foundation day report

What a great day for Allegiance Mining! The unveiling of the Foundation Stone symbolically marked the transition from being a nickel explorer to being a nickel producer, although processing of ore won’t begin till 3rd quarter next year as we all know.

Those of you who have only recently discovered AGM may not appreciate the hard struggle that went on to get to this stage. Ive held shares in AGM for almost seven years and until I attended this function I had no idea how difficult it was. They spoke of the year 2002 as being the “black year” when despite all the good drilling results the share price went down to 0.03c. At the time, for me the drop in price was disappointing, but I did buy more shares at the time (I didn’t tell my wife) because Id done enough research to know they were on to something. And that belief is what kept them going.

Finances were so tight they couldn’t afford to put a decent access road into the drilling sites and the drillers had to walk in after heavy rain. The rigs were helicoptered in and out- far cheaper than a series of roads.

But I gained an appreciation that those involved with the project in the early days had real guts, and have every reason to be proud of their achievements.

I came away from the unveiling knowing that the guys involved will get this project up and going- properly and profitably. The company have hand picked the best personnel in the country for the project- that’s a strong impression I got.

The Chairman of Jinchuan was in attendance with a group of engineers and geologists. They got to look through the mine but not us mere shareholders- all we got to see was the site for the processing plant. Work was progressing flat out on the tailings dam which has to be blasted out of a flat low lying area, about a dozen assorted heavy machines were working in the area. The rock was being dumped to raise up an area for the processing plant.

None of the Chinese present could speak English so all the speeches had to be interpereted. The chairman of Jinchuan made one significant comment which I found interesting. He had just returned from a conference of mining/ metal company heads in China sponsored by the Chinese Government. The purpose of the conference was to prepare the mining/ smelting industry for the next step in Chinas development, which was to improve the living standard of the 900 million peasants in rural areas. Apparently infrastructure development throughout rural China on a MASSIVE scale is about to begin. State owned companies, like Jinchuan must play their part (for the good of the country) and would have to revise their production targets.

Jinchuan has a small city in Ganshu province on the edge of the Gobi desert devoted to nickel production, employing 80000 people (from memory). They are doubling production by 2008 by building a new production line. They are very keen to find news sources of nickel ore to smelter. (China was a net exporter of nickel ore until 2000- but export of nickel and some other ores were made illegal last month).

AGM Chairman Tony Howland-Rose emphasised in his speech that he believed that nickel prices would “remain stronger for longer” than many of the doomsday “experts” were suggesting . Given his track record I don’t think his comments can be easily dismissed.

Ian Levy showed us the usual slide comparing nickel mining at Kambalda WA to Avebury, and said that the slide spoke for itself in reguard to the potential profitability of the Avebury mine. He also emphasised that the average 1% nickel contained in the ore was around the industry standard wordwide, and that it was inaccurate to describe the deposits as “low grade”.

All shareholders present got a free green hat with “Avebury Mine- Foundation Day December 2006” printed on it, looks like it would make a good fishing hat, but Ill keep mine as a memento. We got a free lunch too.

The announcement that Barminco was the successful mining tenderer was a surprise, as was the fact that they would start mining on Dec 7th (to build a stockpile for processing and to extend the decline about 5km round the orebodies). Barminco is local company formed by miners (ex Rennison mine I think), and were described as very experienced and competent.

I asked around about the rumour of a Zinifex or Jinchuan takeover of AGM. All I spoke to thought there was nothing in either suggestion. Hope that’s right because AGM will make us some big dollars- Im very confident in that now.