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.

Some chunky Buys at the tail end of the day plus when are MAM going to stop showing X deals (Agency Cross) as Sells when they represent both a purchase and sale at an agreed price. Somebody seems to be keen to pick up sizeable amounts of stock ahead of Roger Goodwin (FD) returning from China and releasing an RNS giving a timetable for doubling current zinc production and the assay results of the gold drilling programme late last year.

GFM's aim was to get an RNS out by the end of January to say when they would be able to double their zinc output and also give their gold assay results from last Autumn's drilling programme.With the zinc and gold prices still so strong when that news comes out it will have a positive effect on the sp.

Havn't they missed the target then, I mean getting the RNS out before the end of January?
UC.

This was posted on ADV.. early today, surprised that no one as mention it .

All,

edit: this is regarding the Colling Stewart research note.

I have not seen the research note but most of this has been forwarded to me from two separate sources so I trust it is accurate:

-This year capacity will be upgraded to 275kt p/a, next year to 500kt p/a (expected total cost c. $2m to be funded from profits)
-The ore grade is lower than expected (c.9%), assuming this continues production at 500kt p/a will be 44kt zinc and 40,000oz gold
- operating costs are in the $1100 / tonne zinc produced region.
- the gold circuit is expected to be switched on imminently
- the 2 year tax holiday starts Jan 06, so tax will be payable for the 2005 production, but not this or next year.
- Griffin expects to publish updated resource figures in April
- 36,000m of drilling planned for this year
- results from previous drilling expected within 6 weeks, all expected to be good.
- dividends expected from 2007.

The 85p price target is calculated by using 1.5x the NPV of $162,022,982 which was calculated using
- current spot prices for gold and zinc fading to $400/oz and $1,102/t by 2012
- discount rate of 8%

Using long term metal prices of $500/oz and $1542/t gives a target of 1.15, using $350/oz and $815/t gives 31p.

aldwickk, thanks for that. I am surprised that they have used a broker note to confirm this + the production cost for zinc have increased quite alot as a result of lower grade ore being shunted through. However the predicted gold output more than makes up for that.

Record zinc prices on global shortage

Zinc prices have risen so fast that Robin Bhar, a metals analyst for 22 years, is about to raise his forecast for the second time in two months.

Tuesday, January 31, 2006

Zinc prices have risen so fast that Robin Bhar, a metals analyst for 22 years, is about to raise his forecast for the second time in two months.
"We've all been left behind," said Bhar, who follows the market in London for UBS. "It's just phenomenal. No one in their wildest imagination thought it would get to these levels."

Zinc for delivery in three months on the London Metal Exchange was US$6 (HK$46.8) lower at US$2,244 a tonne in early trade Monday. It traded at US$2,320 Thursday, the 11th consecutive day the metal rose to a record.

Little relief is in sight, as mining companies restrain investment in expanding output and China stops exports and begins imports of the metal. "There is a global shortage," said Greig Gailey, chief executive officer of Melbourne- based Zinifex, the world's second- largest zinc supplier.

"New mine development is a lengthy process and it's difficult to see new mines coming on stream in the short to medium term." His company has no new mines planned until 2008 at the earliest.

Driving the market is China, stoking demand for zinc, used as a rust-resistant coating for steel in buildings, cars and appliances.

Pension funds and speculators are joining the rally in zinc and metals including copper, aluminum and gold, seeking an alternative to stocks and bonds. The Reuters Jefferies CRB Index, which tracks commodity futures, gained 17 percent last year, compared with a 3 percent increase in the Standard & Poor's 500 Index of US companies.

"Two, three, four, five years ago, we would have seen that with the hedge funds, but not the big state pension funds," said Bob Diamond, chief executive officer of Barclays Capital. "We are seeing an asset class shift." The shortage of zinc is a legacy of lower prices in the past and a lack of investment by the industry. Prices dropped to a record low of US$742 a tonne in August 2002, prompting mine closures and leaving producers such as France's Metaleurop bankrupt.

