New entrant to market today. VDM mine sapphires and tin(wasn't that a 70s TV series starring the lovely Joanna Lumley?). See article below. I'm backing this to be a winner. Metal prices high and forecast to be at that level in the short term. China can't get enough. Keep an eye on this.


There are so many mining flotations on the launching pad at present that it is tempting to write them all off as utterly opportunistic. But amid the dross there are a few opportunities of quality and Van Dieman mines is one of them. Its shares are due to start trading next week - on the 23rd - and at the 40p issue price they are a strong (if speculative) buy.

Australia based Van Diemans owns 100% of 13 licenses in Tasmania where it will be mining tin and sapphires within a year - this is a mining junior which will actually be generating cashflows within a year of flotation. Van Diemans was established to exploit the resources in North East Tasmania: the Ringarooma river and its tributaries are said to contain heavy deposits of tin, sapphire and heavy mineral deposits. The licences were snapped up once the original tenement holder decided that he did not have the resources to fund the mining. The licences have been mined earlier, but production stopped when the International Tin Agreement fell through in 1985. Following the application for the licences and a 2 million pound private fundraising to buy out minority interests in the same licences in may of this year, the company has spent most of the last three years compiling data to prove the extent of the deposits, completing extensive financial modelling and in discussions with equipment manufacturers, mining contractors and gemstone distributors.

Now, the company is in the city, looking to raise 3.3 million pounds to develop the neighbouring deposits, construct the plant and establish marketing channels for the sapphires. Once the money is in, production will begin using dry mining techniques, equipment will be on hire which reduces overheads. The cash element of the business comes in as tin concentrates will be sold to a Malaysian Tin Smelter and natural Blue Sapphires to the New York jewellery market. Contracts and agreements to ensure both are already in place. Payment is expected within 30 days of delivery.

In terms of production and capacity numbers, the licences are said to contain 40,000 tonnes of tin, the company is expecting to produce 1,200 tonnes of tin metal and 620kgs of sapphires in the Phase 1 of production in the next 12 months. Given that the tin price is in the range of $8200 - $8400 per tonne (Van Diemans requires the tin price to be $7000 to breakeven ) and estimates suggest that post-tax profits could in the year to December 2006 could be 3.7 million rising to 5.5 million in December 2008. By 2008 operating cashflow should be well over 8 million pounds a year. The mine life is estimated to be 13.8 years.

There is a risk in the form of environment protection acts, Van Diemens is positive that it will gain the necessary clearance. Marketing sapphires in America can be tricky and unusually difficult because of the Patriot Act. But the team at Van Diemans has plenty of experience in the field and has understood the downside to marketing the gem. The company hopes that in the next few months, it will be able to make inroads into the sapphire distribution market in America, the world's largest consumer of the blue stone. Van Diemans is looking to list on 23 November at 40p, valuing the company at 21.5 million pounds.

Those investors who lost money on Murchison United may remember that high cost tin producers are not always a one way bet. If the metal prices runs against Van Diemans those cash projections and forecasts will start to look rather optimistic. However we are bullish on metal prices on a medium term view and thus take the view that the forecasts have as much upside risk as downside risk. If, even the cautious forecasts above are met this company will be a lowly rated growth play paying chunky dividends. The stock is speculative but at 40p a buy

For more details contact Ambrian partners on 020 8528 1445

Being invested in this share is like living in a Ghost town!!