Griffin Mining - golden future! http://www.basemetals.com/

GFM deserves a new thread after todays AGM. For the first time the venue was packed with shareholders, a tribute to the interest and support the company has for what the Board has achieved. For those unable to be at the meeting here are some of the points I noted which may interest folk on this BB.

Production: dry and wet testing now completed and zinc concentrate comes through the smelter next week. Zinc price on the LME is currently $1300/ton. GFM is being offered $1700/ton at the mine gate. This premium reflects the demand and difficulty local industry has in sourcing this basic metal ( As an aside the chairman reported that zinc is not easily and efficiently extracted as a recycled metal so newly mined zinc is always required). Cost of production is $595/ton ($700/ton if all depreciation costs are included). Labour costs are $1000/worker pa cf an Aussie underground worker of $130,000/worker pa. Apparently the 20m.pa worker migration from agricultural to industrial jobs means that there are queues of applicants wanting jobs at the mine; wage inflation is not an issue. 240+ employees on site to run the mine on a 24/7 basis.
Production can be increased w/o further investment for a throughput of 400,000 tons of ore pa; An increase to 500,000tons pa would require further investment of between $1m and $2m . All plant has been purposely over-engineered to ensure capacity can rise reliably and with back-up facilities (eg 3 boilers, 2 of which are back-up)
H&S is to world stds., setting an example to the rest of the Chinese mining industry which has a poor record currently because of the number of small private mines.

Reserves: 14.5years supply on current zone rising to 25 years in zone 3. Chairman showed an independent report which believes that the closure of many existing zinc mines is now producing a supply gap which will continue to improve the zinc price cycle to year 2012.

Profits: No problems known or foreseen to the repatriation of profits. However the chairman stated that the profits might achieve more for shareholders if the company uses these for further exploration and possibly buying back the companys shares. The latter move might help resolve the current shorting problem where it is thought that between 6 or 7 million shares are currently being shorted. This move could have a highly geared effect on increasing the share price and help deter the shorters/stock bashers from further activity.

Exploration: Chairman says company will be drilling a further 18,000m over the coming summer months and in his personal view he expects the company to steadily move towards becoming a gold mining concern, with some of the profits from the zinc smelting funding that work. An RC rig which costs 33% of the cost of a diamond drilling rig has been brought on to site.
Future exploration areas always being looked at + changes in Chinese Ministry of Land & Resources policy towards funding means that GFM will likely be offered many more prime government held assets in the near future.

Personal view is that GFM is a well and responsibly run mining company which is now likely to really grab a lot more attention as the profits start to flow as of next week. I am sure others on this BB at the meeting can fill the gaps where I have missed anything.

From The Mining news (S.Africa);



Zinc market remains in deficit

Following a 10% fall in cash-quotes mid-May, zinc prices have this month bounced back, to around $1 300/t, global mining research company GFMS MD Neil Buxton reports.

Writing in a newsletter, Buxton says that the latest data from the London-based International Lead and Zinc Study Group (ILZSG) suggests that concentrate production in the West rose by 2,2% in the first quarter, to 1,672-million tons. However, GFMS Metals Consulting believes that the figures are in fact higher than the reality.

The outcome of a tender for zinc concentrates by Peruvian miner Minera Atacocha will have important implications for the market, GFMS says.

The company called for bids for 25 000 t in 2006, 35 000 t in 2007 and 15 000 t in 2008.

Spot treatment cost (TC) quotes in Europe at $70/t and at $55/t in China, mean that the terms should prove favourable for the company. Despite strong demand in China, imports of concentrate up to April were flat last year at 218 333 t.

Further, Buxton quotes Chinas biggest producer of refined zinc, Huludao, as saying that this years output is expected to be 300 000 t, compared to a stated target of 320 000 t.

This was caused by a shortage of raw materials, as was the companys decision not to reactivate 80 000 t/y of capacity that was idled in 2001.

