six bagger in the next six months if ...

GIP could easily go up six-fold in six months if what they are now putting together gets completed on schedule. Here are some reasons why:

(1) GIP more than quadrupled on 22/1/2002, mainly due to an afternoon announcement about its tantalum reserves equating to 2,000,000 ozs of gold http://www.gippslandltd.com.au/articles/art220102b.html . The company claimed, with good reason, it could become the world's second biggest producer of tantalum. The announcement so stunned the incredulous market and bulletin board punters ("it's a scam" versus "it's worth $4.00 per share") that the ASX queried the company, asking for evidence from drilling results etc. GIP responded with detailed results www.gippslandltd.com.au/announcements/documents/asx020220.pdf including data from geologists from four countries over several decades, having already pointed out that relatively new mining techniques and generally better prices now made the deposit quite valuable. Despite the quality of progress made since then www.miningnews.net/storyview.asp?storyid=16128 and the increases in reserves of tantalum and feldspar in particular (the deposit was open at depth, having not been drilled below 150 m as at 3/10/2001 www.gippslandltd.com.au/announcements/index.html ), the stock has drifted down to less than 20 % of what it reached in January last year and is not even traded most days. The recent bull market in penny dreadful mining stocks has passed it by thus far and discussion about it is almost non-existent. For a deposit equating to two million ozs of gold, GIP's market cap. of under five million dollars in the current environment seems ridiculously low. This seems even better value than my much favoured GTP two years ago.

(2) Many stocks have long term cycles and GIP appears to be one. There has been a significant spike approximately once every two years for the last decade. The next one is due around January http://finance.yahoo.com/q?s=GIP.AX&d=c&t=5y&l=on&z=b&q=l , by which time the BFS (bankable feasibility study www.lycopodium.com.au/article.asp?CategoryID=3&TopicID=11 ) should have been released in full and January is the month that is traditionally best for penny dreadfuls. This particular BFS promises to be more significant than most for several reasons, including (a) pre-release results are extraordinary www.gippslandltd.com.au/announcements/documents/ASX%20030415.pdf , with a pay back in under three years, NPV (net present value) up to 50 times the market cap. (N.B. 50:50 partnership with the Egyptian Government), two decade mine life etc (b) the BFS will include pilot plant results from processing 40 tonnes of ore which have already been brought back to Australia (c) contract negotiations with interested customers are being delayed until after the BFS results, in an attempt to enhance the value of potential contracts (after all, customers in this industry tend to look for stable and long term suppliers).

(3) Along with the BFS there should be an EIS environmental impact statement). All indications so far are that the project is unusually good for a mine in that sense too, not to mention its generally excellent location and almost ridiculous ease of access www.gippslandltd.com.au/PictureGallery/AbuDabbab6.html . The deposit is mainly in the form of a hill in a hilly area in a rocky desert region which is out of the way and yet reasonably handy to a highway, major water source, sea port www.gippslandltd.com.au/announcements/documents/asx011003.html , air port, tourism, former mines etc www.goredsea.com/EN_gomaps.aspx . There will be unusually little waste www.gippslandltd.com.au/projects/02.07.29.pdf , especially given even the quartz and tin could be sold (not just the more valuable tantalum and feldspar) and any tailings dams will be in a stable, barren area largely devoid of wildlife and potentially contaminated water courses. As for overall location, there are no world class tantalum mines operating in Europe at the moment and it's handy to Italy if a significant feldspar contract is gained.

