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.

Sharesure,
Many thanks for your efforts..
They must think there's a lot of gold in them there hills if they expect it to
overtake the zinc operation.

p.s.- Thanks also to Andy.

Sharesure

It was mentioned on the advfn site that the co. had been approached previously
by Ivanhoe, did you hear any of that?

dibbles,

Yes that was mentioned, and the answer was an emphatic "no"

dibbles, ie 'No' as in Ivanhoe offered too little. The Board are seriously concerned that they are vulnerable to a bid in this lull period before they get their first batch of zinc sold. An after meeting chat with the chairman did give me a lot of confidence that he has the expectation (and a plan) that the sp will hit 50p fairly rapidly. The ideas for stuffing the shorters will produce a geared effect on the price.
As for takeover approaches, if another is received he has good plans for how to mount a defence to ensure that the company is not 'stolen'
Re zinc v. gold.He quoted the geology of the area being classically similar to another mining area (didn't catch which) where the zinc on the periphery had a gold deposit in the centre. I think he is personally very confident on this but as a plc chairman cannot give a company view just yet. I know that a lot of mining directors have a reputation for being over bullish, to say the least, but in 4 years experience of speaking to Griffin's chairman I have found him to be almost over cautious.

Sharesure,

Thanks, that's what I meant, but upon re reading, my post wasn't clear.

Andy, Sharesure,
Great feed back from you both, from the meeting, did they say anything about the 15% RAB holding , i have been told that the Chinese now have it.

aldwickk, They did say that they thought the stake had not gone to a single purchaser but included some institutions. I have a suspicion they are not too clear about where it has gone because they seem so concerned that an opportunistic bid will emerge. There view is that they are excited enough about their current plans to wish to remain independent and would go to considerable lengths to ensure they don't get swallowed up cheaply. However, they did comment that some of the institutional holders may be tempted to take a good profit if they see that opportunity so they are not complacent about how successful they will be in fending off a serious bid.

UB18 is the steel & metal index, i wanted to use a zinc chart which would have been more interesting.

Any write ups in the weekend papers?

Sharesure,

"There view is that they are excited enough about their current plans to wish to
remain independent and would go to considerable lengths to ensure they don't get
swallowed up cheaply."
Perhaps the news in the next month is a management buyout?

Don't think a management buy out would be good for shareholders, rather there was a bid war between a number of interested companys.

aldwickk

Agreed- just thinking out loud.
Mind you if management offered 1 a share, not many would complain and they
would still have a bargain longer term without the fear of a hostile bid ruining
all their hard work just as its coming to fruition.

That is a bold thing to say considering you can never be sure what way the market will react to any particular news.(Hold on for 4 weeks when we expect a
major re-rating and shorters to burn.)
The only idea's I can think of are:-
1)As they will be cashflow + very soon and have 9m in the bank perhaps they plan a share buyback sooner rather than later.
2)Further exploration licences from Chinese government.
3)Fast forwarding of gold exploration possibly with confidence of whats there now.
4)Very + broker note coming.
5)As I said earlier, a management buyout at a level suitable to most.

I'm stuggling to think of anything else so I'd better go and lie down now as my
brain hurts...lol.

aldwick,

Absolutely agree, another reson why the price needs to rise, they must be vunlerable at this (seemingly) low price

They mentioned 52% of the shares are institutionally held, so they are vulnerable IMHO, and they admitted as such at the AGM.

Aldwick,

Absolutely stagerred no posts on here today, we are up 2p!

Good volume, although a slight pullback at the close.

Minesite reported this from the AGM last friday;
=============================================================

Date: June 14, 2005

Griffin Mining Gets Into Production In China On Time And Below Budget Without Any Help From Banks.


With an excellent bit of timing Mladen Ninkov, chairman of Griffin Mining, was able to announce at the annual general meeting today that production would start on Wednesday at the companys Caijiaying zinc mine north of Beijing in China. Nitpickers could point to the fact that he forecast back in April that production would have started by the time of the AGM, but why quibble about two days when it has taken this company seven years of hard graft against the odds to get to this point.

The processing facilities have been constructed and tested by dry and wet commissioning and the underground mine workings have been developed. Caijiaying is the first foreign owned and built, new hard rock mining operation in China in over 100 years and that is quite a feather in the caps of management and of the AIM market as the mine was funded out of equity. As a result Griffin has no debt on its balance sheet, no hedging commitments and substantial cash balances. This puts it in a very strong position as it does not have any bank covenants round its neck, nor have to pay any interest.. It was also able to build the mine itself, rather than having its bankers agree a fixed price contract with an EPCM contractor, and significant money was saved.

Development and construction will have cost US$15.3 million and initial production is estimated at 200,000 tonnes of zinc metal rising to more than 500,000 tonnes of zinc metal over time. The cash cost of production is expected to be US$600/tonne compared with the present price of zinc which is US$1,400/tonne. Griffin will also receive credits from production of gold and silver. The project is 60 per cent owned by Griffin and 40 per cent its Chinese partners, the Ministry of Land and Natural Resources, the Zhangjiakou City Government and the Third Geological Brigade. Griffin is allowed to take all cash flow from the first three years commercial production in order to repay the mines development costs.

The management looks on this achievement as the end of the beginning for the company, rather than the beginning of the end. Its exploration leases contain prospective epithermal gold targets, which are now about to be tested with an 18,000 metre reverse circulation drilling programme. The RC drill rig is on its way to China and it will start with the extension to the zone 111 ore body before moving on to other gold anomalies. It is interesting to note that this is the first time an RC drill rig is to be used in China for an exploration programme.

The achievement at Caijiaying has not gone unnoticed in China and Griffin is being offered other advanced mining projects by various government and non government agencies. No reason why it should not be equally successful with a gold project.


http://www.minesite.com/storyFull.php?storySeq=1771

Andy,
Have you seen the new photo's http://www.griffinmining.com/gmpresagm2005.htm