & people listen when he reccomends, im targeting .50+ to start & if they hit the goods $1+ will be easily reached, 1-4month play also if your set by the 10-11-06 you are entitled to buy options at .01 for a 1option for every 2 shares you own.

Im not set as Im trying to free up so cash, had to reveal these before they start gaining momentum

DYOR


FAR EAST CAPITAL LIMITED
Suite 24, Level 6, 259 Clarence Street
SYDNEY NSW AUSTRALIA 2000
Tel : +61-2-92470077 Fax : +61-2-92470044
Email : [email protected]
www.fareastcapital.com.au
AFSLicence No. 253003 A.C.N. 068 838 193
6 October, 2006 Analyst: Warwick Grigor
This research report is provided in good faith from sources believed to be accurate and reliable. Far East Capital Ltd directors and
employees do not accept liability for the results of any action taken on the basis of the information provided or for any errors or omissions
contained therein. 1
OZEQUITIES
COMMENTARY
On Presentation
The Mining Investment Experts
Catalyst Metals Ltd (“CYL”)
“A New Molybdenum Story on Its First Public Outing”
Recent IPO Flew High, then Fell
CYL was a recent IPO, listing on 26 July 2006, after
raising $3.2m at 20¢ a share. The stock initially came
on strongly, peaking at 35¢, but since then a steady
slide has taken the price back to the IPO level of 20¢.
We first looked at the Company’s lead project, Minnie
Springs, in 2005 when the private owner was
considering joint venture proposals and options for
advancing the prospect. At the time it certainly
appeared to be one with merit, and good upside when
compared to another molybdenum project – Spinifex
Ridge (Moly Mines). The ability to raise funds in the
IPO has given Mark Thompson, the original holder of
the licence and now the CEO, an opportunity to
demonstrate what he believes he has on the table
Simple, One Project Company
CYL comes across as a single purpose company; one
that aims to prove and develop a major molybdenum
resource. As such it give investors a clear and focused
alternative to the general purpose junior exploration
stock.
Classic Molybdenum in Porphyry
Without getting bogged down in geology, we can
described the Minnie Springs discovery as being part
of a classic porphyry system which give rise to large
tonnage potential; the known dimensions of the
system are 5 km x 2 km. This is in contrast to the
narrower skarn-type of mineralisation, which a
number of other Australian companies are looking to
develop, frequently containing molybdenum and
tungsten (scheelite).
Although there is potential for in excess of 100 mill.
tonnes within the system, CYL is aiming to confirm a
figure of only 7-10 mill. tonnes in the first instance,
then building on this figure. This would be sufficient
for a 5-7 year mine life at a rate of 1.5 mtpa. At the
expected grade of 0.1% Mo, this would give an in-situ
resource of 7-10,000 t (15-22 mill. lb) of
molybdenum. The economic significance of this can
be compared to that of a million ounce gold deposit,
at US$600/oz.
Quick to Prove Up A Resource
To prove up a resource of the 7-10 mt size is not an
expensive exercise due to the 100m width of the
mineralisation. It would only need a 300m strike
length to a depth of 100m. The first 20 RC drill holes
are about to commence, with a pattern of holes on
lines spaced 50m apart.
We would expect that CYL will seek to double this
initial resource prior to committing to any sort of
feasibility study or development plan.
Comparison with Others
Minnie Springs has a number of advantages when
compared with Spinifex Ridge, the most obviously
similar project in Australia.
Moly Mines describes Spinifex Ridge as “world
class”. Indeed, it is a substantial orebody with a
Measured and Indicated Resource of 469 mill. tonnes
at 0.06% molybdenum and 0.01% Cu. It is planning
for a 15 mtpa operation for at least 20 years, with a
capital cost of $600m (US$466m). It could produce
21 mill. lbs of Mo and 8,500 tpa Cu, in separate
concentrates. Cash operating costs would be
US$4.50/lb (pre copper credits).
In contrast, CYL is much more modest in its
expectations. A 1.5 mpta plant for a simple
crush/grind/float operation might cost in the order of
$70m, with mining fleet and infrastructure adding
another $50m (but this is really guesswork).
The grade at Minnie Springs would be much higher
(0.1% versus 0.06%), but there would be no copper
credits. However, early drilling, which returned a 64m
intercept at 0.09% Mo, also included widths of 24m at
0.14% Mo. This suggests that there could be a high
grading option if necessary.
The Company believes that the assaying techniques
were defective when the first drill holes were analysed
and has suggested that we could see up to a 20%
improvement in grade. This could be interesting.
Minnie Springs virtually outcrops so the waste to ore
ratio would be almost nothing for the first few years,
whereas Spinifex Ridge is expecting 1.4:1. This
sounds low, but it is still a sizeable tonnage to move
each year (21 mill tonnes).
Even though Minnie Springs is modest in size, to
begin with, the system is sufficiently large that it
could fit Spinifex Ridge into it three times over. Thus,
there is nothing modest about the potential size.
Metallurgy Not Expected to Be A Problem
At this point there is nothing adverse known about the
metallurgy of the ore. To the contrary it seems as if
the large flat grains are well suited to the flotation
process, suggesting recovery rates to concentrates in
the order of 85-90%.
