IT’S time for the junior resources sector to have its regular three-monthly check-up and we found the pulse, but it’s beating a little erratically.
A tiptoe through the quarterly reports mayhem last week suggests that plausible stories can still raise money while others are doing it tough. But there is also evidence that companies, faced with a challenging market, are sharpening their strategies.
So it’s probably past due for Pure Speculation to mention a few companies not noticed of late by this column.
Realm Resources (RRP) has a thermal-coal project in Indonesia ready to roll but the problem is that the seaborne steaming-coal business is rather oversupplied at present. So the company has switched strategies and is looking to the fast-growing Indonesian power sector for customers.
Also making a fist of coal, at a time when it is one of the least- liked mineral commodities, is Intra Energy Corp (IEC),which operates mines in Tanzania and Malawi. While still not in profit, the company is pursuing markets in neighbouring countries, with Kenya and Zambia taking output. IEC also hopes to supply a new power station in Malawi. But Walkabout Resources (WKT) has a few transport hurdles before it can exploit seven billion tonnes of coal in Botswana. Either it will have to wait until Botswana and Namibia act on their deal to build a rail line from the coalfields to Walvis Bay for exporting coal, or the company will have to help lay a spur line to connect with existing track to thE South African market.
Meanwhile, both Fitzroy Resources (FRY) and County Coal (CCJ) are exhibiting determination in their quests to become North American coal producers. A fair bit of thinking has also been going at Radar Iron (RAD) at a time when iron ore is in a dip. Radar has bought the Yerrecoin project in Western Australia which, importantly, is close to an existing railway line. Radar believes that, with the depletion of high-grade direct-shipping ore, global demand for high-grade magnetite concentrate will increase substantially. It is going to begin small, which keeps the capital cost low, but with the option of scaling up to meet demand. And, with iron ore prices now below $US100 a tonne, you would certainly feel fairly pleased to have a production cost of $US26/tonne, which is the case with Amex Resources (AXZ) and its Mba Delta iron-sands project in Fiji.
With project financing secure, design work of its port facility completed, the quarterly reminds us that all of the first year’s output, and two-thirds of iron-sands for the next nine years, have been spoken for. Exploring in France within reach of major cities (one hour to Paris from the nearest station to one project) and all those cafes is a hell of a job, but someone’s got to do it. And Variscan Mines (VAR) — the former Platsearch — is just the company for the task. Its quarterly report outlines progress on gold projects in France. We were staggered to learn from VAR’s website that France, once an important producer of lead-silver-zinc, gold and uranium, has not had a significant operating mine since 2002 and large parts of the country’s mineral provinces are largely unexplored. VAR also has a portfolio in five other Australian juniors worth $3.8 million.
VAR has a market cap of $7m. But the quarterlies also reminded us that some juniors are on Struggle Street. Siburan Resources (SBU) had $284,000 left on June 30 but, having sold its antimony-gold project in New Zealand, the company is back to grassroots exploration in WA (with all the lack of excitement that brings with it). Many shareholders in Magnum Gas & Power (MPE) sat on their hands during a recent entitlement issue of $1.3m, handing over just $114,620. Clearly its Botswana coal-seam gas story needs a tweak. And Indonesian explorer Krakatoa Resources (KTA) ended the quarter with $62,000 left. And so on to the “I’ll show myself out” section.
Utah coal play New Horizon Coal (NHO) says it will consider projects “in all business sectors”, Lawson Gold (LSN) will look at “other sector investments” and Dempsey Resources (DMI) is reviewing “opportunities in other sectors”, while Nemex Resources (NXR) has already made the leap, buying into an online mobile security business. Finally, who said miners don’t care for fauna? 3D Resources (DDD) has deferred drilling at its Tatu coal project on New Zealand’s North Island so as not to cause local farmers any problems during the lambing season starting now and finishing in October. Pots of potash MINING in the old German Democratic Republic East Germany, as it was known — was run as badly as the communist state’s economy as a whole. Because the country did not have sufficient hard currency to import needed metals, and also because the Soviets just took what they wanted (uranium particularly), mines operated with little regard to making a profit. The result after reunification was that many couldn’t compete, especially with low metal prices in the early 1990s, and so closed. Now Potash West (PWN) is planning to revive one of the GDR’s old potash operations, taking a 55 per cent stake in a mine that closed in 1992. PWN sees its West Australian deposit as supplying Australia and Asia and aims to break into the European market with its new acquisition. Europe tends to be overlooked when discussions occur about future potash supplies but Germany is a significant producer, with global player K+S operating six mines. Back in 1925, Germany and France dominated the industry, supplying 96.5 per cent of the world’s potash needs (and the French only had a look-in because they had acquired some German potash-producing areas due to border adjustments after the Great War). The old East Germany has been attracting attention of late as companies pick up shuttered projects containing tin, rare earths and other key minerals. China is, of course, a huge potash market. High yields of rice require potash application, yet 80 per cent of China’s arable land is potash-deficient. No doubt this connection had occurred to Hong Kong’s Kam Lung Investment, as it has just ploughed $1.85m into South Boulder Mines (STB) which has an advanced project in Eritrea. [email protected] No investment advice is implied and investors should seek professional guidance. The writer does not own shares in any company mentioned.
WKT Price at posting:
0.5¢ Sentiment: Buy Disclosure: Held
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