Stock list - at current date

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I have a number of stocks at the moment:

1. Union Resources (UCL.ASX) - This both has short term and long term potential. I see a financial deal here which will see the phosphate project floated off into a new AIM listing given the world-class standing of this project. This would take the development off balance sheet. I see Union searching for another project whilst it waits for some developments in Iran....even if that requires regime change. 

2. Marengo Mining (MGO.ASX) - This company is developing a major copper-Molybdenum project in PNG with some gold. This project is huge in scope; it has an appealing overburden ratio, only improved by the recent discovery of high grade ore. This is a longer term project, but its market entry will be well-timed. This company is currently capitalised at $153mil; with scalar potential to a large earnings stream.

3. Millenium Minerals (MOY.ASX) - This company has just commenced gold production; and recently had a $8mil issue in order to fund working capital and exploration. This company offers short-medium term upside from drilling results, earnings re-rating and a higher gold price.

4. Gippsland Minerals (GIP.ASX) - This company has an advanced tin-tantalum project, bank syndicate, immense upside given the appeal of smartphones and the like. Egypt as a project host is settling down, so I think we can expect some upside here. 

All of these companies are well set to move forward. I also have some Globe Minerals (GBE.ASX), which is a longer-term proposition. Not concerned because it sits on a wad of cash ($25mil), has a world-class niobium project, underwritten by the Chinese, who are seeking an alternative to the Argentinian company which controls about 80% of global supply. I think Gippsland and Union Resources are listed in Frankfurt; Marengo is listed in Canada.

Japan Foreclosed Guide Profiting from the Gold Boom Mining Fundamentals eBook

Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Non-gold stocks which will do well

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Japan Foreclosed Guide Profiting from the Gold Boom Mining Fundamentals eBook

Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

This is a fitting week for some market action - since its my birthday!! - Celebrated with 3 of my stocks making positive announcements. These are:
1. Union Resources (UCL.ASX) - Its JV partner in the Mossbecker phosphate deposit, Minemakers (ASX.MAK) sold its share in the mine for $25mil to UCL's major shareholder (a third party interest). This values the UCL stake at 34c/share, compared to their current share price of 16c. Of course the Oman engineering company would not make this investment unless they thought the project was worth more. This stock has not really moved yet, but we note that the Oman state engineering firm is already a 19% shareholder in Union Resources. Might we expect a takeover of UCL? There is good reason of course to expect as much since UCL also holds a 34% interest in an Iranian project, at a time when Iran is under sanctions for its nuclear escalations, its President is hugely unpopular, and the civil unrest in the Arab world has already precipitated conflict. Rest assured that next time the US will help the Iranians if they flare up again. Fortunately I believe the shareholders alligned with the management of UCL will ensure a reasonable bid to reflect the value of the Iranian Mediabhad zinc-lead project, the latest undeveloped project of its type.
2. Global Metals & Mining (ASX:GBE) - This company has just had some very appealing deeper drilling suggesting wider ore zones at depth. This company is cashed up ($25mil), and with its Chinese banking, its an appealing and strategic investment. Note that the company is trading at its cash backing...though that will disappear as they spend $5-7mil on a feasibility study. Maybe cheaper since they will probably do the metallurgy through China. Even the feasibility study might be done in China because it will likely be Chinese financing. The problem of course is that this project is still 2 years off from production.
2. Gippsland Ltd (ASX:GIP) - This company has a large-scale tantalum-tin project in Egypt (50% equity share with govt). The company has just secured finance from 4 Egyptian banks, which will allow this project to progress. Not the best commodity market, but both tin and tantalum prices are buoyant. This project is probably 1yr off production, though mine overburden removal can start earlier. Of course it will need a capital raising. 

Top ASX stocks for a moving market

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The US market has had some positive earnings reports overnight. We need to remember that the US is rebuilding savings in the household sector, and that the corporations are cashed up. The implication is that there is scope for significant business investment, but I wouldn't be expecting a 'flash flood' of economic activity since the corporate sector is depending on consumer or export market action. 