Molybdenum Price
The molybdenum price has, like just about every
other commodity, been the beneficiary of the
enormous appetite for raw materials in China. From a
Far East Capital Ltd/OzEquities Junior Resource Company Comment
This research report is provided in good faith from sources believed to be accurate and reliable. Far East Capital Ltd directors and employees
do not accept liability for the results of any action taken on the basis of the information provided or for any errors or omissions contained
therein. 2
price of below US$5/lb in 2003/04, the molybdenum
price peaked at US$40/lb in mid 2005, before falling
to US$23/lb in 2006. It is currently sitting at about
US$27/lb, still well ahead of the US$11.93/lb average
for the past 10 years. Stocks of molybdenum have
been reported to be at their lowest levels for 14 years
Molybdenum Production – World Profile
In 2005, the world production was 389 mill. lbs. High
grade mines (0.2%) in North America contributed
38% of this while lower grade Mo/Cu mines in South
America, with grades 0.01-0.03% contributed another
36%.
Rhenium – An Ultra-Exotic Co-Product?
You will be excused for ignorance on this one, as I
hadn’t heard of it before today. Apparently it is a very
rare metal that is used in catalysts. It sells for US$32/g
(gold is $19/g).
Rhenium is believed to be tied up in the molybdenum
grain at Minnie Springs at a grade of 1 gpt. CYL
might be looking at production of 1.3 mill grams p.a.,
which would have a gold equivalent value of about
70,000 oz p.a. We are not aware of what payment
terms would be, as it would report to concentrates
with the molybdenum, but is could be very significant
as a co-product.
The Bottom Line
Investors usually gloss over when given a specialty
metal company to look at, for anything more exotic
than gold is usually put in the too hard basket as there
is a shortage of comparisons with other companies.
This could change as the knowledge of the mining
sector improves.
CYL is a very tightly capitalised company with only
23 million shares on issue, giving a tiny market
capitalisation of $5.5m, backed by just under $3m in
cash; but remember that there are four million shares
in each of Class A and Class B, which will vest upon
share price performance measures or the proving of
minimum size resources in gold equivalent terms
(share price over 50¢ and 75¢ for 30 days, resources
of 150,000 oz and 225,000 oz). While this is designed
to give incentive and a level of comfort to
shareholders, it seems reasonable to assume these
hurdles will be met so there will be 32 mill. shares on
issue, giving a market capitalisation of $7.7m. At this
price CYL can be regarded as an “option” on the
molybdenum price.
A 1 for 2 option issue has been announced, costing 1¢
and exerciseable at 20¢ by December 2008. The
shares go ex-entitlement to the issue on 10 November,
so there is a little “bonus” there for shareholders at
present.
It wouldn’t take much buying, inspired perhaps by
some good results, to make the stock perform. The
tight capitalisation is a double-edged sword however.
The Company needs to deliver at the end of the day, if
it is going to satisfy serious investors.
Geologically the Company seems to have to goods. A
substantially higher share price can be expected as the
work program is undertaken and the number become
clearer. However, it is an early stage project that is
unlikely to benefit from the recent high point in the
price cycle (like most other prospective molybdenum
producers). This means that it will have to look better
than its competitors if it is going to get up and running
at some later date.
In the interim, the share price will also be affected by
the performance of other near development companies
such as Moly Mines. It will experience collateral
benefit if Moly Mines is successful as CYL will be
seen as an earlier stage play and the confidence could
well rub off onto its share price. However, there could
also be collateral damage if Moly Mines disappoints
shareholders. (The impact on the rest of the lateritic
nickel hopefuls was very apparent when Anaconda
Nickel stumbled, and almost fell).
The table below is incomplete due to unavailability of
information, but it gives an idea of molybdenum
projects out there
Contact OZEQUITIES NEWSLETTER “Australia’s Most
Comprehensive Daily Digest of Equities News”, at
[email protected]. Tel: +613 97485033. Warwick
Grigor is a director of Far East Capital Ltd, an ASIC
Licensed research and investment firm. He and his
associates have a material interest in the securities of
Company Ltd, being shareholders. This report provides
information of a general nature and it does not contain a
recommendation, express or implied, to deal in the
securities mentioned herein. A professional investment
advisor should be consulted before acting on the contents
of this note. Copyright © Far East Capital Ltd 2006
Project Company Location Capex Plant Grade Cash Costs Strip Forecast % World First
US$m Size % Mo US$/lb Ratio Prod'n Supply Prod'n
mtpa Mill lb Mo
Davidson Blue Pearl Mining Canada 50 0.7 0.29% $8.00 u/g 5 1.3% 2008
Lucky Ship New Cantech Canada ? 1.8 0.09% ? ? 5 1.3% 2009
Malmbjerg International Moly Greenland ? ? ? ? 22 5.7% 2010
Minnie Springs Catalyst Australia ? 1.5 0.09% ? ? 5 1.3% ?
Mt Hope Idaho General Nevada, USA ? 14 $3.40 ? 30 7.7% 2009
Ruby Creek Adanac Moly Canada 320 7 0.06% ? 0.95:1 8 2.1% 2008
Spinifex Ridge Moly Mines Australia 450 15 0.06% $4.50 1.4:1 20 5.1% 2008