Miners warn Peru as environmental battle rages over gold and copper project

MINERS worldwide will be watching Peruvian President Ollanta Humala in coming days to see how he handles a very hot mining potato.

Big miners are warning Lima that Peru risks losing something like $US50 billion ($49bn) in proposed mining and oil investment if the government doesn’t back Newmont Mining after demonstrations against its $US4.8bn Conga gold and copper project forced work there to stop.

As with coal-seam gas in our eastern states, Conga is all about underground water along with rivers. The locals believe this water will be polluted by the mine waste.

The country’s image may also suffer from Glencore’s announcement that it is pulling out of its planned $US475 million acquisition of a copper project in Peru after failed negotiations. The mine is expected to produce a vital 100,000 tonnes a year of copper.

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Peru is the world’s second-largest producer of copper and silver and also exports large quantities of gold, zinc, tin, iron ore and molybdenum.

Another reason to watch Peru is that China is close to being its largest investor and trading partner, most of the activity involving oil and minerals.

No surprise then that a large Chinese investment firm, Junefield Holdings, is to take 16.8 per cent of Latin Resources (LRS) as well as having the right to earn 70 per cent of two iron ore projects. LRS also has a large heavy minerals project in Peru that has significant potential for rare earths, including the prized neodymium.

The other news of the week came from Laconia Resources (LCR), a hitherto poor performer with unspectacular West Australian projects. The company hit 26c soon after listing in late 2009, but its shares dived within two months of that and recently hit a low of 3.7c.

That price has managed to get back to all of 5c on news of its acquiring an advanced gold-silver project in Peru. It already has a completed feasibility study and Laconia is aiming at production within 18 months. The project is being backed into Laconia by Gulf Mines of Peru, which attempted to float on the ASX earlier in the year. The latter company stands to end up with 56.5 million shares in Laconia in addition to the 82 million now on issue.

We had news from one of the bigger Peruvian players, Metminco (MNC), which has just raised another $US40m, seen by the company as a good result in present market conditions. This tops up the war chest for the 2012 work at the Los Calatos copper-molybdenum discovery in southern Peru and also ground in Chile.

Forgotten prospects

WE’RE told by someone who attended a number of junior resource company annual meetings in recent weeks that attendance was well down, a sign of lack of interest in this part of the market.

When it comes to the small explorers, these meetings are usually attended only by those who need reassuring their investment has been wise one. They certainly don’t go to hear the address from the chair, which is in most cases a recital (and a very dull one at that) of drill holes combined with whistling in the wind about the company’s prospects.

But, occasionally, you do find a few scraps of news or a reminder of a long-forgotten story.

Take Outback Metals (OUM). Since listing in September 2008, the stock has failed to regain its 20c face value. It now sits at an all-time low of 0.6c and recent roadshows have failed to raise a cent, so executive chairman Graham Chrisp told the annual meeting he is lending the company $500,000.

Last month, it was announced that a Chinese state-owned company, Midon Land Resources, was negotiating to take a 78 per cent interest in OUM, including the chairman’s majority stake. Chrisp said the talks were continuing and other international companies were also interested in the junior.

So what’s the big attraction? In the Northern Territory, the company has ground prospective for copper, tin, silver, uranium, coal and rare earths.

On Friday, Pancontinental Oil & Gas (PCL) announced a $15m placement. The company plans to drill its Mbawa prospect offshore of Kenya. At the annual meeting two days earlier, chairman David Kennedy was very enthusiastic about the project, noting that virtually all Kenyan acreage had been taken up and that Pancon’s neighbours included several majors such as Shell and Total, while the operator at Mbawa is Houston-based Apache Corp.

Over at the Platsearch (PTS) annual meeting, chairman Pat Elliott clearly felt he was beating his head against a brick wall, pointing out that the company’s investments and cash were worth 12c a share, that there were 22 projects in joint venture for base metals, gold, silver, uranium and iron ore, yet the share price was stuck at 10.5c.

Platsearch’s holdings include 48.3 per cent of Eastern Iron (EFE), 14.6 per cent of Silver City Minerals (SCI) and 25.7 per cent of Thomson Resources (TMZ). All the companies have a very heavy weighting on NSW exploration, a state that has rarely fired investors’ imagination.

And still they come. Artist & Entertainment Group (AEM), which on Friday traded at 0.4c, seeks to find a better future in resources.

Chairman Ross Hill had hoped to tell the annual meeting that two projects — oil and gas in Indonesia and coal in Thailand — were in the bag, but global volatility had caused delays. News in the “coming weeks”, he hopes.

Mongolian failure

A REMINDER that not even magic words like “Mongolia” guarantee success.

Having earlier this year dropped the non-magical word “diamonds” from its name, Blina Minerals (BDI) took on a copper-gold project in the north Asian country now regarded as an exploration hotspot.

Then “sophisticated and professional” investors pumped in $663,000 at 0.9c a share.

They were in the money until Friday when BDI broke the bad news that a review of assays from Mongolia were such that the deposit was shelved. The shares fell 45.45 per cent to 0.6c, but those who took the placement also got free options exercisable at 2c. Now they will be hoping the share price beats that by the expiry date of October 2013.

brombyr@theaustralian.com.au

The writer implies no investment recommendation and this report contains material that is speculative in nature. Investors should seek professional investment advice. The writer does not own shares in any company mentioned.

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~ by FSVSF Admin on 4 December, 2011.

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