Wednesday, 30 November 2011

Continental Coal valued at greater than double share price by GMP Securities

Continental Coal (ASX: CCC) has been valued at up to $0.56 per share, well over double the company’s current trading price of $0.19, by GMP Securities.

The investment dealer maintained its ‘buy’ rating on Continental  and increased its price target from $0.52 after the company released the preliminary draft Bankable Feasibility Study for its De Wittekrans Coal Project.

When in operation the project is expected to produce over 0.8 million tonnes of export sales, over 1.7 million tonnes of domestic sales, and annual EBITDA in excess of  US$50 million.

The following is an excerpt from GMP’s report.

De Wittekrans BFS – value accretive
Adding 3.6Mtpa of ROM coal production
Continental Coal reported initial results from a draft Bankable Feasibility Study (BFS) for its De Wittekrans project with plans to produce 3.6Mtpa of ROM coal for 33 years, yielding c.1.7Mtpa of domestic coal and 0.8Mtpa of export coal at a cost of c.US$55/t of export coal. The study suggests an initial capex of US$219m of which US$60m can be saved by using existing infrastructure and US$107m for underground development is to be incurred after one year of operation.

Including De Wittekrans DCF to our model
We have included the DCF valuation for the project in our model assuming the start of open cast mining in FY/15 and underground mining in FY/17. We have assumed a slow ramp up of the project to target 3.6Mtpa of ROM production in 2019. Our assumptions accounts for a 15% increase in operating costs from current forecasts and we also assume a 15% capex overrun. Taking a 12% discount rate (as very early stage) our valuation for the project stands at A$229m and we apply a further risk discount of 75% on this to arrive to our final value of A$57m for the project.

Funding an issue but can be manageable
We realise that the estimated capex of US$219m could be difficult to source but we also note that US$107m of this is for underground development which is required to be spent in the second year of operation and it can further save up to US$60m by using existing infrastructure or by using Build Own Operate Manage contractors. Therefore the company would require only US$52m in first two years of development which we believe can be managed by a combination of debt and cash flows.

PT raised to A¢56 (36p); maintaining BUY rating
We value Continental Coal using a SotP valuation based on DCFs for its operations and the Penumbra and the De Wittekrans projects and EV/resource multiples for its other development projects. On inclusion of the DCF value for the De Wittekrans project our per share value has increased to A¢56/sh vs A¢52.30/sh earlier and we increase our price target to A¢56/sh (GBp 36/sh). We maintain our Buy rating.

Continental Coal reported the results of a draft BFS for its De Wittekrans project on 28 November 2011:

• The initial study suggests a 33 year mine life with an annual ROM capacity of 3.6Mt yielding 1.7Mtpa of domestic quality coal and 0.8Mtpa of export quality coal. It plans to start production with opencast mining at 100Ktpm capacity for 5 years and start developing the underground mine after one year of opencast operation. The underground mine is expected to have a life of c.31 years.
• It forecasts operating costs of ZAR140/t of ROM coal and expects a further ZAR153/t of rail and port costs for the export product.
• The capital costs for the project is expected to be c.US$219m out of which:
o US$51m surface infrastructure
o US$21m railway siding and other offsite infrastructure
o US$40m coal wash plant and
o US$107m underground mine development
• The company is in discussion with consultants to reduce capital costs by:
o Using an existing wash plant and rail siding facility in the proximity of the project (can save up to US$60m) or
o Use of contractors to complete the construction of the wash plant under a Build-Own-Operate-Manage system to save US$40m.


We have modelled the De Wittekrans project on a DCF basis:

- Assuming the project to start production in FY/15 with an initial production of 720Ktpa increasing to 3.6Mt in 2019.
- On our assumptions, we have provided for a 15% increasing in operating costs vs company’s current forecasts.
- We have assumed a 15% contingency on the guided capex to account for unexpected cost overruns.
- We are assuming a 12% WACC to discount the project as it is in very early stage of development.

On the basis of above assumptions the value of the project stands at A$229m. However we apply a further 75% risk discount on it to arrive to our final value of A$57m for the project. We apply the risk discount to account for funding uncertainties and other development risks.

The project was earlier valued on an EV/Resource multiple basis using a multiple of US$0.2/t deriving a value of A$25m.

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Gold One International: accepting shareholders to receive cash offer on 23 December

Gold One International (ASX: GDO, JSE: GDO) has provided an update on the A$0.55 cash offer from a Chinese consortium.

BCX Gold, which is the special purpose vehicle formed by the consortium, has confirmed that shareholders who validly accept the share takeover offer for Gold One shares by Wednesday 7 December - will be paid consideration on Friday 23 December.

The board of Gold One reaffirms its recommendation that shareholders who wish to realise, in whole or in part, their investment in Gold One for cash accept the offer in the absence of a superior proposal.

The offer reviewed

The offer comprises a series of interdependent transactions, including the cash offer and a minimum A$150 million capital injection into Gold One.

The Chinese consortium is seeking to become the major shareholder and long term strategic partner of Gold One targeting a minimum 60% stake, with the cash injection providing a major boost to the development of the company.

Gold One positioned to exceed 120,000 gold ounces in 2011

In news from earlier in the week, Gold One continues to ramp up gold production from the company's Modder East operations in South Africa, and is poised to overtake the 2011 targets in the next few weeks.

Gold One targeted 120,000 gold ounces to be produced during 2011, with the company already pouring 113,569 ounces, with Modder East well positioned for 2012 production to be even stronger. December quarter production up until Friday 25 November was 23,742 ounces.

Gold One also has its annual budgeting cycle for the Modder East Operations underway, allowing the company to then deliver a comprehensive production update and guidance for 2012 at the beginning of the new year.

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Phoenix Gold: gold treatment grade exceeds expectations, additional cash flow to be generated

Phoenix Gold (ASX: PXG) has recently evolved into a cash flow generating gold explorer, with the company delivering some more good news to the market in that the treatment grade of a recent ore agreement beat expectations by 35% to be 1.65 grams per tonne (g/t).

The ore agreement was with the nearby FMR Investments using ore from Phoenix's nearby Catherwood Mine, using ore stockpiled above ground.

Under the agreement Phoenix delivered an ore parcel to the mill and paid a toll treatment charge on a $A per tonne basis, with the processing circuit configured under the direction of the company's management to enable optimal conditions to achieve maximum recoveries and minimise costs.

Where the story gets even more interesting for Phoenix is that the company will seek to treat the remaining 25,000 tonnes of stockpiled ore in early 2012, which will generate additional cash flows for the company.

Providing another plus to Phoenix besides the cash flow, the treatment of ore also provided valuable metallurgical information, and has confirmed the gold recovery values used in the Catherwood Feasibility Study and project evaluation announced in August 2011.

This study demonstrated robust economics with a mine design producing 313,600 tonnes at 2.6g/t of gold for 27,000 ounces. Catherwood is projected to deliver $15.6 million in free cash flow at a A$1,500 per ounce gold price.

Additional cash flow generating agreements

The FMR agreement follows a deal with Kalgoorlie Mining Company (ASX: KMC) for the treatment of up to 300,000 tonnes per annum of Phoenix ore through the Bullant processing facility, which is forecast to be operational in mid-2012.

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Azure Minerals welcomes new non-executive chairman, Peter Ingram

Azure Minerals (ASX: AZS) has appointed Peter Ingram as non-executive chairman, while Tony Rovira has stepped down as chairman to focus on his role as managing director.

Ingram brings more than 40 years of experience in Australian mining and exploration and was previously managing director of Universal Resources, before its merger with Vulcan Resources. He is now a non-executive director of the merged entity, Altona Minerals.

Other previous roles include managing director of Metana Minerals, Eastmet and Australia Oriental Minerals, and a founding councillor of the Association of Mining and Exploration Companies.

Meanwhile, after retiring by rotation at Azure’s annual general meeting, John Saleeba decided not to seek re-election.

Saleeba is looking to reduce his workload and focus on his family as he moves towards retirement.

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Polymetals Mining: working its magic at Mt Boppy gold mine

Polymetals Mining (ASX:PLY), while just listed in May 2011, has over 25 years of track record of delivering profitable resource projects, including White Dam gold mine in South Australia.
Now Polymetals is fast tracking the Mt Boppy Gold Mine into production and has moved a step closer today to the recommencement of mining operations with the lodgement of the Development Application and Environmental Impact Statement with the New South Wales Government.

The company is in the process of completing a Feasibility Study, which is scheduled to be finalised in early 2012.

