Gippsland - worth another look

For several years I have been following the fortunes of Gippsland Ltd, an Australian listed company developing a tantalum, tin, feldspar deposit in Egypt. Just today I was carrying out a price review and I came across the tantalum price - see http://metalsplace.com/prices/?a=14&grt=6. A few years ago the tantalum price rose to over $200/lb, but then collapsed as a result of over-supply. The demand was prompted by the PDA, cellphone, laptop demand for resistors. As you can see tantalum prices are recovering so it seems likely that over-supply has been absorbed.

Logic would suggesr new mine capacity is required, and Gippslands tantalum project must be a contender given that its a world class deposit capable of supplying 8% of the world's demand. I guess however there are several problems:

1. The International Finance Corp (World Bank affiliate) walked away from financing the project. Why?

2. The government has a 50% free carried interest

3. Country risk - Egypt is perceived to be a high risk

The outlook for tin is good as well. I dont place much value on the gold/copper exploration they are doing. Anyway, you can see the latest (Aug'07) broker report at www.gippslandltd.com/i_broker_reports.asp. I new financial advisor was appointed 6mths ago, but there are no visible signs of progress. Its quite possible this project will be overlooked in favour of others. I think banks are unlikely to accept the financial terms, and it seems unlikely that the government will alter the law for one project, although perhaps the foreign investment regulations are under review anyway. So thats worth following up. There are a number of tantalum projects in Africa looking to develop, and in this industry manufacturers have been an important source of finance....so perhaps this company poses an unacceptable risk at this time.

- Andrew Sheldon www.sheldonthinks.com