one to watch in 2011, page-195

Very nice write up on GLF...all you need to know!! Read the last two paragraphs.. might explain the recent move UP!!

January 19, 2011

Gulf Industrials Is Achieving Growing Success With Vermiculite And Limestone In East Africa, And Is Now Widening Its Range
By Charles Wyatt



It makes a welcome change to be writing about a company which is targeting industrial minerals for use in enhancing agricultural food production, in manufacturing industrial goods and in specialist and chemical processes, instead of the usual metals and minerals. Last year the Namekara vermiculite mine in Uganda, now owned and operated by ASX-listed Gulf Industrials following its acquisition from Rio Tinto in 2009, came into production. And for those who do not know, vermiculite is the mineralogical name given to hydrated laminar magnesium-aluminum-iron silicate. When subjected to heat vermiculite has the unusual property of exfoliating, as a result of the mechanical separation of the layers by the rapid conversion of contained water to steam. Its aeration properties combined with its water holding capacity are essential to the agricultural and horticultural industries, and it is also manufactured into pressed boards, and used for insulation, fire protection and in light weight concrete.
Investors clearly took a shine to the company in December when the shares nearly doubled to A5 cents following the announcement that Jonah Capital was going to invest around A$2 million in the company. Sir Sam has since joined the board and taken over as chairman. In the meantime, Mike Brook of African Lion 3 has invested a further A$500,000, taking African Lion?s holding up to 18.9 per cent. Mike Brook has long been remembered fondly by Minews since both attended a seminar in Paris some years ago when representatives of JB Were suddenly decided that journalists were not welcome. Mike had been an analyst with Were before becoming a fund manager with Lion Selection, so knew the politics and simply offered Minews a seat next to him. Anyway, the presence of these two institutions and their representatives on the board have convinced investors that Gulf Industrials is serious about its operations in East Africa.

The Namekara mine is close the Kenyan border and has good access to the port of Mombasa. In 2009 an independent review of the project was commissioned from SRK, and this confirmed that the project contains a JORC inferred resource of 54.9 million tonnes at 26.7% vermiculite in the +180 micron fraction, and 18.8% vermiculite in the +425 micron fraction. This resource calculation has a surface extent of one kilometre by one kilometre, which covers the existing location of existing mine, but additional exploration work indicates that it is a lot bigger. Indeed it?s possibly that the Namekara vermiculite resource might turn out to be one of the largest in the world. The deposit extends from near surface to a depth of between 45 metres and 55 metres, and is excavated using off-the-shelf mechanical excavating equipment in a standard shallow open pit operation. Mining is therefore pretty simple and cheap, and the re-commissioning of the processing plant has gone smoothly, with industrial minerals specialist Dupr? contributing US$1 million for additional facilities to accelerate the production ramp-up. In return, Dupr? gets a 25 year sales and marketing contract for all vermiculite production from Namekara.

The mine life is expected to be around 50 years, and Vic Fitzmaurice, the chief executive who is based in South Africa, intends to increase capacity from the current 15,000 tonnes per annum to 35,000 tonnes in the next two years. Based on current market conditions and expectations, he is also currently reviewing the feasibility of increasing output to over 100,000 tonnes per annum within the next five years. Sales should be no problem, as Dupr? will provide expert market and product support and provide dedicated sales and distribution staff experienced within the vermiculite market. There is a significant shortfall in Europe and no other producers can produce medium and large flakes in any quantity, only fines, so Namekara should merit a premium.

Still, Namekara isn?t the only asset that Gulf has on the go, as Vic points out. The Soalara limestone deposit in Madagascar, which was acquired recently, is also showing plenty of promise. This deposit, currently the subject of an ongoing feasibility study, has a chemical composition suitable for application in the cement, mineral processing and fertiliser industries and covers an area of 12.5 square kilometres in the southwest of Madagascar. Internal conceptual and scoping studies model an initial two million tonnes per annum operation, with targeted revenue of US$28 million per annum, and ramping up to a five million tonnes per annum operation over a further two years with targeted revenue of US$70 million per annum.




Discussions are in progress to secure the rights to an adjacent tenement which also covers a substantial limestone deposit, as both have the advantage of being close to a port. Ultimately Soalara could be developed into a world class limestone, lime and cement exporting project, so Gulf Industrials has arranged strategic alliances with companies expert in these operations. Talks have started with the operator of a nickel laterite project also in Madagascar which will need 1.7 million tonnes of limestone for 40 years, and with an Indian steel group which is interested in buying two million tonnes for 50 years, so there is plenty of demand. Construction should start within the next year.

In the meantime, Gulf Industrials is also seeking rights for gypsum and graphite projects in Madagascar. It already has an exploration licence in Kenya over the Mwingi prospect where it will be exploring for base and precious metals, mineral sands, rare earth elements and uranium. This takes it wider than its original targets which were vermiculite, phosphates, gypsum, lime, salts, lithium and borates, but the successes with Namekara and Soalara have bred confidence and Vic Fitzmaurice is now looking for partners to explore for any base metals, iron ore and gold in his company?s licence areas. He emphasises, however, that the original reasons for getting involved in industrial minerals still hold good, namely that they are vital commodities with a wide range of uses, and that demand is consistent and long term, governed by offtake agreements. Looks an awful lot safer and more profitable than one of these rare earth stories.