One wonders if the rise in prices is due to greater success by the UN in curbing illegal mining or strong demand for tantalum in Asia and elsewhere for use in cell phones, and a litany of portable devices which use this material. There is of course a scrap trade in tantalum because most people tend to recycle their phones, etc. This is of course commonplace. This is a useful commodity, and one can expect much higher prices if global demand continues to grow, and illegal mining is curtailed. It will happen eventually, and Gippsland Ltd is well-placed to benefit.
If my recollection is correct it has a 51% stake (certainly controlling interest) in the large open cut resource in Egypt, with the government holding the balance. The project will also product feldspar and tin by-products. The project, once in production, will be the largest tantalum mine in the world, with a long life.
In addition the company has a stake in some interesting gold-copper anomalies along strike from the Koka gold-base metals project in Eritrea, so that project interest also offers long term upside. This company has a lot of shares on issue, so a consolidation might place some pressure on the stock, though this will probably not happen until the company turns around (i.e. proceeds with construction go-ahead). The feasibility study is complete, the company really needs project finance in order to proceed. The World Bank was involved at one point, but opted out. Understandable perhaps, as the market reality might not change as long as rule of law is absent in the Congo. You might ask what the United Nations are united on when they cannot bring about peace for this backward state, where simply militia folk run around looting farmers, forcing child labour and raping village women. More surprising still. Why is it so hard for them to foil the supply lines for the tantalum. I'd have thought that at military school that lesson was covered in War Strategy 101. Oh that's right. I forgot the UN is about peace. And peace means conceding to groups of unsophisticated tribal 'guerrillas'.
Anyway, given that the UN listens to my words, I'm expecting a turnaround soon. From the perspective of investing in GIP, the positives are:
1. Prospect of a takeover
2. Prospect of buying out the Egyptian government - I should look for a precedent but I'm an armchair analyst with back problems :)
3. Prospect of drilling results from the Eritrea projects
4. Prospect of financing for the Egyptian tantalum project
5. Prospect of improved sentiment as tantalum prices rise. See chart below.
On the negative side, who knows how long the UN bureaucracy takes to deal with this issue. The global economy might slacken off a bit as a result of weaker economic activity (as Fed is no longer buying back debt securities). One would however expect them to print money, but that is not the same as jobs. Will people upgrade their phones? Hmm...I doubt it. The Eritrean projects are long term, GIP is rather cheap, so I think I would be inclined to trade the stock off its current lows.
Andrew Sheldon www.sheldonthinks.com