The market outlook is more positive elsewhere. This is however a trade opportunity. My focus is on the low-cap stocks in Australia which offer strategic value. Cases in point where I have been buying on weakness:

1. Union Resources (UCL.ASX): This stocks has been very good to me as a trade in the past. Mostly on speculation about its Iranian lead-zinc project; the largest undeveloped project in the world. There is a huge sovereign risk attached to Iran of course, so the company has sought out and developed the Mossburger phosphate deposit in offshore Namibia in a JV with Minemakers Ltd (MAK.ASX). Recently an petroleum engineering services company in Oman (the new oil sheikdom) emerged with a 20% stake in UCL; so there is the prospect of a takeover here. This is of course not a surprise to me. I have long written about the prospects for a takeover of this company. The project is at feasibility stage, and really needs some love from a large company. This company fits the bill. After a capital reconstruction, UCL has a market value of just $13mil for a world-class asset with an equity-based NPV of around $100mil; with upside in Iran. We bought this stock yesterday for $0.15.

These stocks are less compelling because there is no imminent or pressing value to be realised to my knowledge.

3. Clean Seas Tuna (CSS.ASX) - It has a strategic positive developing farmed kingfish and other species in South Australia. This company has some backing, but has struggled to firm up a breeding program. The globe is suffering from over-fishing and stricter controls are destined to push fish prices up. Or might we displace our pallet with cheaper fish in other markets. No doubt there will be a move both ways. 

4. Gippsland Ltd (GIP.ASX) is another favourite stock. It is developing a tantalum deposit in Egypt. Not the most stable of places given the political instability. They do however possess a very large tantalum-tin-feldspar resource, and they are capitalised at just $9.75mil. I'm inclined to wait on this one for a better price because there is no clear motive for them to move - except a high tantalum price. Tantalum is not exactly the rarest of commodities. i.e. Australia, South Africa, Canada, Greenland as potential sources of supply. I will buy on weakness as the market is very thin despite its near 1bil issued capital. The fear is actually the prospect of a consolidation. My experience is that consolidations usually undermine a share price. 

5. Vital Metals (VML.ASX) is developing a tungsten project in Queensland, as well as a gold project in Africa. China produces 85% of the world's tungsten and is expected to curtail supplies from illegal mines. This creates appeal for tungsten miners in the West. There is a project being backed by Warren Buffet in South Korea (through a Canadian group), plus an Woulf Resources, with its project in Mexico. Vital also has the Kota gold project in Burkina Faso. 2nd round drilling suggests high grade, modest resource. 

Japan Foreclosed Guide Profiting from the Gold Boom Mining Fundamentals eBook

Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Gippsland - worth keeping?

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Have investors been fed a lemon. In the short term investors might feel so. In last 2 weeks Gippsland has been posting a lot of encouraging news. It then announces a capital raising which raised $3.2 million. Post-capital raising we learn that there is no firm off-take, and the company has only just appointed a Corporate Advisor to negotiate the details of the agreement. The problem with this is of course that its a bit of 'bait and switch'.

Do shareholders have reason to be confident that they will see a sustained rise in the share price? There is of course selling pressure in the 'high 5's' (i.e. 5 cents), whilst considerable support in the mid 4s. The question is - will that support evaporate when the underwriter (if there was any) has offloaded all the stock? This remains to be seen. It remains to be seen whether Gippsland will be able to commission this protect. I am actually confident it will. Both tantalum and tin have solid demand at the moment. Stark has been a long term supporter of this project.

Shareholders might however be cautious about paying too much for the stock. The announcement can be read here. We might expect that any agreement with Stark will be finalised in the next month...but that is old territory. It has been there before. It might be a few more months before the company is able to secure finance. The company must have known that, so this strikes me as a little unfair in terms of reporting....the timing of this news is disappointing.

This is common practice of course for small stocks firing on one cylinder. Maybe its not their place to set standards...maybe there is a need for an entirely new way of conducting equity raisings. I will outline my suggestion for capital raisings here.

Japan Foreclosed Guide Profiting from the Gold Boom Mining Fundamentals eBook

Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Gippsland up 21% so far

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I was a little concerned about Gippsland the other day. I bought when they appeared to have established a technical support. They sell to 4.2c from 4.8c from which point I bought. This raised in me fears that, despite the appeal of tin and tantalum, this project might have problems with illegal mining. Unless there is discipline with respect to tantalum mine supply from the Congo region, this project probably makes less sense. Anyway, all price concerns have been eroded because I did not sell despite technical signals alluding to such. I now see they are up 17% already today. So where are they going? Well, there is some good news going forward:

