Glengarry Resources (GGY.ASX)

Glengarry Resources (GGY.ASX) is perhaps one of the best stocks I have some across at an exploration stage for some time. They are delineating what looks like a very attractive orebody. There are a number of attractive features:

1. The width & consistency of copper grades

2. The high grade intersections they are making - makes me think the original inferred resource will be upgraded - by 40 to 60% - but thats a guesstimate based on the drilling results.

3. Mineralisation close to the service - This will make it easy for them to mine this orebody by openpit, and later sink a decline to chase the main ore zone

4. The occurrence of moderate grade molybdenum at depth, with the positive news that the grades are increasing. One of the deepest holes recorded 35m at 2.09% copper so the mineralisation shows no sign of abating at a depth of 200m. Given the nature of the orebody the company should be able to mine to a depth of 300-350m using open cut techniques.
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.
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Andrew Sheldon www.sheldonthinks.com