Importantly, necessary plant and infrastructure are already in place at Mt Boppy, meaning Polymetals will require minimal capital for refurbishment and start-up.

The company is aiming to begin gold production within eight months of approvals being granted and the recommencement of mining.

The Mt Boppy Gold Mine has historically produced around 500,000 ounces of gold, with about 67,000 ounces of that produced by Polymetals in the mid-2000s.

The mine has a current Measured Resource of 30,000 tonnes at 5 grams per tonne (g/t) of gold, an Indicated Resource of 240,000 tonnes at 3.8g/t and an Inferred Resource of 365,000 tonnes at 4.6g/t for 87,000 ounces of gold.

Polymetals has completed infill drilling to upgrade the resource, with a new resource assessment underway. The company’s A$6 million fully-funded Canbelego Exploration Program is targeting an extension and upgrade to the resource to extend the life of the mine.

White Dam Success

Polymetals is already producing from the White Dam Gold Mine in South Australia in joint venture with Exco Resources (ASX: EXS).

The mine went from the start of construction to first gold production in just 31 weeks. The company has a 25% interest and is operator of the mine, which has been in production since April 2010.

Total production for the 2011 financial year was 87,400 ounces, which was 30% better than expected. A further 19,400 ounces was produced to the end of October.

To put the cash return into perspective, Polymetals cash costs were $450 per ounce and the average gold price received was $1,280 per ounce. That’s a return of almost three times is cash costs.


Polymetals has around $21.3 million cash in the bank with no debt. Cash reserves increased by $2.5 million during the September quarter as production from the White Dam Gold Project continued to fund the company’s corporate overheads and build cash reserves.

Polymetals also banked a further $2.5 million from the sale of its Boorara Project to MacPhersons Reward Gold (ASX: MRP).

ASX Listing

Polymetals witnessed a good start to public life when it hit the ASX boards in early May after a successful IPO which offered 7 million shares at $1 to raise up to $7 million.

The company holds 932 square kilometres of land in two of Australia’s major mineral provinces, including:

- Canbelego (NSW) - 204 square kilometres of tenements with more than 20 exploration targets and the Mt Boppy Gold Mine which has Measured and Indicated Resources; and

- Drew Hill (SA) - 728 square kilometres of tenements with more than 20 exploration targets and the White Dam Gold Mine which has potential for project expansion.

Polymetals excels at bringing projects into production fast (Mt Boppy) and extending mine life (White Dam) and increasing reserves as well as operating in the lowest percentile ranking in cash costs (fifth lowest at White Dam).
In 2011, Polymetals logged these returns:
- EBITDA of $15.9m
- Net profit after tax of $8.4m
- Net cash flow of $13.5m

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Allied Healthcare Group: Broker places "Speculative Buy," $0.10 price target

Allied Healthcare Group (ASX: AHZ) is the subject of a broker research report which has placed a Speculative Buy recommendation and a price target of $0.10 per share on the stock.

An extract of the report is below.

Company data

Recommendation: Spec Buy
Price: $0.035
Target (12 months): $0.10 (previously $0.18)
Enterprise value: $21.5 million
Market cap: $22.5 million
Issued capital: 643.4 million
Free float: 100%
Avg. daily vol. (52wk): 0.65 million
12 month price range: $0.026-$0.095

Upside in DNA vaccines and soft tissue repair

Tissue engineering technology that works

Over the last six years Allied Healthcare (bioMD until July 2011), has successfully demonstrated that its ADAPT technology can work well in a variety of soft tissue repair situations.

This opens up the potential for the technology to displace existing synthetic products used in soft tissue repair. Around US$700m a year gets spent in the US on soft tissue repair procedures such as heart valve replacement, hernia surgery, and pelvic floor reconstruction.

We rate highly Allied Healthcare’s chances of addressing these markets. Studies on the use of ADAPT in tissue heart valves are ongoing.

Professor Ian Frazer’s Next Big Thing

The 2011 merger of bioMD with Allied Medical brought into the listed company a major investment in Coridon, which is developing a new generation DNA vaccine.

The Coridon technology is being worked on in the laboratory of Professor Ian Frazer, famous as the inventor of Merck & Co’s Gardasil cervical cancer vaccine.

Coridon’s lead candidate is a vaccine for HSV-2, the virus which causes genital herpes. It will go to the clinic sometime in the next twelve months.

Meanwhile pre-clinical work is being undertaken on an Epstein-Barr Virus vaccine, potentially useful in the treatment/prevention of lymphomas and head-and-neck cancers. In addition, the work may contribute to a prophylactic vaccine against glandular fever.

High risk / High return

Teams around the world have been at work on DNA vaccines for a long time. Ian Frazer’s group believes their chances of success are better than most because 1) they have developed technology to improve protein expression from DNA vaccines, boosting the likelihood of a strong immune response compared to other DNA vaccines; and 2) by mixing together two DNA vaccines, one of which has been combined with the regulatory protein ubiquitin, the Frazer group believes it can get a long-lasting cell-mediated immune response.

Allied Healthcare is undervalued on our numbers

We value Allied Healthcare at $0.08 per share base case and $0.12 per share optimistic case, diluted for another $15m raising.

Our target price of $0.10 sits at the midpoint of our valuation range. We expect the market to re-rate Allied Healthcare as further clinical and pre-clinical data on the utility of its technologies emerges during 2012.

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Peak Resources: 5400m of assays pending, building to maiden resource at Ngualla Rare Earths Project

Peak Resources (ASX: PEK) has now rounded out an extensive drilling campaign at the Ngualla Rare Earth Project in southern Tanzania, with a significant 5400 metres of reverse circulation assays now pending.

Adding spice to the short term news flow is that a maiden resource is scheduled for completion towards the end of the March 2012 quarter.

Ngualla is already demonstrating a large rare earth discovery with 5% and over total rare earth oxide mineralisation extending from surface over an area of 660 metres by 740 metres and to depths of up to 120 metres.

Since May this year, over 250 holes for more than 19,000 metres have been drilled, providing sufficient data for a JORC Resource in the Southern Rare Earth and South West Alluvial Zones of the Ngualla Carbonatite.

Drilling has also provided sufficient bulk diamond core samples for metallurgical test work now in progress on a range of material types, together with an initial evaluation of the economic potential of the Northern Niobium – Tantalum – Phosphate Zone.

Highest rare earth grades to date delivered in November

Highlighting the potential of Ngualla and building anticipation for the pending assays, just last month the company delivered the best intersections to date from the project.

High grade results such as 4 metres at 10.7% rare earth oxides from 32 metres provide support for the extensive broad intersections, with November highlights from Southern Rare Earth Zone including:

- 120 metres at 4.06% REO from surface, including 36 metres at 7.40% from 22 metres; and
- 120 metres at 3.54% REO from surface, including 46 metres at 6.17% from surface.

The results underpin that Ngualla is one of the largest and better grade new rare earth discoveries of recent years, with another plus mineralisation is similar in style to Lynas Corporation's (ASX: LYC) Mt Weld in Western Australia, being rare earth enrichment in the deeply weathered regolith profile of a large carbonatite.

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Eden Energy closer to bulk commercialisation of concrete strengthening technology

Eden Energy (ASX: EDE) has refined the dispersion technique for the company’s concrete strengthening technology, overcoming a major hurdle to the development of bulk commercial applications.

Concrete manufacture provides a prime market for Eden’s carbon nano-fibre and nano-tube products which can be used to reinforce a number of products due to their high strength.

The technology works in concrete by bridging the gaps across micro-cracks which occur from the initial setting of concrete. Over time, these micro-cracks gradually grow to form larger cracks, exposing reinforcement and allowing damage to the integrity of a structure.

Initial tests of Eden’s carbon products in certain concrete formulations showed increases in flexural strength of between 15% and 30% seven days after treating.

Increasing the flexural strength of concrete is a boon for the construction industry, allowing for reduced concrete beam dimensions and consequently thinner floors, reducing overall building height.

At the same time, this can reduce the need for steel reinforcement, which lowers project material costs.

Due to the nature of the carbon products, dispersion has been an issue in concrete use in the past.

However, Eden’s wholly owned U.S. subsidiary Hythane Company has developed a greatly improved technique which enhances the even dispersion of the carbon products in concrete and mortar composites.

To measure the effect of this new technique, Hythane Company will re-create earlier trials, examining the effect on the flexural strength of mortar beams made from nano-carbon enriched mixtures.