1. Sales contracts - with the German group again perhaps

2. Financing - maybe by the World Bank - as they originally took a sniff before walking away

3. Strong tin and tantalum prices

4. The spin off of the company's gold-base metals interests in Ethiopia, which have appeal

5. Perhaps even a JV partner? Unlikely as they already have a partner in the form of the govt if my memory serves me.

Japan Foreclosed Guide Profiting from the Gold Boom Mining Fundamentals eBook

Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Trading opportunities - gold & tantalum

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Based on the current chart, it would normally be a good idea for gold investors to sell Red 5 Ltd (RED.ASX), which is currently at resistance, and to enter A1 Minerals (AAM.ASX), which is cashed up after just absorbing an issue. I caution however because the company is testing a large geological intrusive which is lightly mineralised. It does not promise the grades of Anglo American's Bo????gan project up the road, however it could be of significant size. I wonder if this is the intrusive they drilled about 5 years ago?

Anyway, AAM would not surprise me if they offered some positive drilling results to the market, as well. Also there is likely to be some movement in Gippsland (ASX.GIP). It has been finding some buyer support over the last week. There is still some seller at 4.2c if anyone wants 100K odd parcel. I have historically done very well on this stock in the past, so blow me down, I think I have done it again. I recall getting 2 sets of free options before because some people did not take them up, so I was able to get more. Can't remember how that worked. Maybe I was able to exercise a right to get options. It does show how long this company has been sitting on this tantalum project in Egypt. We must remember that they have an interesting copper project in Ethiopia as well, though this project is less advanced.

GIP had a memorandum of understanding with Thyssen, a German trader some time ago. I'm guessing that the agreement has expired. In any case, the strong Asian market and the prospect of purging purchases of Congo tantalum strike me as a good basis for supporting the tantalum market. Based on the following price action, we might conclude that:

1. Shipments from the Congo are irregular because of civil unrest

2. The market is small, thus suffering from significant volatility.

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Andrew Sheldon www.sheldonthinks.com

Gippsland (GIP:ASX) eventually to develop tantalum project

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Sometimes there are companies who profit from human right violations. Sometimes there are companies who would be doing far better if only human rights were observed. Gippsland Ltd (GIP.ASX) is a case in point. The company controls one of the largest undeveloped tantalum resources in the world, and has faced a substantial hurdle to develop the project. The problem is that tantalum consumers have done little to trace the supply on their tantalum. The world price of tantalum is rising, up from $US38/lb to $45/lb. Sustainable demand however for the commodity will rest upon a concerted effort to end the purchases of illegally mined tantalite (Ta2O5) in the eastern Congo. The UN has its largest humanitarian force in the nation (numbering 17,000), and their are calls for greater efforts to be placed on the Eastern border with Uganda and Rwanda, where militia groups continue to mine illegally.
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.

http://www.google.com/finance?chdnp=0&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chdet=1268974800000&chddm=77615&chls=IntervalBasedLine&q=ASX:GIP&ntsp=0
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Andrew Sheldon www.sheldonthinks.com

Gippsland - worth another look

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For several years I have been following the fortunes of Gippsland Ltd, an Australian listed company developing a tantalum, tin, feldspar deposit in Egypt. Just today I was carrying out a price review and I came across the tantalum price - see http://metalsplace.com/prices/?a=14&grt=6. A few years ago the tantalum price rose to over $200/lb, but then collapsed as a result of over-supply. The demand was prompted by the PDA, cellphone, laptop demand for resistors. As you can see tantalum prices are recovering so it seems likely that over-supply has been absorbed.

Logic would suggesr new mine capacity is required, and Gippslands tantalum project must be a contender given that its a world class deposit capable of supplying 8% of the world's demand. I guess however there are several problems:

1. The International Finance Corp (World Bank affiliate) walked away from financing the project. Why?

2. The government has a 50% free carried interest

3. Country risk - Egypt is perceived to be a high risk

The outlook for tin is good as well. I dont place much value on the gold/copper exploration they are doing. Anyway, you can see the latest (Aug'07) broker report at www.gippslandltd.com/i_broker_reports.asp. I new financial advisor was appointed 6mths ago, but there are no visible signs of progress. Its quite possible this project will be overlooked in favour of others. I think banks are unlikely to accept the financial terms, and it seems unlikely that the government will alter the law for one project, although perhaps the foreign investment regulations are under review anyway. So thats worth following up. There are a number of tantalum projects in Africa looking to develop, and in this industry manufacturers have been an important source of finance....so perhaps this company poses an unacceptable risk at this time.

- Andrew Sheldon www.sheldonthinks.com