juniors learn about life the hard way

from Pure Speculation in today's Australian

Robin Bromby | March 31, 2008

LIFE can be heart-breaking at times in the junior resources sector. There are the disappointing assays, the scramble to get workers and equipment, the grovelling to brokers and bankers for support and, when times get tough, your investors start dumping stock which causes your share price to fall and that makes it even harder to raise money.And then there are the deals that seem poised to deliver a company-maker but slip through the fingers at the last moment.

Please welcome Republic Gold (RAU). Last year, the company had its Bolivian gold hopes dashed and is now pursuing its former Canadian partner in that project through the courts.

In the meantime, it has turned to its Australian projects with particular focus on tungsten and gold in Queensland. Tungsten is a must-have metal these days, and is one of the fashionable things to be in. Republic Gold was certainly very anxious to expand those interests and started negotiations with the owner of the old Mount Carbine mine northwest of Cairns -- owned by Mt Carbine Quarries and its boss Geoff Nicholson.

The Mount Carbine mine was Australia's largest producer of tungsten until the market collapsed in the 1980s (thanks to those world citizens in China flooding the planet with the metal when they needed some foreign exchange quick smart).

Republic Gold spent eight months investigating the project, including parting with cash for diamond drilling. On the basis of this, Republic offered Nicholson a $14 million deal -- of that, about $12 million was a mix of cash and shares (Republic has $9 million in the bank) and the remainder as a 1 per cent royalty over the 10 years the mine is expected to be in existence (which was estimated by Republic at $1.7 million).

Throughout the prolonged negotiations, the deal under discussion was Republic offering to buy the entire operation -- quarrying included.

After this had gone on for eight months, Nicholson suddenly told the Republic people in late January that there was no deal.

But on Friday, eight weeks after Republic had been given the flick, the quarry boss accepted an offer from junior Icon Resources (III) which involves 3.5 million Icon shares (worth $665,000 at Friday's close) and a 2.5 per cent gross royalty. Nicholson is to keep his quarrying business with Icon buying only the rights to the tungsten. No cash is involved at this stage.

That would have been difficult because Icon, unlike Republic, does not have $9 million in the bank. At December 31, it had cash of $1.38 million after spending $901,000 in the December quarter. No money has been raised since, and chairman John Bishop is aware of the fact that more money will have to be acquired in the coming months. However, he is trying to avoid being forced into a discounted placement price, something that would cheese off existing shareholders.

Icon at least has some good grasp of what this project entails, an important factor given the nuggety nature of the mineralisation. One of its directors, Andy White, was part of the management team when the mine was in operation.

We were anxious to find the reasons for Nicholson's sudden change of mind, and turning down a good dollop of cash in hand, but he didn't return our calls.