Preliminary tests have begun, with initial analysis of the results expected to begin within 30 days.

Conductive concrete

In addition to improved strength, preliminary tests of Eden’s new dispersion technique has resulted in concrete showing an increase in conductivity of up to 40 times.

Increasing the conductivity of concrete could allow for stress testing, as the resistance of carbon products in the concrete changes due to changing load conditions.

This could have major implications for the concrete industry.

Potential markets

Eden has already received interest from the concrete industry in its strengthening products, with one of the world’s largest cement and concrete manufacturers currently testing Eden’s products.

However, the products have a number of other applications, including electrical applications such as batteries and electronic paper, where they are currently being used on a small scale, as well as conductive paint, coatings and thermoplastics.

It also has potential for reinforcing rubber, with tests underway. With the ability to extend the life and reduce the weight of tyres, this could prove to be very popular among mining companies and contractors that have been hit hard in the past by tyre shortages.

The impact of the improved dispersion technique on these markets has not yet been addressed.

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Algae.Tec ups the ante in Asia, launches first biofuels facility with Holcim Lanka

Algae.Tec (ASX: AEB) has signed a collaboration agreement with Holcim Lanka Limited to build its first algae biofuels production facility in Asia that will reduce carbon dioxide emissions from cement manufacturing.

Holcim Lanka, a cement and building materials company, has agreed to build the facility in Sri Lanka in conjuction with Alga.Tec as its technology is in line Holcim's desire to be environmentally sustainable.

Algae.Tec is an advanced algae to biofuels company with a high-yield enclosed algae growth and harvesting system designed to capture carbon from carbon emitting companies and industries.

Algae.Tec's technology attracted Holcim as it provides a way of reducing the company's carbon footprint by channelling waste carbon dioxide into the algae growth system. This in turn generates valuable biofuel at below market cost.

Initially, the biofuels production facility will comprise a production plant of five photo-bioreactor modules, enabling Holcim to evaluate the benefits of capturing more of the waste carbon dioxide in a much larger facility. This first step could lead to the roll out of further modules at other sites.

Stefan Huber, Holcim Lanka CEO, said "the Algae.Tec facility is designed to reduce the cement manufacturing carbon dioxide emissions with an off-take into the algae growth system.

"We look forward to working with Algae.Tec on this exciting development that is alligned with our focus on sustainability and a commitment to the environment."

"Algae.Tec has a truly innovative technology backed by an expert international engineering team."

Roger Stroud, Algae.Tec's executive chairman, said the company was very pleased to be involved with such a significant development at an economic, ecological and social level.

Today's news adds to the momentum building for the company. On November 24 Algae.Tec announced that its first photo-bioreactor module was shipped from the Algae Development and Manufacturing Centre in Atlanta, Georgia, to its Shoalhaven One Australian showcase facility at Nowra, south of Sydney.

Also, in early November Algae.Tec received a significant boost for its technology following the Australian Government’s announcement of a price on carbon, which should spur on carbon dioxide emitters to seek out clean energy and carbon capture solutions.

Algae.Tec is one of few advanced biofuels companies globally with an enclosed modular engineered technology designed to grow algae on an industrial scale and produce biofuels that replace predominantly imported fossil fuels for transportation use.

The Algae.Tec solution is less than one tenth the land footprint of pond growth options, while its enclosed module system is designed to produce algae biomass in virtually any environment.

The system is designed to deliver the highest yield of algae per hectare and, importantly, does not require the use of food producing land for biofuel production.

Holcim Lanka is part of Holcim Group, which is a global company with market presence in over 70 countries on all continents. The Group employs some 90,000 people and is currently the second largest cement manufacturer in the world.

Holcim Lanka generated annual revenues of about LKR 12.3 billion (US$107 million) in 2009.
For further information on the company click here to watch Algae.Tec's video.

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Legacy Iron Ore strengthens cash reserves with $1m in interim funding

Legacy Iron Ore (ASX: LCY) is well funded to continue aggressive drilling programs at Mt Bevan where the company is eyeing an upgrade to the Inferred JORC Resource of 617 million tonnes at 32.1% iron.

Legacy Iron has now entered into two short term funding agreements with two funds separately managed by founders of SpringTree Global Investors, LLC, the New York investment firm that is currently funding Legacy.

The investors have agreed to provide $500,000 each in funding for a total of $1,000,000, which will be settled this week.

The interim funding is ahead of a proposed $18.9 million capital injection should shareholders approve the placement to National Mineral Development Corporation Limited at an EGM on 16 December 2011.

Terms of the agreement

- The amount funded will be interest free and unsecured against the company’s assets, with a $25,000 fee to be payable in shares;
- The amount funded is to be secured against 2,250,000 shares of Legacy;
- 1,000,000 unlisted options exercisable at a price equal to 110% of the average of the daily VWAPs per Share during the ten consecutive trading days immediately prior to the Execution Date, and expiring at a date which is 36 months from the date of execution of the agreement.


The amount funded will be convertible into Legacy’s shares at the lesser of:

- 130% of the average of the daily VWAPs per share during the twenty consecutive Trading Days immediately prior to the Execution Date; or
- 90% of the average of five daily VWAPs per share during a specified period immediately prior to the relevant conversion notice date.

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Central Petroleum expands unconventional acreage with new targets in central Australia

Central Petroleum (ASX:CTP) has uncovered up to 260,000 square kilometres of additional unconventional play targets in the Amadeus, Eromanga, Wiso and Pedirka Basins in central Australia, through a review of historical and recent data, that could increase the company’s total area of unconventional play potential to over 307,000 square kilometres.

The additional unconventional play exploration targets in the Palaeozoic and Pre-Cambrian throughout the Lander Trough of the Wiso Basin, the Amadeus Basin and Pedirka/Eromanga Basins are represented by known mature source rocks with elevated total organic contents in a series of superimposed (vertically stacked) horizons which have been drilled, at least in part.

Managing director John Heugh told Proactive Investors today the potential size of these plays represents a substantial prospective addition to the company’s portfolio.

“The total surface area of these additional plays is approaching 70 million acres (280,000 square kilometres), which is an enormous portfolio of unconventional exploration plays,” he said.

“Even if only 10% of that is a prospective play that’s an enormous chunk of 7 million acres of ground added to our existing 11 million acres of known unconventional plays that we have.”

Many of these horizons have been logged, sampled and analysed but not specifically for the purposes of unconventional exploration.

The potential for Central lies in the development of not just one play in one horizon, but underneath the known horizons such as the lower Larapinta Group in the Amadeus Basin and the Arthur Creek Formation in the Southern Georgina Basin.

“Those plays are both pretty well known and independently assessed, but if we are drilling deeper targets than the Amadeus, and we will be, we can examine the unconventional potential of possibly several superimposed plays, one on top of the other, with the one well,” Heugh said. 

The results that led to the discovery of the additional targets are preliminary and based on sparse drilling and sampling from historical and recent exploration over a 50 year period.

Central will need to undertake more exploration, sampling and analyses before the company can deliver any resource figures.

The company plans to drill the Mt Kitty well next year, which will test the unconventional potential of one or two of the additional play types.
“The first test that’ll be gathering some modern data on some of these additional unconventional plays will be Mt Kitty. We’ll be drilling through several of these potential horizons on the way down to the Heavitree formation,” Heugh said.

Share Purchase Plan

In November, Central announced an extension to its share purchase plan to eligible shareholders to raise A$5.5 million. The share purchase plan is now due to close on 6 December 2011.

Eligible shareholders can purchase shares to a value of $2,500, $5,000, $7,500, $10,000 or $15,000, at an 18% discount to the average closing price of shares in the five days prior to the announcement of the share purchase plan on 15 September 2011.

Cash Position

At the end of the September quarter Central had $13.3 million cash in the bank, which will receive a further boost with the addition of the funds from the share purchase plan.

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Mindax drilling unveils more direct shipping material at Mt Forrest Iron Project

Mindax (ASX: MDX) has uncovered additional direct shipping goethite-hematite and related iron mineralisation from drilling at the Mt Forrest Iron Project in Western Australia.

Significant mineralisation including new regolith material has been revealed over two kilometres and one kilometre sections of strike, that was previously undrilled due to areas being inaccessible.

These results will provide a boost to Mindax as the company is focussed on initiating mining at Mt Forrest with a modest DSO operation.

The mineralisation will add to the Indicated beneficiable magnetite JORC Resource at Mt Forrest of 248.2 million tonnes at 32.6% iron (cut off 25% iron) announced  on November 22.

