- pierpont article

Given the recent interest in GIP I'm surprised no-one has posted today's pierpont article. Hope Trevor doesn't mind me posting it here. Cheers John

AFR Friday 27th August 2004


Seeking Lara and King Tut's gold

2004/08/27



For the past week the Pierponts have been enjoying a leisured cruise down the Nile.

Your correspondent lolled by the starboard rail, puffing a duty-free Cohiba Lancero and sipping gin and tonic while Mrs Pierpont became transformed into Lara Croft, tomb raider.

Mrs Pierpont has never forgiven herself for refusing Pierpont's offer to buy her a genuine ancient gold necklace studded with lapis lazuli back in the days when it was legal to trade in such antiquities. She spent last week trying to get even by haggling with bazaar merchants in the hope that if she wore them down far enough they might produce a few legitimate articles looted from the Valley of the Nobles.

(If Lara Croft exists, incidentally, she lives in a flea-bitten mud-brick village called Qurnah which is built right on the nobles' tombs. The inhabitants of the village have been systematically finding and looting tombs for the past five centuries. And Pierpont has sad news for teenagers smitten by Lara's pneumatic charms. The local Laras your correspondent saw at Qurnah were wearing the full chador and look - so far as Pierpont could tell - as though they have figures like sacks of potatoes.)

This train of thought led Pierpont to wonder over his fifth - or it may have been his sixth - Plymouth gin whatever happened to Egyptian gold. After all, Egypt must have been littered with the stuff in the good old days.

When Howard Carter opened Tutankhamen's tomb in 1922, he discovered the boy king had been buried in a series of shrines and coffins, rather like Russian dolls. The innermost coffin was solid gold, weighing 110 kilograms. And there were plenty of other gold artefacts scattered around the tomb as well. Today, few corpses apart from Bill Gates's could afford that sort of funeral gesture.

Under the New Kingdom, the Egyptians plundered gold from the Libyans, Hittites, Nubians and other nations they conquered, but the Old Kingdom tombs also contained gold, so the pharaohs must have discovered a few ounces in Egypt as well.

The chaps at Gippsland Ltd have been thinking along the same lines. Two months ago, Gippsland announced that it had been granted the rights to explore eight gold areas and one copper-nickel area in the Wadi Allaqi area.

Wadi Allaqi is in the southernmost corner of Egypt, running between Lake Nasser (created by the Aswan High Dam in 1971) and the Sudanese border.

Gippsland reckons there are 19known gold occurrences in the area, which were mined superficially by the ancient Egyptians and Romans. If Gippsland finds any gold there, it will be mined in a joint venture 50 per cent owned by the Egyptian Geological Survey Authority.

Conceptually, Pierpont has no problems with Gippsland's approach. Egypt is a place where there must have been gold once, but nobody has been mining it or even looking for it much since Tutankhamen, so it has to be a good spot to go exploring.

There will be problems with sand cover, of course. Apart from the delta and a mile or so each side of the Nile, there doesn't seem to be a blade of grass in the entire country. The rest is rock and sand so bare that it makes the Simpson Desert look lush. But modern exploration techniques can sometimes overcome sand cover, so Egypt would have to be considered as having potential for gold.

Gippsland's big play in Egypt is in tantalum. Tantalum is used to make steels with high melting points and high strength. It is used in aircraft and missiles and, because it is inert, tantalum is used as a liner for nuclear reactors. Tantalum oxide makes special glass with a high index of refraction for camera lenses.

Pierpont suspects that the amount of tantalum mined by Tutankhamen and his crew was pretty close to nil. The ancient Egyptians worshipped a big nuclear reactor called the sun, but didn't have to provide lining for it.

They were stuck with bronze swords because nobody had discovered steel then, and their standard missile was the arrow, which is very little improved by the application of tantalum. There are heaps of camera lenses around the Valley of the Kings today, but that is a recent phenomenon.

Gippsland has a half interest, with the Egyptian government, in a tantalite deposit at Abu Dabbab, in the Central Eastern Desert between the Nile and the Red Sea. Based on previous survey work by Italians, Gippsland reckons Abu Dabbab contained 29 million pounds of tantalum pentoxide.

The company has signed offtake agreements with two buyers to take 420,000 pounds of Tantalum pentoxide a year. Gippsland coyly refrained from naming the buyers but said they were among the top eight tantalum companies in the world.

One excited reader has told Pierpont the directors are increasingly confident that Abu Dabbab has the potential to become the world's largest and lowest-cost tantalum producer.

He also compared Australia's major tantalum producer, Sons of Gwalia, to Gippsland, saying that Sons of Gwalia's costs were up to 10times those of Gippsland.

This excitement has yet to be discerned in Gippsland's share price. As Pierpont writes, Gippsland shares are 8.2¢ and have been at that level for the past year. That capitalises the company at $11.5million, which seems rather low for the world's largest tantalum producer.

Pierpont's guess is that the punters are weary of waiting for Gippsland's long-promised bank feasibility study (BFS). A BFS is a detailed study showing the capital and operating cost of a project, together with the returns it will generate.

Until a project has a BFS signed off by some reputable party, no sane bank will lend a cent on it and the major investors won't touch it.

Gippsland acquired its half interest in Abu Dabbab in September 2001, nearly three years ago. Abu Dabbab had been explored in "great detail" (Gippsland's words) by Russians during the 1970s and by Italians in the early 1990s.

It was the Russians who estimated the 29 million-pound figure in categories that correspond to today's indicated and inferred resource estimates under the JORC code.

In September 2001, Gippsland said that because of the quality and detail of the extensive past exploration work, it was expected that the project would "quickly move to the preparation of a bankable feasibility study".

The BFS would be greatly aided by a feasibility study undertaken by the Italians in 1992, Gippsland said.

Three years later, Gippsland has still not produced its BFS.

In March 2002, Lycopodium Pty Ltd was appointed to undertake the BFS.

At the end of 2002, Gippsland raised $470,000 in a rights issue to fund the BFS. In July 2003, it made a $700,000 placement, primarily to finance the BFS.

In its half-year report to December 2003, Gippsland said the BFS had begun on the project and was expected to be completed by June 30, 2004.

This all seems rather slow to Pierpont. If the Italian feasibility study had given Gippsland such a flying start, it should have completed its own BFS a year ago.

The BFS was not completed by June 30. In May, Gippsland said it was expected to be completed by mid-July. On July 30, Gippsland said it was expected to be completed by mid-August.

If Pierpont were a Gippsland shareholder, he might have started wondering by now just why the Russians or the Italians didn't proceed with the world's greatest tantalum mine. They did a lot of work on it.

According to Gippsland, the exploration programs were "most thorough" and included detailed mapping, sampling, drilling, trenching and the construction of four adits totalling 736 metres, as well as comprehensive metallurgical test work.

Odd then, that they dropped Abu Dabbab and let Gippsland pick up this treasure trove. But Pierpont is feeling charitable this week and prefers to believe that Gippsland has absorbed too much Egyptian culture, where the pharaohs ruled for more than 3000 years and Cheops took 30 of them just to build one pyramid.

In all that time, the Nile has always flowed steadily northwards and the peasants on its banks still live in the same mud-brick huts they always did, except that they now have television aerials.

Operating in a country that measures its history in millennia, Gippsland is naturally taking a relaxed attitude to a mere year or so.

Mrs Pierpont showed more speed. The souk Arabs proved no match for a girl who trained in the Place Vendome and Rodeo Drive, and she has emerged with a splendid gold bracelet and aquamarine ring. They're modern (you get thrown into jail for buying antiquities these days) but the right price.