AB47 - 93.0m @ 3.1% Pb and 4.1 g/t Ag from 502.0 metres
AB45 - 89.3m @ 2.5% Pb and 5.4 g/t Ag from 355.7 metres, 76.0m @ 4.1% Pb and 7.9 g/t Ag from 487.0 metres, 56.0m @ 3.4% Pb, 14.9 g/t Ag, 0.4 g/t Au, 0.3% Cu from 612.0m and 37m @ 0.5% Cu, 0.7 g/t Au and 6.5 g/t Ag from 670.0 metres
Based on these drilling results it seems somewhat premature for Abra to seek a joint venture without further testing the resource. It would have been more prudent to test the resource further to the north (Area 2) since they could be sitting on a resource as significant as Broken Hill. A JV agreement was reached in Dec'07 with Hunan Nonferrous Metals Holdings Group Co (HNG), which allows the HNG to receive 10mil stock at 34c - close to the current market price - plus a further 10mil stock options at 39c upon executing the JV agreement. Wow! I dont think I have ever seen such a generous agreement in favour of a farm-in partner. Shareholders are about to lose alot of value, in what was otherwise a company-making project. The back-end of the deal is reasonable, but I wonder what measures have been taken to prevent HNG just satisfying itself with its 10mil shares at a good price. AII might find itself diluting project equity with other partner. Poor consideration of contingencies by my thinking.
Should HNG step up as expected, it will fund all exploration activity through to feasibility study, as well as fully funding the capital development through to production. A 6Mtpa treatment plant is envisaged. HNG will be able to recover a portion of its costs from Abra's share of mine revenues. HNG already has interests in Australia since its involved in developing the Browns Base Metals Deposit in the Northern Territory with Compass Resources.
Fortuitously Abra & its JV partners control the total 60km strike length of the Jillawarra Sub-basin, which hosts the main Abra base metals deposit. In the adjoining Jillawarra JV, Abra can earn a 70% interest from Apex Minerals (another favourite stock) by spending $1.35million. After a recent capital raising AII has $4.5mil in cash. Abra has 130mil shares on issue at 32c worth $40.5mil. The stock is currently trading at support, however should that support break (as I expect), then the stock is likely to fall to a 25c support. Despite the free-carried nature of this agreement, it will take Abra some time to develop this deep underground mine (600m+), so Goldstream Mining likely serves as a good model of how to trade this stock. I think it will go sideways for at least the next year with rallies between 25-45c based on previous support & resistance. So I see this stock as a buy at 25c.
Andrew Sheldon www.sheldonthinks.com