However, Buxton writes that the company is building a new 100 000-t/y smelter, which is expected to be commissioned later this year, and questions whether there will be enough raw materials for the plant to operate at capacity.

The Chinese concentrate market is further contracted by several smelter capacity expansions.

Outside of China, the restructuring of the supply side continues, says Buxton.

Another market development is the filing for insolvency by German producer Sudamin.

Production has, until now, been unaffected, but GFMS notes raw material shortages mean that the plant is currently operating below its 100 000 t/y rated capacity.

Buxton reiterates GFMSs view that the zinc market remains in deficit, which he says is supported by the latest ILZSG data.

Initial estimates suggest that global demand exceeded supply by 63 000 t in the first quarter, which roughly corresponds to a 40 000 t reduction in reported inventories in this period.

Sharesure,

Can we liven up the header a bit pls?

Do you kow how to paste HTML links in such as company logo, charts, etc?

A chart like this may be useful,



and maybe a LME Zinc stock chart,



And maybe at the very top of the header page,



And maybe a 1 year chart?

14:09 14Jun2005 RTRS-ANALYSIS-Zinc stocks seen falling despite LME rise

By Declan Conway

LONDON, June 14 (Reuters) - World stocks of zinc are expected to resume a downward trend in the next 12 months despite a recent jump of more than 100,000 tonnes in London Metal Exchange (LME) warehouses, analysts said on Tuesday.
They expected a world supply deficit of around 300-400,000 tonnes in the next twelve months that could knock LME stocks by a similar amount, depending on demand.

"Last year's stocks rose by about 100,000 tonnes and the recent rise should leave just about 80,000 tonnes off the LME," SG Corporate and Investment Banking (SGCIB) analyst Stephen Briggs told Reuters.

"We expect stocks will trend sharply down in the next twelve months and it's not inconceivable that the LME total could fall, with a possible interruption, to as low as 250,000 tonnes by the end of 2006."

On Tuesday, LME stocks rose 59,375 tonnes to a 4-1/2-month high of 623,050 and by 103,325 tonnes, or 19.8 percent in the past three days.
But the jump was merely a blip and further evidence of private, or non-LME housed, metal being exposed after a build-up of 300,000 tonnes in 2002 and 2003, analysts said.
"Despite the recent strong rise in LME stocks the market is still seen in deficit for the rest of 2005 and most of next year," another analyst said.
"However, calculating deamd is a tricky exercise and there are macro factors like exchange rates and the world economy to consider that may alter price and supply."

LME stocks had dwindled to a 3-year low of around 520,000 tonnes on Thursday from around 690,000 in April last year. Back then stocks had risen 100,000 in March -- the first delivery of private stocks.

Zinc is used mainly as an anti-corrosive coating on steel for the automotive, construction and household appliance sectors, all of which have flourished in line with China's hot economy which sucked in one-fifth of world supply last year.

Refined zinc consumption rose to 2.62 million tonnes in the first three months of 2005 from 2.53 million a year earlier, the International Lead and Zinc Study Group (ILZSG) said in its latest report in May.

Additional data from the ILZSG showed March producer stocks fell to 284,500 tonnes from 300,500 in February. At end-2004 they were 262,000 tonnes.

MALAYSIA
About two-thirds of the latest LME stock rise was registered in warehouses in Johor, Malaysia, with the rest stored in Italy and the Netherlands.
Traders said the stock rise partly reflected metal being warranted as part of a financing deal.

It was contracted for delivery to two major international traders from a key Asian producer, with an end-user already lined up, an industry source said.
"It's cheaper to store but more expensive to release than Singapore or Rotterdam and it was part of the agreement to use named warehouses only," he said.
The benchmark LME three months price has eased just $15-20 a tonne since Friday, suggesting the market had been aware of incoming metal, analysts said. At 1130 GMT, three months zinc was at $1,275/277 from around $1,290 at the kerb close on Thursday. In March prices hit $1,450, a high last seen in 1997.

However, analysts said that with the majority of private stocks now exposed on the LME, a truer picture of prices should emerge in the coming months in reaction to further stock moves.