London-based Anglo American and Xstrata are now struggling to meet the world's zinc needs. Labor disputes this month at Mexico's Industrias Penoles and mines run by Peru's Volcan Cia Minera have added to concern that zinc production will lag behind demand this year. Inventory will drop this year as demand outpaces supply from the world's mines. Nick Hatch, an analyst at Investec Securities in London, estimates zinc use will exceed global production this year by 310,000 tonnes. The stockpiles monitored by the LME have declined by 40 percent in the past month to 375,750 tonnes.

"There is a dearth of new projects as a consequence of a lack of exploration," said Alan Heap, Citibank's Sydney-based director of commodity analysis. "Deficits are set to persist."

Heap, who said in 2005 that metal markets were entering a "super cycle" jump in prices, last week raised Citibank's first-half average zinc price forecast 44 percent to 97.5 cents a pound, or US$2,150 a tonne.

Morgan Stanley this month raised its 2006 zinc forecast 12 percent to 95 cents a pound, or US$2,094 a tonne.

Zinc is already up 18 percent this year. The price was forecast to rise 21 percent for the whole of 2006, averaging US$1,666 a tonne, according to the median estimate of 24 analysts polled by Bloomberg.

"We expect the deficit to persist into 2007, implying a price peak may be over a year away," said Simon Toyne, an analyst in London at Dresdner Kleinwort Wasserstein.

China became a net importer of zinc in 2004 as its economy boomed, according to Canada's Teck Cominco.

The nation's zinc demand jumped 16 percent to 2.7 million tonnes in the first 11 months of 2005. BLOOMBERG

As GFM got the ok from the Chinese to export zinc ?

And still no RNS update!! Bloomberg announced this morning Gold at all time high since 1989.

Amities / Always been extremely bullish on GFM but at this moment in time it needs news desperately in order to get these damned "shorters" off thier backs{ known to be in the region of 8 million shares }. .Until then they will trade sideways and downwards. .lf solid assayals of gold are to be believed and zinc prices remain high GFM will break this 60 to 67 parameter with consumate ease. BUT WE NEED NEWS. . But those who know the board know this has never been a company that bolsters thier ebbing s/p with RNS tittle tattle or bow to shareholders s/p concerns { witnesses by thier violatility of the past two years .They juste quitely and dilligently get on with the business . .Rememeber ..Patience is a vitue . ,,,and this is a stock woth being patient about. , @+ J

Zinc pops up another $82/tonne and what does the sp of GFM do? It's perverse.
The directors were hoping that the various pieces of news we are all waiting on would be ready to announce by the end of january although that was caveatted that a number of things needed to be sorted and assessed so the timetable might slip a little. If the sp going down in the last couple of trading days is shareholders viewing that as a bad sign, I doubt that that is a valid conclusion to draw. I still rate this as a great company which should advance a lot more as information on cash flows, assay results etc are available.

holding...

Ditto

Please check out Aim Resources on news which was issued yesterday re: Zinc
& quanties in mine yet to come out of mine.

Parkin, I had a look sometime ago but I think I'll wait for fundraising......

Anyone think we'll get our news soon?

Who knows with this board, I think The FrenchConnection hit the nail on the head with his/her last post. Patience is whats required and personaly haven't even considered selling yet!! A firm hold on my portfolio...

Strong start today..news due.

looks like its buy em whilst there cheap...

The Colling Stewart extract (see #824 ) might be all we get for a while according to one of my sources. A full resources report is apparently planned for April and in the meantime everything that they had planned to achieve on the zinc and gold production is going according to their schedule. That is a different message to what I had been led to believe in terms of timing of announcements.

Investors seem to have info from to many different scources, No one knows who is accurate, Its better to wait for official news from Griffin.
In the mean time just remember,This company is mining Zinc in a Zinc bull market, with no debt, no hedging, and planning to increase Zinc production, All this with the added bonus of gold.
(Me thinks we should buy some more)