Anglo Australian May Be A Tiddler, But It Has The Potential To Follow Big Brother Troy.
By Our Man In Oz
There comes a time when we are all tempted to say: “I told you so”. Minesite is no exception, though emphasis is put on the fact that it is not a share tipster. In this case there is also the time factor as it was over three years ago that we suggested investors take a gander at a small Australian explorer with a grand name- Anglo Australian Resources - which has no connection whatsoever with the somewhat larger Anglo American PLC (£34 billion v A$37 million). Size, as the actress said to the bishop, is not an issue when it comes to a winning investment, and over the past few weeks Anglo Australian has spectacularly outperformed Anglo American. The big boy of South African mining has risen by about 10 per cent as rumours of its dismemberment swirl around the once grand dame of Johannesburg. Across the pond , Indian Ocean version, the small boy of Australian mining has risen by 200 per cent.
Comparisons of the great and glorious with an upstart that hasn’t a headline to its name is a little unfair though, when it comes to making a quid in the mining market size, of the lumbering variety, can be an impediment. Anglo Australian, for readers who can cast their memories back to Minesite’s first report on January 20, 2003, is a classic penny dreadful on the move, for the best of reasons. It has a goldmine – and a possible base metals mine to follow – and it has an admirable pedigree (by Australian standards, anyway).
Conceived in 1986 by John Jones, of Troy Resources fame, Anglo Australian spent the first 20 years of its life in the dog-house, partly because Jones was busy building Troy, and partly because the market for small explorers was rubbish. That started to change three years ago, though largely in the mind of Jones who would regularly suggest to anyone who listened in London and Oz that the second miner in his stable, Anglo Australian, was going to perform – at some time. Minesite never lost faith in Jones, or his second-string stock, though it has been a bit of a wait.
Yesterday, as Jones was preparing to jet his way back to his home-from-home in Australia’s gold capital, Kalgoorlie, Minesite’s Man in Oz found him deep in a bowl of soup in the Qantas Club at Perth’s domestic airport. “I told you it would come good,” he muttered through crouton or two. “I was signing off on the first production report, and asked if the grades were right.” What caught Jones’ eye was the astonishing disparity between what had been expected from Anglo Australians firstn and very small goldmine, and the reconciliation from the toll treatment mill – a difference of 51 per cent – on the positive side of the ledger. Before going any further with the life, times and soup-eating habits of the man they call Jonesy, a snapshot of what Anglo Australian has been up to – and a heads up alert along the lines of “we told you so” .
Anglo’s little goldmine is called Mandilla and is located about 70kms south of Kalgoorlie, and 20kms east of the nickel-mining centre of Kambalda. Previous explorers, including WMC, have kicked the rocks around Mandilla, but couldn’t see much to get excited about what is essentially a paleochannel (ancient water course) with some bedrock sniffs. Anglo Australian shareholders can. Last Friday the company lodged its first production report. But, before Minesite goes through the numbers all readers must promise not to laugh, because if you do you may miss a company-starting event. The first parcel of ore delivered to the toll-treating mill was predicted to be 10,656 tonnes at a grade of 9.17 grams a tonne of gold, for a recovery of 3,142 ounces. The actual results were 8,451 tonnes delivered at a grade of 17.68g/t for 4,755oz – less tonnes for more gold. Better still, on October 4, Anglo Australian sold its first 4,221ozs at A$775 in order to collect a cheque for A$3.3 million.
Mandilla, by any measure is a tiddler. BUT, it’s a start. After 20 years in the wilderness Anglo Australian can finally tell the world it has a mine, it has cash flow, it is ready to grow. Jones, the father of a multitude of Biblical proportions, well, almost half a cricket team anyway, speaks of Anglo Australian as the prodigal company. At long last, it has succeeded.
Celebratory soup aside, now come the hard yards. Cash flow from Mandilla’s paleochannel will not last long. Within nine months the rich, and easy-to-treat, ore should have been mined out in a 20-metre deep pit. In theory, and assuming the reconciliated ore remains 51 per cent above the predicted reserve model, Anglo Australian will generate around A$27 million in revenue, a not insubstantial number for a business capitalised, at its freshly inflated price of A7.4 cents, at A$35 million.
For investors satisfied with the way the Australian mining world works revenue from Mandilla is the equivalent of cash in the kitty that will now be applied to growing the business. First point of attack is to find (a) more paleochannel ore, or (b) the bedrock ore which generated the paleo material. Drilling has revealed some high grade intercepts, including 4metres at 105.1g/t and 5metres at 8g/t. In theory, the company says, there is “a new, very high-grade zone, 85metres below surface”. More drilling is planned.
The “take-away” message, as the young chaps in the city like to say these days, is that Anglo Australian is about to enjoy nine months of fame and fortune. Cash flow will be re-invested in Mandilla, a number of other properties, and the long-dormant Koongie Park project which has for 30 years tantalised with its copper, lead, zinc, gold and silver assays. Perhaps a project in the making, perhaps not. That decision is up to Jones and his crew at Anglo Australian. But, for long-term followers of the Qantas Club soup eater there is a certain sense of déjà vu about this baby of the family because it is exactly how Troy started – first by crawling, then by walking. Just remember what Troy did to a small mine in Brazil. ------------------------------------------------ The Editor has a beneficial interest in Anglo Australian shares
AAR Price at posting:
0.0¢ Sentiment: None Disclosure: Held
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