"As long as the world economy doesn't fall apart it's still possible that prices could rise to $1,450/500 a tonne," Briggs said.
The benchmark spread was now at $12.50 contango, but at the start of the month stood at a backwardation of $18.00.

"If I was a consumer I wouldn't be bidding the price up as demand looks certainly weaker this (northern hemisphere) summer," the other analyst said.
"I can't see people being squeezed or strong forward positioning happening, leaving prices fairly steady and possibly slightly higher, depending on demand and currencies."

GRIFFIN MINING (a speculative buy), todays Independent

* Buy Griffin Mining. *

Will Griffin zinc or swim ?

Back this miner to continue its successful run.

You know all the potential risks with natural resources companies on AIM. The oil or minerals hinted at by early seismic studies may not actually be there, or it may not be possible to profitably extract them. The emerging markets in which these companies operate can be unstable, so the political risks are high. The costs of exploring are high, too, so companies often have to come back to shareholders for more funds. And there is the risk that commodities prices will fall, making once attractive mines uncommercial and sending mining stocks out of fashion.

At least with Griffin Mining, unlike some of AIM's more famous explorers, you don't have the additional worry of a management prone to hype or worse. Over seven years, Griffin has done what it said it would, concentrating its efforts on a site five hours' drive from Beijing, proving up the reserves of zinc that appeared to be there and investing in a new mine which begins production today.

It is a wholesome story, and one which has rewarded investors with a share price rise each time progress is proved.

And from here?

The zinc price looks set to remain high because of a supply shortage, and the site has unexploited extra potential.

It could be making earnings of * 5p per share next year * and the stock, at 32.5p, is a speculative buy.

After that summary, I can't see why the Independent rates Griffin as a 'speculative' buy. Surely its proving itself.

One other little gem of info that most reports seem to omit. Griffin has developed the current site alongside the Chinese government who have expressed their complete satisfaction with progress and with the management of Griffin. The Chinese government have already indicated that if Griffin bidded for future mining development sites within their territory they would be looked on very favourably. IMHO this alone justifies huge upside potential in this stock.

Starfrog,

I think you mean 'proven' in the first line!

With regard to The Independent article, it makes you wonder if the writer knows anything about GFM at all, or just copied a few notes from someone else.

As you rightly say, GFM are in collaberation with the Chinese government, who must be impressed with the mine that GFM have built, and they are already in talks about other potential projects.

It failed to mention that GFM are in fact selling their zinc to a local factory at $300 HIGHER per ton than the LME price!

That there is such a shortage of zinc in China that the local factory is sending it's own trucks to pick up the zinc, gaining GFM a further $24 per ton!

Nice gently steady movement upwards last few days..
:>)

Any views on 5% drop at a time when we are expecting upwards ? Must be tree shaking as I cannot see it finishing the day in red figures.

Oakapples,

Just spoke to Griffin, minestart did not occur yesterday due to an unexpected Chinese VIP visit, and the contractors running some last minute checks.

there sre no serious problems, and production commencement is imminent.

Griffin WILL RNS as soon as production commences.

Many thanks Andy - you really are handy (sorry!)

I do my best! :-)

A small retracement today, not a surprise in this market.

Andy,

Whats your view on when the RNS will be issued, monday morning ?

aldwick,

Monday would be my best guess, gives them the weekend to work through all the tests.

The directors are flying out there next week, so they may even delay until they have seen it for themselves I suppose, but I'll be looking for an RNS Monday, China is seven hours ahead so (hopefully) they will already have completed some production by the time our market opens.

Isn`t it more likely that the Directors will be on site "When the Zinc hits the Pan !!"

Oakapples,

Well if it was my company, I would be there for sure, so yes, you MAY be right.

It goes against what they said at the recent AGM though, when they said production was due to start "in 5 days". Anyway, once it's confirmed as started, it's all academic, IMO.

I am confident it will commence next week, then we may see a small boost for the price.