This is a very attractive orebody, and I suspect this company is going to be taken over. The question is whom by? Well given the open-endedness of the orebody at depth, might Xstrata be interested? But my best guess would be Kagara Zinc, whose Balcoona operations are nearby and they aready have a 19% (blocking?) stake in the company.
The company is not short of cash since they have $5.3mil in the bank, plus $1.5mil in investments so no need to worry about an issue this year. The company has 286mil shares on issue at 10c thats $28.6mil market capitalisation. I think thats very cheap, though I wouldn't necessarily expect the market to get excited just yet. I would suggest though now could be exactly the time to buy with a resource upgrade expected in March, and I suggest there will be financial backers lurking around wanting to put some money into it.
Most importantly this stock is cheap, they are supported by a major backer (Kagara Zinc) and they have cash resources. I suspect the next capital raising will be a convertible note issue, likely to Kagara, and finally an equity issue after feasibility (early 2009). Its the wait that gives me reason to pause. Although 10c is a support, the 8-8.2c level is a far stronger support, so I would be waiting for that level to be reached. This is a company for traders and investors since I believe this mine will have a life in excess of 10-15 years based on the geometry of the deposit and the prospectivity of the region. The open-cut will help fund underground development access, thus avoiding the burden of additional capital raisings down the track.
Andrew Sheldon www.sheldonthinks.com