(4) A lot could go wrong with such a project, but as time goes by, the signs are looking better and confidence levels are increasing. The company has by necessity been run on a tight budget, so is not strong in that sense, but it has been able to go to the market for a small placement from time to time, as it did quite recently. Management appear to be keen to keep any costs and share dilutions low and are on track to continue that process if and when the mine is developed, with next year now looking very likely, having acquired the stake in 1999. Part of the reason for the current disinterest in the stock may be that punters remember the almost fanciful yarns associated with Wired City in early 2000, when many struggling mining companies were going dot com to draw attention to themselves and raise some funds. Another reason may be that the company has been mucking around for many years, taking up interests in one small mining operation after another and not getting very far and such histories don't go down well with investors who've been around a while. This time, however, things look quite different. Cross checking www.egsma.gov.eg/investiment.html has essentially come up trumps and the main director is adamant the company has backers to keep it on track for what needs to be done. Meanwhile, there have been rumours for years about alternatives to high priced tantalum, but so far nothing has turned and while the lease from the Egyptian Government can never be absolutely guaranteed, it's most unlikely to be ever be taken away, as long as project milestones continue to be met.

(5) There have been no GIP sales of note in the past year. The main company director owns a significant proportion of the shares and continues to buy on market from time to time. There also don't appear to be any obvious and significant bank etc stock holdings just waiting for a chance to be dumped - a big trap for the unwary for a great many stocks in 2001 in particular. Finance for the project's main stage is an issue, but apparently should be quite easy to obtain and probably on unusually good terms for the company and share holders because of the exceptional projected returns and the Government partner. Whatever the case, the main speculative run up in such stocks tends to occur before such issues are finalised.

(6) GIP could certainly become the world's second biggest tantalum producer, but that doesn't mean it will maintain its position, although anything's possible given more drilling could be done, the grade is high (especially for the feldspar component), radioactivity levels are low and current indications are that other operations which might one day take second place have significant issues and / or start up funding problems at the moment (mainly in Brazil, Saudi Arabia and Australia). Australia is the main source of tantalum at the moment, with SGW leading the way with particularly its high grading Wodgina deposit which SGW will be concentrating on in future, instead of its better known Greenbushes mine. In the 80's and 90's, Brazil and even Thailand were major suppliers of tantalum, mainly through by-products of tin mining, but operations continue to be wound down. New mining methods, generally increasing demand from countries like China and new applications associated with mobile phones, playstations, medical instruments and aerospace technologies www.tanb.org/tantalum1.html have seen some new mines being opened and sought with tantalum as the main focus eg. TAA , but cost-effective tantalum operations are still rare. Demand went over the top in 2000 and then almost collapsed, centring around the tragic Coltan story www.miningnews.net/storyview.asp?storyid=11878 as African national parks and animal populations were decimated http://amsterdam.nettime.org/Lists-Archives/nettime-l-0206/msg00012.html in the mad rush to build up scarce stocks, regardless of where it came from and who benefited from it. Measures are being taken to help ensure only "legitimate" supplies are obtained in future www.commerceresources.com/s/AboutTantalum.asp .

(7) GIP's deposit is arguably more about feldspar (for ceramics and optics) than anything else www.gippslandltd.com.au/articles/art010203.html and the project is apparently viable on that basis alone, provided a customer can be signed up. Much of it is of significantly superior quality to what the Turks are supplying to the Italians and the better grading material may be worth as much as five times what the BFS has assumed it could be sold for. The tin and quartz GIP has will be easier to sell on the open market.

(8) Tantalum was declared a strategic resource by the U.S. Government a half century ago. Since then the price has appreciated more than any other commodity with a gain of over 1,000 % www.e-mj.com/ar/mining_tantalum_embroiled_world even after the collapse in prices from 2000. Contract prices are hard to determine www.metalprices.com in what is a closed market, but spot prices as low as U.S. $25-30 / lb have been bandied about in recent years www.commerceresources.com/s/MarketPrice.asp? while Platts Metals Week www.platts.com/marketing/newsletters/metalsweek.shtml recently quoted U.S. $ 40-50, indicating an improving market for producers. GIP estimates tantalum processing costs of U.S. $5 / lb and the project is apparently viable at U.S. $30. The mine is potentially the lowest cost operation in the world.

For these reasons and more, I could see the stock going up six fold in six months. The company is currently capitalised at under $5 million, yet is looking to start up a project with a net present value of a quarter billion dollars and a projected full pay off in under three years in a tax free partnership.