The resource represented a 200% increase which adds considerable value to the project in terms of generating an ore reserve.

The regolith drilling program has now completed 67 holes for 3,269 metres. Scout drilling of a blanket of detrital material adjacent to goethitic iron formation at Cassowary returned consistent iron mineralised intervals of 40-45% iron over a 20 metre section from surface.

This target was generated from earlier gold exploration drilling. Mapping indicates the detrital blanket to abut outcropping goethitic iron formations to the east and laterally extensive for 2 kilometres along the ridgeline and up to 1 kilometre to the west.

Early observations suggest that simple screening or trommelling should generate a suitable product. This regolith mapping is being extended to similar detrital blankets at the Toucan, Parrot and Emu North prospects and drilling will also extend to these areas.

Mapping has outlined an area of 2 x 1 kilometres along the ridgeline and out to the west, and its potential will be quantified by drilling.

Preliminary metallurgical testwork on surface detrital material has upgraded above 57% iron by a simple crushing, screening and washing process.

A new zone of goethite-hematite mineralisation has been identified by scout drilling and mapping at Paradise Bore. This zone includes iron grades greater than 54% iron over 1000 metres of strike and extends to depths of 70 metres below surface.

Recent Davis Tube Recovery (DTR) testwork returned a best weight recovery of 62.3% with a concentrate grade of 71.1% iron, indicative of an ultra clean magnetite specification.

Analysis of DTR tails has confirmed certain mineralisation includes a hematite component potentially enhancing overall iron recoveries.

Further resource definition drilling of these new Regolith targets has the ability to significantly increase the current JORC Resource inventory.

The company is making solid progress on approvals, infrastructure planning and negotiations with infrastructure providers with the aim to mine DSO in 2013 and magnetite in 2015.

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Astra Resources dials into Nigerian thermal coal sector with joint venture

Diversified mining company Astra Resources PLC (Code: 9AR), which is the UK parent company of Astra Mining, is continuing with its global expansion at speed.

The latest instalment of Astra's growth includes the finalisation of a joint venture agreement covering Nigerian thermal coal sites, with the company already undertaking geological investigation.

The agreement, signed through Astra’s subsidiary Muyiwa Pte Ltd, gives the company a super-majority ownership of Barjalex Nig Ltd, an African company that owns a coal exploration license (10077EL) covering the Manejo and Odele communities in the Ika District of Ankpa Local Government in Kogi State, three kilometres south of Ogboyaga.

A geological study will soon commence and compare the licensed area with previous JORC standard reports for the Ogboyaga coal district as well as the pre-feasibility and costs for local mining and logistics for export and internal markets.

The resulting report on the geological investigation to be conducted should reveal a coal JORC Inferred Resource within the area and will also include proposed exploration drilling points for core drilling which will be required for ascertaining the Measured Resource estimation of the deposit.

Astra CEO Dr Jaydeep Biswas says undertaking these investigations will allow the company to complete one of the exploration exercises required for the fulfilling of a mining lease application.

“The geological investigation of the Barjalex coal properties is estimated to take 30 to 45 days with a total of five geologists,” Dr Biswas says.

“The study is prior to drilling and the exercise should be able to lead us to an inferred estimation of the coal resource within the area owing to the proximity of the site to the Ogboyaga coal field where previous studies for the area are available to support the work.

“Drilling will increase the geological confidence of the site to a proven reserve level and the work will form part of the report that will be used to assess the qualification of the Barjalex exploration licenses for a mining lease.”

Dr Biswas says Astra is one of only a handful of Australian companies exploring the Nigerian coal market.

“The Nigerian government is focusing on developing coal-fired power plants and revitalising the coal mining industry due to the major underexplored and underexploited high quality coal resources in the area.

“We are one of only a few resource companies to be active in the country, and our Barjalex exploration sites will create a beach-head for growth in a region which has the potential to host 800 million tonnes of thermal coal,” Dr Biswas says.

“The coal present in the district and surrounds of Nigeria is ideal for power generation and export into the international market as it is low in sulphur and ash, and high in calorific value.”

Astra Managing Director Silvana De Cianni says large coal reserves in the district and surrounding region can be developed into a highly economical mining venture.

“The site can initially be developed using surface mining technologies, however most of the coal will be exploited using highly productive longwall methods,” Ms De Cianni says.

“International geological and feasibility studies estimate that the total coal deposit in Nigeria is 2.6 billion tonnes, which will attend to the strong internal demand for coal with a major emphasis on local power generation. 

“Due to its proximity, Nigeria is in a prime position to become a major player in the international traded coal market to Europe due to the sizeable international market for seaborne trade.”

The reports required for a mining lease application include geological studies, drilling and resource estimation, feasibility, mine plan, an environmental impact assessment and environmental management plan, all of which are underway.

Once completed the report of the geological study will be forwarded to the Ministry of Mines to form part of the reports to be used to assess the qualification of the Barjalex exploration licenses for a mining lease.

Astra Resources’ global portfolio includes gold and iron sands interests in Southeast Asia, coal mines in Africa, iron ore in India, carbon efficient businesses, mining housing developments in Queensland and the production of the high-strength T-Steel technology in Hungary.

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Toro Energy exits trading halt, talks with cornerstone investors continue

Toro Energy (ASX: TOE) is no longer in the trading halt granted by the ASX on 29 November 2011, pending an announcement of a capital raising initiative.

Toro has been in talks with a number of Asian based investor groups interested in entering into strategic partnership with the company through a cornerstone equity investment.

Negotiations are continuing and the market will be updated again in due course.

Toro is fully funded for its near term activities at the Wiluna and Theseus projects in Western Australia.

Wiluna contains two shallow calcrete deposits, Lake Way and Centipede, with prefeasibility and optimisation studies completed and technical work underway that will lead to a Definitive Feasibility Study.

Just last week the company delivered results from a major review of the financial outcomes of the Wiluna Project. Highlights included that over the first 10 years operating life of the project the new economic model has indicated that a "C1" cash operating cost of US$33 per pound uranium.

C1 cash operating costs encompass all fixed and variable site based costs such as mining, milling, processing, admin and general expenses. It excludes royalties and capital allowances.

Toro has commenced the approvals process targeting the company’s first uranium production late 2013 and Wiluna remains on track to emerge as Australia’s fifth operating uranium mine.

The company has a very healthy cash balance of about $15 million, and in addition recently announced the $3.75 million consideration for the retirement of the Mt Woods uranium rights in South Australia.

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Greenland Minerals and Energy in pre open pending Kvanefjeld announcement

Greenland Minerals and Energy (ASX: GGG) has been granted a trading halt by the ASX today pending the release of an announcement regarding developments associated with the Kvanefjeld multi-element project in Greenland.

In August this year, Greenland Minerals moved to 100% ownership of Kvanefjeld, which hosts the largest occurrence of rare earths, 6.6 million tonnes total rare earth oxides, as defined by internationally recognised standards, along with 350 million pounds uranium and 3 billion pounds of zinc.

The company will remain in pre-open until the earlier of the announcement being released to the market or the open of trade on Monday December 5.

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Silver Swan Group's follow up drilling hits more high grade gold at Stakewell

Silver Swan Group's (ASX: SWN) follow up reverse circulation drilling has intersected further high grade gold at its Stakewell Gold Project in Western Australia, adding to the promising results received from diamond drilling at the historic Kohinoor mine.

The company has been targeting stacked high-grade gold lodes at the historic Kohinoor open pit and underground mine, and also targeting several shallow oxide gold targets located to the east of the Kohinoor mine.

Highlights include:

- 4 metres at 6.3 grams per tonne (g/t) gold from 28 metres;
- 8 metres at 1.0g/t gold from 38 metres; and
- 17 metres at 1.0g/t gold from 24 metres.

The results support the potential for multiple stacked high-grade lodes and for shallow oxide gold mineralisation.

Further drilling is required to properly assess these shallow targets as the project is located near under-utilised processing facilities with spare capacity to treat oxide ores.

Silver Swan’s drilling program at Stakewell has so far drilled a total of 29 holes, comprising five diamond holes (836 metres) and 24 reverse circulation holes (1,859 metres) for a total of 2,695 metres.

The previous high grade diamond drill results include: 7 metres at 5.8g/t gold from 34 metres, including 4 metres at 9.9g/t gold.

The Stakewell Gold Project is located 50 kilometres south of Meekatharra along the Great Northern Highway.

