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.

Objectively, what is a target sp if GFM achieves its production plan?

Offers now moved to 101, a great day so far for Griffin.

Winsorsmyth, 1.21 was the new target set by the times however if all production plans this year are met I would have thought more like 1.30's

winsor/explosive
Yes id say 1.30s on zinc alone and even more with gold production.
Regards,
Griff.

Hi Griff, has Griffin a mining lisence for gold yet? If not then are they able to sell any stocks which they have accumulated?

explosive-
I think the gold licence is not an issue, Or why would they prepare the gold circuit for commissioning.
Regards,
Griff.

Good write up on Minesite today,

Minews Story Date: May 12, 2006

Griffin Mining Expected To Announce Excellent Results Next Week.

By Rob Davies

Griffin Mining is in the happy situation of being in the right place, China, at the right time as it produces highly sought after zinc. It will release results on May 16th so the company is understandably tight-lipped at this stage but recent press releases convey a strong, positive message.

Griffin operates the Caijiaying mine in Hebei Province, some 200 km north west of Beijing. It is easy to find, leave Beijing, go past the Great Wall and it is a tarred road all the way. Griffin has built the first new mine in China by a foreign company and is already producing after successful commissioning of the mine last June. In the six months to the end of the year it produced 92,000 tonnes of ore that generated nearly 7,000 tonnes of zinc in concentrate. The initial projected rate was 23 tonnes per hour to give 200,000 tonnes a year but in February it announced an increase to 32 tonnes an hour that will take the annual rate to 275,000 tonnes a year.

The concentrate produced is auctioned every month to local smelters who pay for it in advance and this eliminates negotiations on freight and smelter charges. It also gives the mine a slight premium to LME prices. At the moment zinc mining is so profitable that extraction and processing of the gold rich ore has been delayed, although some free gold is being recovered on Whitley tables.

In March the company announced the results of a major underground drilling programme that significantly extended the resource. Intersections were typically 10metres long with gold values ranging from 8 to 19 g/t and zinc grades from 4 to 10%. This resource sits below the current 1,355 metre mining level and so will not be mined for a few years, but it is nice to know it is there. On top of this potential at the mine the company has completed a reverse circulation drilling programme to explore other epithermal prospects in its lease. This programme discovered another zinc target 1,200 metres from the mine with an intersection of 52 metres of 5.45% zinc.

Financially the company is in good shape with no debt and US$7.5million of cash as at last June. The transition from exploration to production should have a dramatic impact on the cash flow. Although Griffin only owns 60 per cent of the mine it has the rights to 100 per cent of the cash flow for the first three years of production. At current zinc prices that is a handy thing to have. The probable ore reserve is 2.75 million tonnes of 12.59% zinc, 2.47 g/t gold and 445.63 g/t of silver but the indicated resource is 16.9 million tonnes at 7.84% zinc and 0.75g/t gold giving plenty of potential for expansion and a good mine life.

Planning to convert the mine from hand shrink stoping to mechanisation is in hand although wage rates are not onerous for the 200 employees and 200 contractors. Few companies are blessed by record metal prices as they start production, but Griffin appears to be one of the lucky few.


Companies featured in this Story
Griffin Mining Ltd (AIM-GFM)

Regards,
Griff.

Seems like good news. let's hope that the workers and contractors get their due rewards. All shareholders have had to do is to put some cash in and have 'faith' !!

Griff.
Nice report , by the way

Holders here - take a look at #953. You may find that worthwhile

Sharesure, holding both and in early :-) Looks good all round

Also holding both, either the bubble has burst on the markets today or some serious seculation, down some 7.5% on my entire portfolio

Quality & Value will win through in the long term and GFM has both, though patience and nerves of steel may be required! 50 Day Moving Average not broken today.

Have no intention of selling GFM unless of course my 1.30 target is hit before any announcement to change this target!

Silver & expl.
Against a different backdrop than yesterday, todays prelim results statement would have pushed sp upwards towards that 1.30. C'est le vie!.. it will as sure as oeufs are oeufs get there.

explosive,

Griffin have a licence to mine gold up to 3% of the quantity of zinc produced, ie as a by product.

In order for them to mine gold itself, rather than as a by product, they will need to apply for a licence.

They have a Chinese partner, so at last year's AGM they said this would not be a problem.

Looking at the Preliminary Results published today, they make excellent reading with only a minor downside, that being the the Foreign Exchange issue, ie. US$ being the working capital, so weaknesses in the dollar impact upon profits. That said though the management appear to have their feet firmly on the ground, remain objective and judging by the Chairman's comments at Para No.3 fully understand the true meaning of 'Value' in relation to potential acquisitions. The drop in SP has been overdone IMHO. No debt, Profit making, Increase in production and the prospect of Gold! Onwards and eventually upwards :-)

explosive,

Griffin have a licence to mine gold up to 3% of the quantity of zinc produced, ie as a by product.

In order for them to mine gold itself, rather than as a by product, they will need to apply for a licence.

They have a Chinese partner, so at last year's AGM they said this would not be a problem.

Thanks for the info Andy

For what it's worth, The Independent has a HOLD recommendation for GFM based upon the company's track record of delivering and a Forward PER of 10. :-)

Griffin Mining has so far always delivered on its promises to investors. In 2006, it is forecast to notch up earnings before interest and tax of $29m compared with $400,000 previously. That puts it on a forward rating of just 10 times earnings. Hold for more gains says The Independent.