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.

Parkin, I share your frustration. Will be writing again to Jeremy Lacey, editor, but when they can do a lead article on China without covering GFM, small hope that they have a view on the company as a general results article. All this in spite of covering a lot of much smaller caps. plus, in my view in recent issues, some really spec. mining stocks where shareholders are likely to lose their shirt. If you or any others following this thread feel like emailing Shares on editorial@shares.msm.co.uk it might help the team realise that they are not serving many of their readers' interests on this company. Nobody is asking them to ramp it; I'd just like to see their view of it and see if it coincides with mine.

Zinc price down?

no...don't think so...just intra day variations I think

Just wondered, as several miners have taken a hit today, some
through the copper price falling, wondered - with GFM falling back
a tad - if zinc was also suffering.
Chart on basemetals.com shows a slight drop since May.

If zinc is downa little,it is unlikely to be a lasting problem as the supply/demand gap projections should provide a lot of pressure for price of zinc to rise. Much depends on Chinese economy continuing its growth. The recent revaluation of the Remnimbi by some 6 % will make the profits from zinc sales within China worth more.

Courtesy of investech:

Positive Candidate (Medium term) - Jun 22, 2005
GRIFFIN MINING ORD $0.01 is in a rising trend and a continued rise within this trend may be expected. In addition, the price has now fallen back towards the floor of the trend channel, which should give a reaction up. Has also broken a resistance level and given a positive signal for the long-term trading range. The stock has marginally broken up through the resistance at p 37.50. An established break predicts a further rise. Positive volume balance strengthens the stock in the short term. RSI is overbought, which indicates a potential short-term reaction down. The stock is overall assessed as technically positive for the medium long term.

Totally agree, today is I think just a blip, due to the
mining sector being under pressure generally - sorry that
was my point. Certainly medium/long term GFM is positive.

Sharesure,

looking at the lastest 30 day chart, zinc has certainly retraced a little from the high, but not dramatically so IMO.

Andy, Hope it's just a blip. I'll try to find a copy of the supply/demand gap projection chart and will paste it. Apparently the reason this gap is emerging is because many older/inefficient smelters are closing because of environmental regulations.

aldwick,

yes a large jump in the LME stocks caused the price to dip, as more zinc was released onto the market.

I wonder what happens as the LME stocks reduce?

Will the zinc proce rally?, and how much more zinc is held in stock that can be placed on the LME when stocks are low again I wonder?

I remember someone posting an article recently stating reasons for increased
zinc stocks and why it would be short lived after which prices should push on
again.
Can't remember many details now but I think it came from a reputable source.

Mail on Sunday have started what I think may be a two part article on China and have singled out GFM as an example of how the country is industrialising fast. Makes interesting reading if only to counteract all those who were slagging off the stock by saying that there was no mine at all! Hopefully they will run the second part of the article and suggest companies which might benefit from the changes taking place in the Chinese economy and its outlook towards western investment. I would be surprised if they didn't mention GFM again next week if only to confirm that the company's track record so far stands it in good stead with the Chinese authorities for being considered for further joint venture mining deals on some of the government held assets which the chairman mentioned at the last AGM. Nice to see GFM getting some recognition at last.

Sharesure,

Yes it's a good advert for GFM, and the article can only be positive for GFM, as it will increase awareness of the company.

Slightly surprising to see the weakness in sp today; business as usual for GFM! Just read an interesting research document on metals; in the case of zinc Tech Cominco are predicting 1.5% growth pa in demand which will worsen the current shortage of zinc concentrate. Prediction is a shortfall getting steadily worse, chronic shortage in two years, and to the extent that 10 years out the deficit in supply cf demand will be 4m tons pa, equivalent to 8 Red Dog mines (currently the largest in the world)

Sharesure...some people are short term traders. GFM has just risen a large percentage so the profit takers have pushed the price down...not for long I think!

Dynamite, Reckon you are right. I too am relaxed that GFM is set fair for a period of sp growth in the second half of 2005. It's just odd that sp set-backs can happen even on days when they have good comments about the company. As you imply, cashflow and profit will speak for itself as and when they establish the production/sale cycle. Only wish I had more free cash to use the opportunity to buy more.

Agree Dynamite - has the look of profit taking about it.

Nice to see a little improvement in sp today. It would be timely for Shares mag. to offer an opinion on this one as they missed all the results; I'd like a comparison with ZOX, one of their favourites. Can't believe it would be unfavourable

Shares Magazine still ignores the existance of this company in its latest issue! Quite an omission considering the size of the company.