minesite article

May 29, 2008

AIM Resources Under Surveillance By Google Earth


By Rob Davies



The Internet is a marvellous invention and few parts of it are more impressive that Google Earth. This facility lets you zoom in on any part of the globe to see exactly what is on the ground. It could be anything from your neighbour’s garden shed to keeping an eye on developments at a remote mine site you’ve invested in. And that’s exactly what hedge fund North Sound did last year to check on progress at the Perkoa zinc mine in Burkina Faso owned by AIM Resources. The hedge fund was and is an investor in AIM and was a bit miffed that it couldn’t see much progress at the mine despite the fact that some directors had awarded themselves some bonuses on the basis of starting mining. That was the start of the argument between the two parties which ultimately led to the resignation of Mark Flory as managing director of AIM Resources. But in fact, as chief geologist Derek Pang pointed out, Google Earth photographs are not always bang up to date.
The real problem for AIM was that unusually heavy rain immediately following completion of the boxcut in June 2007 flooded it so deeply that a decision was made to delay commencement of the decline until after the end of the rainy season. In the event the company also decided to shotcrete the walls of the boxcut to prevent similar problems in the future. So work on the decline eventually started in April this year, about eight months later than planned.

In the intervening period though, the company experienced much bigger problems with the technical report that was supposed to accompany a listing on the TSX and a C$25 million fund raising. The principle errors were related to cell referencing in Excel spreadsheets, but had the effect of raising questions about the whole report and eventually the listing and fundraising were put on hold. Part of the reason these problems came to light was the arrival of Scot Lowe last November as chief operating officer. As his job title might suggest, he started out by reviewing all aspects of the operation.

Since then a new independent technical report has been commissioned from SRK and in the course of executing that some fundamental questions were raised about the mine plan, or more precisely, about the mining rate. Consequently, it was decided to increase the mining rate from 45,000 tonnes per month to 60,000 tonnes. While this reduces the mine life from twelve to ten years it does increase the NPV. But Derek Pang and his team are now drilling an extension of the orebody at depth to delineate further reserves. He’s pleased to report that five of the six holes have hit mineralisation and assay results are pending. A VTEM survey has also been executed to determine new targets and the results are due in the next four to six weeks.

These recent developments now present a more favourable context in which the company can raise the additional funds required to finish the construction of the mine. Most importantly, the new SRK independent technical report, which is to NI 43-101 standards is key to reassuring investors about the viability of the project and represents the backbone to ongoing discussions with financiers.

And, while all the focus has recently been on Perkoa, Derek and his colleagues have been running a two rig programme at Mumbwa in Zambia where the company is in joint venture with BHP Billiton. Here again assay results are due. Turnaround times in South African labs have been deemed too slow and the analysis is now being done in Alaska. While it has been a tough year for the company, and the share price confirms that, it does now seem that the building blocks are in place to get AIM Resources back on track. But a market capitalisation of A$105m is not exactly pricing in very high expectations.

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