In the Meekatharra area, much of the early historic production of the late 1800's came from Silver Swan's tenement area at Stakewell (the Kohinoor open pit), Abbotts (Mt Vranizan and New Murchison King) and Quinns (Koladbro, Cornstalk, Parramatta, Nowthanna, Murchison Wonder, Wallaby, Nuggety and Olympic).

These areas have received only limited modern exploration despite the proximity to producing gold mines at Bluebird-Yaloginda and Gabanintha.

Gold mineralisation at the Kohinoor mine is controlled by the intersection of banded iron formation (BIF) with high-angle cross-cutting faults and a wide zone of shearing in basaltic rocks, resulting in the formation of steeply plunging high-grade gold shoots.

All drilling results are currently being compiled in 3D to assess tonnage potential prior to drilling of an additional two new oxide target areas located nearby.

Following a recent capital raising, Silver Swan is well funded with around A$5 million to accelerate exploration of its high priority targets at both the Stakewell gold project and the Quinns VMS project.

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Solomon Gold eyes 2m gold ounce target at Rannes after resource upgrade

Solomon Gold (LON: SOLG) has received a 20% boost in resources to 812,000 gold ounces at the Rannes Project in Central Queensland after a review by FSSI Consultants, where the company continues a drilling campaign which is targeting 2 million gold ounces at the project.
The breakdown of the resource is 25.5 million tonnes at 1.0g/t gold equivalent for 812,307 ounces of contained gold equivalent (486,935 gold ounces and 13.01 million silver ounces).
Importantly, the resources are all close to or at surface which may potentially lead to a low stripping ratio at Rannes.
Solomon's share price shot up around 50% overnight after it unveiled the upgrade to the market.

Highlighting how quickly Solomon is moving the project forward, the latest upgrade follows hot on the heels of the September upgrade, which boosted ounces by 24%.

Drilling at Rannes continues at Kauffmans, Crunchie , Shilo, Double Scoop and Nicks Prospects, with a total project-to-date discovery cost just A$6.70 per ounce.

Malcolm Norris, chief executive, commented “The board is highly encouraged by today’s further resource estimate upgrade.

"Exploration also continues at the 21 other nearby prospects, which have been identified in the Rannes Project area, with the aim of delivering the company’s objective of defining two million ounces of gold equivalent."

The project is located around 150 kilometres west of the major central Queensland port city of Gladstone.

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TNG secures Northern Territory license hosting historic 21% copper rock chips

TNG (ASX: TNG) has boosted its exploration footprint in the Northern Territory by securing a new exploration license which is highly prospective for copper - highlighted by historic rock chip results from 5% to 21%.

The new license is strategically located just 3 kilometres north of the Mount Hardy copper field, and includes significant outcrop and undercover extensions of the Lander Group rock formation, which hosts copper and gold mineralisation in the area.

Paul Burton, managing director, said the new licence had been secured as part of the company’s ongoing search for highly prospective areas to further expand its exploration portfolio in the Northern Territory.

“This new tenement contains highly prospective copper exploration targets in a region that is relatively underexplored due to transported cover material, but has demonstrated geological potential to host significant copper mineralisation.”

The license covers a total area of 220 square kilometres.

The new projects represent a significant addition to the company's Northern Territory minerals portfolio, providing a new exploration target for copper alongside its wholly owned McArthur copper project and the Mount Peake Project licences, where significant copper mineralisation also occurs near its large vanadium deposit.

TNG is set to hit the ground running in the new year, with copper exploration activities to accelerate in 2012, alongside its plans to progress the Mount Peake Vanadium Project.

Old Park Lane Capital lifts target price to A$0.45 per share

Adding some interest to TNG, just last week UK broker Old Park Lane Capital lifted its target price to A$0.45 per share.

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Clean Global Energy welcomes new company secretary

Clean Global Energy (ASX: CGV) has appointed Sophie Raven as company secretary following the resignation of Andrew Whitten.

Raven has practised corporate and commercial law in Western Australia and overseas for 20 years both at law firms and as an in-house legal counsel.

She is currently a non-executive director of various investment funds and is company secretary to a number of companies including Transerv Energy (ASX: TSV) and Wildhorse Energy (ASX: WHE).

Clean Gobal Energy is pursuing a new strategic direction away from Underground Coal Gasification (UCG) projects towards targeting conventional coal assets.

This follows the recent granting of EPC 1748 in the Surat Basin in Queensland.

This is aimed at maximising the current cash at hand, and provides the opportunity to significantly develop its asset base in fast growth conventional coal.
The company is moving its head office and corporate operations to Perth, Western Australia, due to its new strategic direction.

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Tuesday, 29 November 2011

Stratum Metals scoops substantial holder one month after listing

Stratum Metals (ASX: SXT) has received a vote of confidence from Elinora Investments, which has taken up a substantial holding in the company.

Elinora and its associated entity Chifley Portfolios have spent a combined $451,000 to purchase 2.35 million shares in Stratum.

Elinora owns the bulk of the shares, holding 2.15 million. The purchase gives Elinora a total holding of 5.72% in Stratum.

The move is a boon for Stratum Metals, which listed on the Australian Securities Exchange last month, following a successful $4 million IPO.

Last week the company acquired two prospective thermal coal tenements in Western Australia’s Canning Basin, adjacent to its existing holdings.

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Mount Burgess Mining chairman tops up shareholding

Mount Burgess Mining (ASX: MTB) chairman Nigel Forrester bought 270,000 shares on-market at A$0.005 per share on November 29.

The shares were bought for a consideration of $1,438 and Forrester now holds 18.1 million shares.

Mount Burgess is currently renewing its focus on base metals exploration in Africa.

The company is undertaking a capital raising to generate $219,000 in funds for ongoing exploration at the company's Tsumkwe Base Metals Project in Namibia and the Kihabe-Nxuu Project in Botswana.

Tsumkwe Base Metals Project

Mount Burgess plans to conduct further exploration at a recently discovered iron/magnetite target at its Tsumkwe Base Metals Project.

The company recently received XRF analytical results containing up to 61.79% iron from two drill holes drilled into a strong magnetic high anomaly.

Kihabe-Nxuu Project

At the Kihabe-Nxuu zinc/lead/silver project in Botswana, assays from close-spaced geochemical soil sampling have generated five significant zinc/lead soil geochemical anomalies and one significant copper/cobalt soil geochemical anomaly.

Significantly, these anomolies have potential to increase the company’s resource base.

The project has vast potential, with the company previously eyeing development into a mining operation.

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Magnetic Resources MD George Sakalidis takes November share spend to $35,914

Magnetic Resources’ (ASX: MAU) managing director George Sakalidis has again increased his stake in the company with the purchase of 50,000 shares on market between November 24 and 28 for a consideration of A$6,450, providing an average entry price of $0.13. 

This latest purchase takes Sakalidis’ total spend for November to $35,914 for 235,000 shares. He now holds 4.5 million shares in Magnetic Resources.

Magnetic continues to advance exploration at its wholly owned iron ore tenements in the southwest of Western Australia.

Calingiri's proximity to Atlas Iron's (ASX: AGO) 187 million tonnes at 30.9% Yerecoin project and the recent discovery of possible direct shipping type ores at Calingiri could potentially bode well for Magnetic.

Composite samples collected from exploration licence E70/3921 near Calingiri showed iron grades ranging from 36.1% to 57.3% iron, indicating that the magnetite-rich units interpreted to underlie the magnetic anomalies have been enriched in some areas and suggesting the possibility of direct shipping type ores being present.

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Rox Resources drilling extends gold mineralisation below Mt Fisher open pit

Rox Resources (ASX: RXL) is making solid progress with drilling programs at its various projects around Australia that commenced during October 2011.

Projects include the Mt Fisher Gold Project, Marqua Phosphate Project and Myrtle Zinc Project.

Ian Mulholland, Rox Resources managing director, told Proactive Investors today "we should receive the rest of the drilling assays, from both Mt Fisher and Marqua, before the end of the year, and will then be working on resource estimates to publish in the first quarter of 2012.

"Teck will commence drilling at Myrtle as soon as possible in 2012 after the wet season."

Mt Fisher Gold Project

At the Mt Fisher gold project, located 450 kilometres north of Kalgoorlie, drilling has confirmed the extension of gold mineralisation beneath the Mt Fisher open pit.

Highlights include: 5 metres at 4.34 grams per tonne (g/t) gold from 126 metres, and 2 metres at 4.78 g/t gold from 158 metres.

