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Andrew Sheldon www.sheldonthinks.com

MIL Resources (MGK.ASX) - break out due?

Over the last week MIL Resources has made its way up from 3.6c to 4.3c on small volumes. One might ask whether this stock is about to break out. Looking at the chart, the stock has been in a consolidation channel. The question is - Is this ascending wedge going to hold up as a trend line? I suspect it will break out in coming weeks)based on news either about a JV over its Amazon Bay iron ore project in PNG, or activity with respect to its gold project in PNG.
There are so many iron ore projects. The question I ask is? How many of them are so close to prospective DRI plants in Asia, how many lie on the coast? How many of them involve extraction of unconsolidated beach sands with dredges? This is a project which lends itself to incremental scaling up. It is the type of project well suited to a minor, but a major would help. You don't need a major terminal. I would suggest offshore self-loading 8,000dwt barges would be adequate, loading into 20,000dwt vessels destined for Singapore, the Philippines or Malaysia. I would be surprised if the total capital cost is more than $20-30million. Of course you can start big and bring in a major partner. In this type of market a Chinese partner might be nice.

I think this stock is way under-valued so I expect as much.
Need a stock update - see the updated chart at Google Finance!
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Andrew Sheldon www.sheldonthinks.com

A few more emerging gold producers

A number of small emerging gold producers that I have identified and bought this week are:
1. Republic Gold (RAU): This company has a number of interesting deposits - a large iron ore resource in Bolivia, which adjoins a Jindal Group project (Indian steel company). It also has a gold resource in Bolivia which will achieve feasibility study stage next year. In Queensland it has a small resource suited to heap leaching. It has not really responded to the gold price increase, and it has $5mil in cash.
2. Adamus Resources: This company has gold interests in Africa. They are an emerging producer, they have a solid resource base, which is likely to expand.
3. NorthWest Resources (NWR): High gold prices favour those with the most advantageous position. At current share price NWR are capitalised at just $7.2mil, yet they have 370,000 oz of gold, a small treatment plant, $5.7mil in cash, and resource upside. I must confess to finding such small vein deposits messy, but the they are just too cheap.

There is a few strategically placed medium-sized emerging gold producers in Africa which are going to be taken over by larger companies, or similar sized companies seeking to increase their PER profile in international markets. I would not be surprised to see Ampello Mining (AMX.ASX), Perseus Mining (PRU.ASX) or Adamus Resources (ADU.ASX) taken over in the next 6 months. Perhaps just as likely is a three-way merger between these companies. Of course no CEO likes to lose their job, so it would depend on other opportunities they have. You didn't really expect them to act in shareholder's interests did you? :) Well least not primarily.
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Andrew Sheldon www.sheldonthinks.com

A1 Minerals set to perform

A1 Minerals yesterday released a glowing outlook for their mining project. The company is due to commence mining this month (Dec'09). News could not be better as gold breaches the $1200/oz mark. In its latest drilling it encountered 6m of 69g/t. This looks more impressive than it is given the the bulk of the high grade occurred over 2m, meaning that its less likely to be continuous. This is near-surface enrichment of gold. The promising aspect about such gold discoveries is that they promise the mining company a 'bonanza' in terms of upfront cash flows. This is the type of situation in which miners can have exceptional years. Importantly the A1 ground has yielded some very high grades over the years, so we might expect some higher output than is indicated by grade control. There is even talk about expanding output to 100,000 oz per annum. I suggest the likelihood of this is likely to come from toll treatment of their ore. Remember - when you have the highest grade in the district - everyone wants to process your ore. You price the competitors out of the market. See the presentation at the A1 Minerals website.
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Andrew Sheldon www.sheldonthinks.com