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.

Amities / Mick . As often happens with stocks with narrow spreads unless you have level 2 the trade is treated as a "BUY" if it is nearer the "Offer" price than the "bid" ,,,,,and vice versa. ,, Happens frequently ,,,,,,tu es bienvenue ...a'bientot ...@+ J ,

http://www.proactiveinvestors.com/registered/articles/article.asp?GFM

Griffin Mining, the first western company to build a new hard rock mine in China, today announced, as expected, a further increase in production from the Caijiaying Zinc and Gold Mine.

Griffin started production last year at Caijiaying, and initially targeted zinc ore bodies for extraction. Some investors may find it surprising that zinc would be extracted first over Gold ore, but there are two very good reasons why this is the case.

The first reason is that Griffin initially proved up a resource of zinc, and even though their was evidence of gold bodies, the higher grade gold lies beneath the zinc.

The second and more fascinating reason is the incredible demand for zinc in China. China has build a number of smelters to cope with demand for base metals as the country continues to expand rapidly.





The problem though is that even with excess capacity to take in ore, zinc is in tight supply. This has played out brilliantly for Griffin, which was lucky enough to move into production at a time when demand for Zinc was soaring. As a result, Griffin is receiving a premium for its products compared to prices on the London Metal Exchange (LME).

Griffin however, knew when they built the mine that at some point extracting gold and zinc would be possible, so the company added a gold circuit in the original mine construction. The gold circuit has yet to be switched on, but recently Griffin began testing it, as the company is nearing depths were gold intersects and grades are high enough to warrant extraction.

Today Griffin announced that production from mine processing facilities had increased from 200,000 tonnes of ore per annum to 275,000 tonnes. This was completed at no extra capital costs, and is part of an ongoing ramp up to maximise the current mines capabilities. Directors in Griffin, also have options that expire at the end of February 2007, which can only be exercised if the mine is producing at an annual rate of 500,000 tonnes of ore per annum. Needless to say, the company has considerable motivation to continue increasing production for the next 12 months. This will involve some capital expenditure to add in extra flotation, an additional settling tank and some other equipment. The revenues currently being generated are more than sufficientto cover these outlays. Griffin has the enviable position of having no hedges on its zinc production, and the mine has no debt.


Griffin is also in the process of securing addition land surrounding the current mine. Griffin believes that there could be further ore bodies that lie beyond the current license along the F45 Fault (Click here)

Griffin is also looking at other projects in China, with a particular taste for base or gold metal deposits.

Considering that Griffin is selling Zinc when prices are incredibly strong, one has to wonder what Griffin intends to do with all of that cash? We put that question to Finance Director Roger Goodwin, who conceded that IF Griffins ambitions at Caijiaying bear out, the company will consider a dividend pay out to reward the loyalty of shareholders. Roger stressed that this decision has not be taken yet, but that it was an option the company is considering, and could possibly occur in 2007.

In the meantime, the company has a pretty full plate between attempting to move production to 500,000 tonne of ore per annum, and acquiring and exploring the outlying areas around Caijiaying. Not to mention the continual drilling in the immediate vicinity to identify further reserves and resources of zinc and gold

For further reading on understanding how to value mining companies we recommend

Thats a very good read, thanks.

Message to Magicmick -I thought that if you sold and brought back in - within a 30 day period you could not use your gain within your capital gains allowance - unless repurchased in the wife's name ! maybe someone else could confirm.

re:msg 892 i have no idea as i am new to shares. could someone shed some light on this subject please.thxs again.

While waiting for GFM's true value to be appreciated take a look at COP - might hold out some quick gains.

ss - been watching this for months
shows signs of taking off, then drops like a stone.
have you any news?

The share seams to have gone to sleep, I expected some volumes in the past week!

Price up 7% already, 70p closing price ?

This is looking very good now, just what holders have been waiting for. Well done GFM! Long term story is looking very good now. Wait until the institutions start piling in.

bingo!

How much exta revenue are we talking in first full year recovery. Say 7 g/t x 275000 tons pa divided by 28 = 68,750 oz x $500 per oz = $34,375,000 pa. Have I got it wrong or are we talking loads of money here?

p-snow,

Have they declared a JORC standard resource?

for an 8% rise and 4 million shares traded, theres a strange stillness about the market makers... no price movement since 9.16
anyone have any idea on this?

Amities / En brevite mes amies / Great news !!! Yes . LOTS of money !! . .................................................................................................................................................................................... The statement accredited in the RNS to the Chairman,Mladen Ninkov, that "these extraordinary results speak for themselves " say it all in a nutshell . There are a plethora of pure gold prospecting companies valued at 10x GFMs s/p who would be green with envy at a strike of such attractive gold deposits. And considering gold was the second string to the bow of GFM i see 80p very soon. Very soon . For from small acorns do great oaks grow ! ..............And yet look at all the sellers letting their shares be literally soaked up by MMs ......Methinks a big institution is making a principal position . How say you all ?? Bonne chance ! @+ J

Juste look at the number of short term traders and t+10 , 15, 20 closing their positions between 65 and 66 yet mms merely soaking them up !! Usually a plethora of "sells" like that would shave a few points of GFMS very volatile s/p .. But as yet it isnt ! . A Principal position is in my opinion being sought by a big player @+ J .,,,,accompanied by the smell of burnt shorters ...

indeed a rise FC!

I dont know Andy.

My only concern is how the Chinese view other resources. Their attitude may be that Griffin have a remit to mine zinc and are being paid hansomely to do it. Any thing over & above zinc the Chinese may view to be theirs. they may be prepared to pay Griffin over the odds to get it out of the ground and process it but may not want to pay anything like its true market value or see the revenue spirited out of the country into western pockets. The Chinese are shrewd businessmen and I think if I were them Id already have a strategy for getting my hands on a decent slice of the gold cake.

Some of those points regarding gold have already been covered , nothing to worry about.