The 5,500 metres in 34 holes reverse circulation drilling program commenced in late October and is still ongoing.

To date 29 holes have been drilled for about 4,900 metres and assay results have been received from 13 of the planned 34 holes.

Mt Fisher is shaping up as an exciting gold project based on results to date and is believed to be a similar geological sequence to Navigator Resources' (ASX: NAV) 3.6 million ounce Bronzewing gold project.

Drilling is aiming to convert a number of potential exploration targets into an initial JORC Resource by early next year.

Damsel Prospect

Continuity of gold mineralisation has been confirmed at the Damsel prospect where an exploration target of 400,000 – 600,000 tonnes grading 4–5 g/t gold for 50,000–100,000 ounces has been defined.

Best intercepts include:

- 7 metres at 3.02 g/t gold from 120 metres;
- 3 metres at 4.90 g/t gold from 71 metres; and
- 12 metres at 2.28 g/t gold from 46 metres.

Marqua Phosphate Project

Drilling has been completed at the Marqua phosphate project, located 450 kilometres east of Alice Springs in the Northern Territory, with high grades indicated from hand held portable XRF scans.

The 29 hole, 2,000 metre reverse circulation drilling program's goal was to test the extent and grade distribution of phosphate mineralisation previously identified by drilling in 2008, as well as targets generated by recent soil sampling and geological mapping undertaken by Rox.

The phosphate target horizon at Marqua has a strike extent of over 30 kilometres and has only been drilled on very wide spacings.

Rox’s drilling will provide a more complete picture of the extent and potential of the phosphate deposits and also investigate two known higher grade zones.

Preliminary hand held portable XRF scans of drill samples indicate the presence of significant zones of phosphate mineralisation however laboratory assays from the drilling are still awaited.

Myrtle Zinc Project

Earn-in and potential JV partner Teck has suspended drilling at Myrtle zinc project due to unusually heavy seasonal rains cutting road access. The Myrtle zinc project is located 20 kilometres south of the McArthur River zinc mine in the Northern Territory.

The first hole has been drilled so far to 220 metres depth, but is still short of the target zone at about 400 metres depth. Teck intends to recommence drilling as early as possible in the new field season in 2012 to compete this planned 2011 program.

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Auzex Resources raises $3.2 million for Bullabulling Gold merger

Auzex Resources (ASX: AZX) has raised $3,203,625 to go towards the company’s merger with GGG Resources (ASX: GGB; AIM: GGG) which will form a new company, Bullabulling Gold.

The merger is expected to be completed by February 2012.

Auzex raised the money through a fully underwritten 1 for 5 renounceable rights issue which was offered at a price of $0.24 per share.

A shortfall of $1.4 million will be covered by the underwriter for the placement, independent financial services group BBY Limited.

This placement is part of a broader $8 million capital raising, with the successful placement of 14.3 million shares at $0.24 in October raising $3.4 million.

Once completed, the raising will fund the development of the Bullabulling Gold Project through to the completion of the merger with GGG.

The project is strategically located 65 kilometres southeast of Kalgoorlie in Western Australia.

At the end of the September quarter, Auzex had cash of $1.39 million.

Bullabulling Gold merger

The merger, announced earlier this year, will combine the 2.6 million ounce Bullabulling gold project under a single corporate entity.

The project is currently held in a 50:50 joint venture.

Bullabulling Gold will be Australian domiciled and listed on the ASX and AIM markets.

The deal will create an advanced exploration and pre-development gold-focused company.

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Dart Mining exposes further prospectivity of Unicorn, Morgan corridor

Dart Mining (ASX: DTM) has uncovered additional magnetic and topographic anomalies within the Unicorn-Morgan structural corridor in northeast Victoria following a review of regional geochemistry. 

The anomalies defined from the review highlight the highly prospective nature of the intersection of the Zulu and Unicorn-Morgan structural corridors, an area of some 400 square kilometres.

The Unicorn-Morgan structural corridor contains a number of unexplored topographic highs and multiple discrete spot magnetic highs that could potentially lead to further discoveries of other mineralised porphyritic stocks similar and in close proximity to Dart’s Unicorn molybdenum-copper-silver deposit.

The Unicorn Deposit has a JORC Resource of 105 million tonnes Indicated and Inferred at 0.07% molybdenum equivalent. 

Dart is currently evaluating the application of a heli-borne, geophysics survey over an area covering approximately 18 kilometres by 10 kilometres, corresponding with the Unicorn-Morgan corridor.

A geochemical signature review of the Morgan Porphyry prospect, which lies just 7 kilometres from the Unicorn Deposit, suggests that previous drilling has only passed through the upper part of an extensive mineralised system.

A 3 kilometre by 2 kilometre soil grid across Morgan has shown extensive anomalous zones of Tin, Bismuth and Tellurium – in addition to molybdenum, copper, silver and gold.

An interesting gold anomaly has also been identified around the Cattlemen’s Creek area, the source of which is not yet known.

The highly anomalous bulk leach extractable gold sample yielded a result of 156 parts per billion gold, where 10 parts per billion is normally considered anomalous.

Dart plans to explore this anomaly in coming months through further infill sampling and prospecting to identify the source and its significance.

Unicorn Potential

Earlier this month, the company received preliminary results from an ongoing Scoping Study of metallurgical test work for the Unicorn Deposit which show high recoveries of 92.3% molybdenum, 96.1% copper and 82.6% silver.

Another plus from the Scoping Study is that saleable grades of 51% molybdenum and 23% copper plus silver concentrates were produced and with further test work it is expected that the metal percentages, especially copper, can be improved.

Importantly, these early results improve the Unicorn development potential.

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Syndicated Metals managing director steps up as chairman

Syndicated Metals (ASX: SMD) has appointed managing director Russell Davis as chairman, replacing Martin Pyle.

Davis is a founding director of Syndicated, and has more than 25 years experience as a geologist, working in fields such as mineral exploration, management, property acquisition, mining and development.

In addition to his role with Syndicated, Davis is a non-executive director of Gold Road Resources.

Davis will continue as managing director of Syndicated.

The company has not indicated whether Pyle will remain a part of the board.

The move comes a week after Syndicated announced plans to raise $902,250 through the placement of 10.6 million shares at $0.85 per share, to continue exploration programs in the Mount Isa region of North West Queensland and for working capital.

Of that, a total of 2.23 million shares for $190,000 will be issued to directors of the company, subject to shareholder approval.

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Lachlan Star targets improved economics from gold processing at CMD in Chile

Lachlan Star (ASX: LSA) has the potential to maximise economic returns from low grade gold mineralisation that is currently mined as waste at its wholly owned CMD Gold Mine in Chile with the delivery of initial results of a large scale trial of run of mine dump leaching.

Managing director Declan Franzmann said the initial results of the tests are very encouraging.

“There is a large amount of gold mineralisation between 0.15g/t gold and our current mineral reserve cut-off grades of around 0.3g/t gold that is currently mined and sent to the waste dumps,” he said.

“If the final results of these tests indicate that this material is economic to process, the potential for the CMD Gold Mine to increase gold production is excellent, and to do so at reduced waste to ore ratios.”
Highlights from the trial include:

- 38% recovery after 38 days for uncrushed run of mine dump leach material grading 0.20 grams per tonne (g/t) gold and still leaching;
- 55% recovery after 45 days for two stage crushed material grading 0.20g/t gold and still leaching; and
- Low reagent consumption.

The cut-off grade for the current mineral reserve is between 0.30g/t and 0.34g/t gold depending on the deposit using a gold price of US$1250 per ounce, which is based on three stage crushing of the ore.

Importantly, the processing costs associated with run of mine dump leaching are materially lower than the current processing route, although with potentially lower recoveries, which may enable the cut-off grades for the mineral reserves to be reduced.

Lachlan’s strategy is likely to revolve around the run of mine dump leaching of the low grade material, and continuing to crush the above 0.30g/t gold mineralisation.

This strategy is employed by several gold companies with operations in Latin America, most notably by Canadian gold producer Argonaut Gold (TSX: AR) at its 1.7 million gold ounce El Castillo mine in Mexico.

Meanwhile, further drilling results from the CMD Gold Mine have returned highlights of 8 metres at 0.5% copper from 31 metres, and 130 metres at 0.52g/t gold from 39 metres, including 21 metres at 1.14g/t, from the Tres Perlas Deposit.

