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.

Financial Mail on sun
"The devastated city of New Orleans is a vital port. Its warehouses hold 25% of all America's coffee bean stores and almost half of all the zinc traded on the London Metals Exchange.
In London's Liffe market, where contracts are traded for future commodity supplies, the price of coffee beans soared 8%, while zinc jumped 5% last week."

Would have thought GFM would have moved up more this morning.

Aldwickk, so would I. The early gold drilling results look quite good; some mines make money on a fraction of those figures. Gold in the ground is worth between $25-$50/troy ounce depending on depth. So there is plenty of scope for the Chairman's view re increasingly becoming a gold producer, being realised.

aldwick, sharesure,

well i though tthe most pertinent part of the RNS was this;

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The Company continues to strive to achieve consistency in achieving the planned
initial production rate of 600 tonnes of ore per day and the scheduled zinc recovery rate.

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IMHO, this suggests that the company have not consistently achieved either, yet, and is probably the reason for the drop this morning!

Grahamsha,

The zinc in New Orlenans is STILL included in the LME stocks, because it still exists, and is simply temporarily inaccessible.

Estimtes are that they are due to start pumping out the city soon, so if there is any rise in the price of zinc, caused by this temporary inaccessibility, it will only be temporary, as the zinc will soon be re-available, and would then fall back.

After 911, a considerable amount of silver (and gold) was stored in vauilts close to the WTC, but the price of silver didn't rocket!

Sharesure,

Although I agree the gold results were excellent, they were quoted in isolation, and they didn't mention how many holes were drilled, and what distance apart the successfuil holes were.

We need more information before we are able to draw any proper conclusions IMO.

Andy, I agree re need for a lot more info on the drilling; that was why last week I posted that I didn't think they would be able to say anything until end Sept/early Oct. I feel relaxed about GFM building up the zinc production, the gold drilling and prospect of other assets to explore just giving the added potential for some surprises every now and again.
Re the price of zinc and the disaster in New Orleans, I agree that that is only a temporary influence; however there is an underlying pressure on the zinc price because of medium term predictions of shortages; that's assuming the world economy continues to grow well

I liked this bit,

"In the search for growth in our region and in our area of expertise, the Company continues to pursue and evaluate other world class mining projects".

Not the 1st time the co. have said that so a potential nice surprise rns to come in the future.

I always worry when anyone mentions anything "world class"

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Main page content:
Zinc prices hit eight year high
By Chris Flood
Published: September 6 2005 12:18 | Last updated: September 6 2005 12:18

Zinc prices rose to an eight year high after the London Metal Exchange suspended delivery against warranted metals stored in New Orleans.







The LME has almost 250,000 tonnes stored in New Orleans from a total of around 560,000 tonnes and there are concerns that the condition of the zinc stocks could have deteriorated if flooding has caused oxidisation in the metal.

Three month zinc prices reached $1,452.50 a tonne before easing back to $1,442.50. Traders said prices were also supported by covering of short-positions.

Copper prices also appear to have been affected by concerns over LME stocks in New Orleans. Three-month copper edged 0.4 per cent higher to $3,695.7 a tonne having reached an all-time peak of $3,725 a tonne on Friday. The LME has 900 tonnes of copper stored in New Orleans out of a total of around 70,000 tonnes.

Traders said that concerns about the outlook for the US economy combined with dollar weakness and lower US Treasury yields had encouraged hedge funds to switch interest into copper and away from the US currency.

Dealers also expect demand for base metals such as copper to be supported by a surge in reconstruction spending in the areas affected by Katrina.

Gold prices eased modestly to $443.10/$443.80 a troy ounce from Mondays close in London of $445.50/$446.25. Prices could be supported by further dollar weakness amid growing speculation that the Federal Reserve might be forced to take a break from raising interest rates. However, traders also said that a correction to lower levels was still a risk due to speculative long positions in the market.

In spite of the announcement by the International Energy Association that its members would release 2m barrels of oil for thirty days to compensate for the loss of production and refining capacity cause by the impact of Katrina, crude oil prices are not expected to sell-off aggressively. IPE Brent for October delivery rose 42 cents to $65.27.