Best results from Toro Deposit are 61 metres at 0.56g/t gold from 120 metres, including 15 metres at 1.07g/t from 120 metres, and 9 metres at 1.98 g/t from 84 metres.

Franzmann said the drill results from both deposits demonstrate the existence of broad zones of lower grade mineralisation around higher grade zones.

“Our goal is to extract value from this mineralisation. The objective of this work and our exploration program is to increase tonnages stacked and to drive unit costs down,” he said.

Tres Perlas

Drilling has recently recommenced at the Tres Perlas Deposit to test for extensions of the mineralisation.

Gold mineralisation at Tres Perlas is up to 100 metres thick at a cut-off grade of 0.30g/t Au and contains an Indicated Resource of 252,000 ounces of gold and an Inferred Resource of 333,000 ounces of gold, both at 0.5g/t.

The mineralisation is open down dip to the east and sits beneath copper mineralisation that forms part of the extension of the copper deposit being mined at Teck Resources’ (TSX: TCK) adjacent Carmen de Andacollo mine.


Meanwhile, the Toro Deposit, located at the western side of the CMD Gold Mine tenements has been the focus of a detailed exploration program over the past four months aimed at upgrading and expanding the current Resource to support the development of a single large open pit.

The deposit has an Indicated Resource of 84,000 ounces of gold at 0.8g/t and an Inferred Resource of 188,000 ounces of gold at 0.7g/t.

Cashed Up

Lachlan had A$16.1 million cash at the end of the September quarter.

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Latin Resources in transformational funding deal with Hong Kong's Junefield Group

Latin Resources (ASX: LRS) has struck an agreement in a very difficult funding environment with Hong Kong listed Junefield Group, the founder with a worth of over $3 billion, should see Latin Resources largely de-risked from a funding viewpoint.

The investment agreement was struck by Latin Resources managing director Chris Gale at a 51% premium to market price, itself an achievement.

Significant investment by major mining companies including BHP Billiton (ASX: BHP) and Antofagasta (LON:ANTO) in the Ilo region of Peru have re-cast valuations and investment multiples significantly.

In addition, the deal which could see Junefield invest up to $52 million in Latin Resources, casts the company's project potential in a new light.

Latin will place 10 million shares to Junefield at $0.28 to raise $2.8 million.  After shareholder approval, a further placement of 20 million shares will raise an additional $5.6 million.

Funds raised through the placement will be allocated to the acceleration of activities at Latin’s Guadalupido Iron Sands Project and to fund other highly prospective Ilo concessions at the company's operations in Peru.

The next stage of the potential total funding investment into Latin is the Junefield backed Total Genius Iron Mining SAC, which has signed an earn-in option agreement covering up to 70% on Mariela and the newly optioned Dylan concessions, by funding all activities up to completion of Bankable Feasibility Study or to a total cost of A$35 million.

Chris Gale, managing director of Latin, said “Attracting a cornerstone investor that is as reputable and experienced as Junefield is a major achievement and a key milestone in the advancement of our Peruvian assets. The premium paid over the current share price is an indication of the value in which our new investor Junefield places on Latin Resources.”

Placement breakdown

The placement will comprise two tranches and represents around 16.8% of the issued capital of Latin. Tranche one is 10 million shares and 3.34 million options under the placement capacity, with tranche two 20 million shares and 6.67 million options - which is subject to shareholder approval.

The options have an exercise price of A$0.30 with an expiry date of June 20, 2013.

These funds will be allocated to accelerate the current exploration and drilling campaign at Guadalupito, where a maiden JORC Resource is forecast to be announced to the market in the March quarter of 2012.

Funds will also be used to fast-track exploration activity on the company’s 110,000 hectares of granted tenements in the highly prospective Ilo district of southern Peru.

The southern Peruvian coastal zone is highly prospective and home to some of South America’s largest mining projects, including Phelps Dodge’s Cerro Verde copper mine, Southern Copper Cuajone and Quellaveco copper mines along with the major iron mine at Marcona owned by Shougang, and the US$745 million Mina Justa copper project recently acquired by Glencore.

Earn-in option breakdown

In addition to the placement the earn-in agreement covers the Mariela and Dylan concessions, located in the Islay Province of Arequipa in Southern Peru.

The key terms are:

- A$700,000 in cash payable to the company’s wholly owned subsidiary, Peruvian Latin Resources SAC at date of signing of the agreement.

- Iron Mining to earn-in up to 70% on Mariela and newly optioned Dylan concessions, by funding all activities up to completion of Bankable Feasibility Study or to a total cost of A$35 million.

- In the event that Junefield fails to implement the exploration program for the project in accordance with the Agreed Program within four years from the date of the agreement, Peruvian Latin Resources will have the right to terminate the formal agreement and retain 100% ownership of project.

Gale added, “We are delighted to welcome Junefield as a strong partner in the development of the highly prospective Mariela and Dylan concessions, and look forward to taking the project into production and unlock the value for our shareholders."

The agreement is subject to regulatory approval and the conditions precedent including; Execution of Placement Agreement by Junefield and the company; and any required Latin shareholder approvals.

That this is a significant milestone for Latin Resources goes without saying.  The founder of Hong Kong's Junefield has built a $2 billion fund to invest in resources and in Peru.  Junefield has been drilling itself at a property around Latin's Ilo project and Mariela and is known to be bullish on the potential.

Recent M&A activity and acquisitions by major mining companies in the area is a testament to the potential of the area.  Together, they signal the potential for significant valuation lift in Latin Resources in 2012.
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Blackthorn Resources gives conditional nod to Perkoa Zinc expansion with Glencore International

Blackthorn Resources (ASX: BTR) has agreed, on condition, to participate in the expansion of the Perkoa Zinc Project in Burkina Faso, as proposed by joint venture partner Glencore International (LON: GLEN).

The company has previously received an investment proposal from Glencore to enhance the business case for the Perkoa joint venture project.

The net present value of the expanded project to Blackthorn is estimated at US$65 million, a US$25 million increase on the current carrying value.

This expansion would be designed to reduce unit costs and diversify the commodities produced, making the project more economically robust.

Some of the proposed changes include:

- modifying the process plant configuration to include separate silver-lead and zinc concentrate product streams;
- increasing plant throughput capacity to 1 million tonnes per annum run of mine at peak production; and
- open cut mining to supplement underground production.

Importantly, the expansion work is not expected to delay project commissioning, which is scheduled for mid-2012.

Blackthorn managing director Scott Lowe said: “The decision to enhance the Perkoa Project represents a very important and positive milestone for the project. The addition of silver and lead credits plus the lower operating costs made possible through open-cut mining and increased throughput will make the project more robust and capable of withstanding zinc market volatility.”

Glencore has advised Blackthorn that it intends to proceed with the expansion, based on the expected improvement to the project’s return on investment.

Blackthorn has the right to participate in the expansion on a pro-rata basis of Glencore at 55% and Blackthorn at 45%. Funding for the incremental investment is available to the joint venture through project finance from Glencore.

Detailed information provided by Glencore includes a financial model supporting the investment case. This model uses tonnage and grade estimates based on both historical data and assays from drilling to explore for along strike extension of mineralisation in the proposed open cut area.

After reviewing the technical and financial information provided by Glencore and engaging external consultants to assess the proposal, Blackthorn has found that the information supports a decision to proceed.

Approval to participate in the expansion is subject to there being no material problems or inconsistencies being identified in the outstanding information to be provided by Glencore.

“We now look forward to Glencore continuing with the technical work required to deliver the expanded case, while negotiations to finalise the detail of the project financing are undertaken. Provided the outstanding technical information is within expectations, then Blackthorn Resources intends to go ahead and execute the financing documentation and participate in the expanded and improved project,” Lowe said.

Negotiations on detailed project finance terms and conditions are due to begin.

Perkoa zinc

The Perkoa project is located in the Proterozoic Boromo Greenstone belt in Burkina Faso, about 120 kilometres west of the country’s capital, Ouagadougou.

Perkoa is operated as a joint venture between Blackthorn Resources, with a 39.9% interest, and Glencore, with a 50.1% interest. The remaining 10% is held by the government of Burkina Faso as a free carried interest.

First ore

First development ore from a cross-cut driven off the main decline is expected by the first week of December.

Last month Blackthorn confirmed high grade silver and lead mineralisation along strike and adjacent to the existing ore body, which adds significant upside to the project.

Importantly, the presence of high-grade silver and base metal mineralisation is consistent with the assumptions used in the enhanced business case for expanding the Perkoa mine and increasing production throughput to 1 million tonnes annually.