Trading in New York is due to restart after the markets were closed for the Labor Day public holiday on Monday.

UK forward gas prices edged lower with the October IPE gas contract trading

aldwickk, I don't want to be a pessimist here, but isn't zinc meant to prevent corrosion; therefore being under water for a few months should not affect it, should it?

LONDON, Sept 6 (Reuters) - The world's biggest metal trading market, the London Metal Exchange (LME), shook markets on Tuesday as it temporarily suspended warranted metal stored in New Orleans warehouses after Hurricane Katrina devastated the city.

The move pushed zinc prices on the LME to $1,452.50 a tonne -- a high not seen since September 1997. The LME only last week assured the market that metal stored in its New Orleans warehouses remained good for delivery.

Prices eased back to $1,431/437 at 0830 GMT for LME zinc, a metal used mostly as an anti-corrosive additive in steel to make cars and trucks.

"The Exchange has noted that the shortage of reliable information about conditions in New Orleans has led to unacceptable levels of uncertainty about the extent to which metal on LME warrant in New Orleans may be subject to damage from flooding," it said.

"In order to safeguard the orderliness of trading, the Exchange has decided temporarily to suspend New Orleans warrants until the situation can be clarified."

The move prompted investors to buy zinc to replace gaps in orders for short-term delivery.

The LME has almost 250,000 tonnes of zinc stored in New Orleans out of a total of about 560,000, while it only has 900 tonnes of copper out of more than 70,000.

"The (LME) Special Committee will keep the LME zinc market under review and will remove the backwardation limit as soon as it considers it prudent to do so," the LME said.

The LME has just 1,200 tonnes of aluminium out of a total of almost 510,000 stored in New Orleans.

With a large proportion of its zinc stocks stored in warehouses left in the ravaged trail of Hurrance Katrina, further measures have been taken to try and ease worried investors, the LME said.

Those with short positions that are due for delivery on Tuesday, and who are unable to effect physical delivery, will be able to defer by a day without penalty, it said.

The LME said those holding short positions falling due on Wednesday, and subsequent prompt dates, and who are unable to effect delivery or borrow metal at the premium demanded for prompt delivery, of $3.50 per tonne, will be able to defer for a day at a penalty of $3.50 a tonne.

Those with long positions for prompt delivery on those days who are subject to deferred delivery will be entitled to compensation of $3.50 a day, it added.

The LME has suspended warrants for various reasons in the past. A few years ago it suspended warranted metal stored in the Netherlands after the facility was removed from the list of LME warranted warehouses.



Reuters 2005. All Rights Reserved.

Oxidization, i read.

Or it could have been something like that.

aldwickk, zinc price up $77/ton today apparently. One longer term outcome of the disaster from Hurricane Katrina may be the quantities of zinc req'd for the eventual rebuild there. Possibly a large amount of those stocks which are underwater right now will need to be prioritised for the rebuilding.

Sharesure,

I picked this up elsewhere.

---------------------------------

FT. From article by K.Morrison.

Zinc prices jumped to an 8yr high after the London Metal Exchange suspended
some trading amid concern over the condition of large stockpiles in New Orleans.
N.O. accounts for half of the inventories of zinc that can be traded on the LME and a quarter of the world's total stockpiles.

Prices fell late afternoon as some N.O. warehouses said that the zinc in storage was not damaged.

Andy, Guess yesterday's blip up was bound to have a reaction. When recently I spoke to GFM mgt. they were very pleased with how evrything was going, boh on production build up, selling the product at higher than LME prices and the RC drilling. They expect to be abe to say more about their RC drilling at the end of the month. Think they are now going to be drilling the southern part of the licence area; that was where the best prospect of gold was thought to be. Up to now the gold finds are incidental to the zinc finds.

Some chunky trades at the close, and starting to see those X- trades again.

dibbles,

Well all the sidnificant trades all look like buys.

I don't pay much attention to 'X' trades, as there is a willing buyer and seller, so it's nuetral IMO.

Sharesure,

I'm looking forward to the RC drilling results, but I expect nothing to October, as there always seems to be some slippage with mining juniors.