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Astra Resources PLC adds iron ore trading license in India

Astra Resources PLC (FWB: 9AR) subsidiary Astra Minerals Pvt. Limited has secured an iron ore trading license for the Joda and Barbil areas in the Keonjhar district of the Orissa State in India.

This is the third of five trading licenses Astra is in the process of securing covering the main iron ore producing regions in Orissa to Paradip Port, where Astra holds a storage and export site.

Astra CEO Dr Jaydeep Biswas says securing this license is a further step towards turning its 5,000 square metre plot at Paradip Port into a major iron ore export province.

“Astra has already secured trading licenses covering the Koira Mining Circle in the Sundergarh district and the Jajpur Road Mining Circle in the Jajpur district,” Dr Biswas says.

“Securing a third trading license expands the company’s reach, allowing Astra to trade and transport self-mined and third party mined iron ore to Paradip Port for export into the international market while further developing our own mining operations for domestic use and export.”

“Being one of the few companies with export licenses for iron ore, while also having possession of leasehold land at Paradip Port for storage and shipping, makes Astra a serious contender in the resources industry.”

A further two trading licenses are being applied for by Astra in the districts of Keonjhar and Cuttack in Orissa.

Astra Managing Director Silvana De Cianni says the trading licence allows Astra to obtain iron ore from the specified area and transport it to its plot at Paradip Port for storage and export.

“The plot size will allow Astra to trade and ship approximately 200,000 to 400,000 tonnes of iron ore per month, bringing a substantial income stream into the company,” Ms De Cianni says.

“Astra has already been granted an export license, and with arrangements already in place to buy iron ore from third party mines, trading can begin immediately.”

A number of other licenses are being applied for in numerous different regions in Orissa.

Astra Resources’ global portfolio includes gold and iron sands interests in Southeast Asia, coal mines in Africa, iron ore in India, carbon efficient businesses, mining housing developments in Queensland and the production of the high-strength T-Steel technology in Hungary.

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Energio: AGM to vote on change of activities, focus on major Nigerian iron ore opportunity

Energio (ASX: EIO) is conducting some very important business at the company's Annual General Meeting today, including the vote on a change of activities.

The ASX has this morning granted a suspension pending compliance with Chapters 1 and 2 of the listing rules.

Where the story gets really interesting for Energio is that the company is developing a world class iron ore opportunity at the Agbaja Iron Ore Exploration Project in Nigeria, which has resource potential of 1 to 2 billion tonnes of iron ore.

Proactive Investors analysis

Energio ticks many of the boxes as it moves to explore and develop the advanced Agbaja project:

- Experienced board of directors
- Proximity to infrastructure
- Large scale resource opportunity
- Lower relative risk
- Resource rich and high growth country

The board of directors has a track record of developing and financing large scale resource projects.  Kogi State is home to the largest iron and steel factory in Nigeria with the full backing of The Federal Government of Nigeria.

The licenses have close proximity to existing rail; road and power infrastructure provides potential advantages in reduced capital expenditure and allows fast track project development.

Energio aims to complete field programs and drilling program in 2011 with a target of maiden JORC Resource in the March quarter 2012.

Energio has a strong cash position of $4.7 million, which is sufficient to complete the current round of drilling,  and take Agbaja to initial resource estimation in mid 2012. 

However, at the current valuation of the company of just $20 million there is no shortage of upside potential for a company moving in on a 1 billion plus iron ore target with proximity to infrastructure. Energio is one to watch as its valuation does also not take into account the exploration upside at the advanced Agbaja project.

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Marenica Energy re-appoints Nelson Chen as a director, eyes U.S. coal sector

Marenica Energy (ASX: MEY) has announced an update following the company's Annual General Meeting yesterday.

Following his retirement in accordance with the company’s constitution, Nelson Chen has been re-appointed by the board as a director - with immediate effect.

John Young, chief executive officer, as previously foreshadowed has resigned which will take effect from this Friday (2 December 2011).

Young’s duties will be undertaken by the chairman Robert Pearce and non-executive director Doug Buerger, while a replacement for the position is sought.

Importantly, Young’s services will still be available to Marenica on a consultancy basis as required.

In other Marenica news, Simon Robertson has resigned as company secretary which will take effect from today, with Michael van Uffelen the new appointment.

Marenica eyes foray into U.S. coal sector

In a very interesting development for Marenica, in September the company announced a diversification of activities through a subscription for a cornerstone investment in a new IPO to be called Texas & Oklahoma Coal Company Limited (TOCC), which would provide the company with exposure to the rapidly emerging U.S. coal market.

The new coal investment is an initial step towards diversifying and expanding Marenica's asset base and provides an early-stage opportunity to participate in the development of coal export opportunities from the U.S.

Marenica subscribed for 3.4 million shares in TOCC, which has issued initial seed capital of 28.75 million shares at $US0.06 per share. This will equate to a substantial 6.4% interest in the company’s pre-IPO issued capital.

TOCC is in the process of acquiring options over or equity interests in selected coal projects in the U.S. Plans are well advanced to secure a coal resource base of between 100 million and 500 million tonnes. Listing on the ASX is expected in early 2012.

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Kasbah Resources: Broker retains BUY rating, sets price target of $0.44

Kasbah Resources (ASX: KAS) has been the subject of a broker research note that has placed a price target of $0.44 per share on the company, nearly three times the current price of $0.16.

Below is an extract of the note.

Company data

Share Price: $0.165
Price Target: $0.44
Issued Capital: 364.3 million
- fully diluted: 408.0 million
Market Cap: $60.1 million
 - fully diluted: $67.3 million
Cash: est $20.7 million

Gap Zone Continues to Prove Up

Kasbah Resources continues to  report good-grade tin mineralisation from ongoing infill and extensional  drilling of the "Gap Zone" at the Achmmach Project in Morocco.

The Gap  Zone represents a poorly-tested exploration target with a strike length of  ~350 metres,  which has the potential to connect resource blocks in the west (Meknes Zone) to resource blocks in the east (Eastern Zone).

The company  has been actively drilling this target with the aim of  adding new significant  tonnes to the Company's existing resources. Kasbah expects to release an  updated resource estimate for Achmmach in early CY2012.

The latest drill results continue to validate (prove up) the predicted position  of the Fez and Meknes Zones along strike within the Gap exploration target, with the tin mineralisation continuing to be of good grade (high grade tin  zones within a broad mineralised envelope).

Mineralisation remains open at  depth, which bodes well for future resource upgrades. Recent drilling has  also intersected a new  broad (drill intercept ~45m)  zone of mineralisation  (respectable grade of 0.64% Sn)  above the Meknes  system, hosted within moderately altered  sediments.

More work is required to determine the  context of this zone, but offers early encouragement for a new structural  position for tin mineralisation and offers additional targets to test.

Improved drill production now being realised

Kasbah currently has 5 diamond drill rigs onsite,  with the  increased rig  capacity improving drilling  productivity, with ~3,000m of drilling now being  completed per month (~7 holes per month at the current drilling depths).

Sample assay turnaround is also expected to improve with onsite sample  preparation and analyses in Europe providing a turnaround time of 2-3  weeks. With improved assay turnaround we expect an increase in news flow going forward.

This accelerated drilling will enable an updated resource estimate as part of  the Achmmach Pre-Feasibility Study (PFS); targeted for release in the first quarter CY2012.

The PFS will include an updated estimate on capital and operating  costs, which were scoped to be US$85m for capital costs and C3 operating  costs of US$12,683/t of tin in concentrate. The pay-back period is expected to be just over 2 years but will depend on tin prices at the time.

100% project assignment de-risks operations; Retain Buy

In August,  Kasbah  received approval for the early assignment of  100%  project ownership of Achmmach, which de-risks the operations.

Tin is currently trading just over US$20,000/t due to continued concerns  over the global economic outlook (Eurozone debt  issues, weakening US  economy etc). In response to softening prices, some producers have reduced exports to improve prices,  which are forecast  (Bloomberg consensus) to recover to US$23,000 – US$25,000/t in the short to medium  term.

Longer term tin price fundamentals remain unchanged with expected  strong demand and continued fragile supply (depletion of mineable  resources, with little new sustainable supply).

Achmmach remains a quality pure-tin project, with the  ongoing results  reinforcing the grade advantage over many competitors. We continue to rate  Kasbah as a Buy with a Price Target of 44cps.

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