InvestSMART

Kimberley's rich seam gives Wall more clout

Jim Wall at Kimberley Metals (ASX ticker: KBL) was a happy man on Friday. He was able to report to the market he had waved goodbye to the first shipment of copper concentrates from Port Botany to far-off Yunnan in China.

Jim Wall at Kimberley Metals (ASX ticker: KBL) was a happy man on Friday. He was able to report to the market he had waved goodbye to the first shipment of copper concentrates from Port Botany to far-off Yunnan in China.

The shipment from Kimberley's rejuvenated Mineral Hill project near Condobolin in central west NSW also marked first cash flow for the company, which listed early in 2010 after being spun-off by CBH Resources - since taken over by Toho Zinc, funnily enough.

The shipment was why Kimberley shares popped 2? or 7.4 per cent higher to 29? on Friday on what was otherwise a tough day out for the miners because of more volatility in metal prices ahead of the European debt crisis being fixed.

Wall, an industry veteran and Kimberley's executive chairman, had another reason to smile last week, thanks to the approval from the Lachlan Shire Council for Kimberley's development of the Pearse gold/silver deposit that sits less than one kilometre from the Mineral Hill processing plant.

The Pearse open-cut development will increase annual production from Mineral Hill to a planned 5000 tonnes of copper, 21,350 ounces of gold and 255,000 ounces of silver from mid-to-late next year.

That's near-on $80 million revenue at present prices, with the value of the copper just edging out the gold as the dominant metal for the project.

Pearse was only found in 2009/2010, which goes to show that despite a long production history with previous owners, Mineral Hill and surrounds have a lot to give up.

Returns from Pearse over its two-and-a-half year mine life should be sweet. The mineralisation is within 100 metres of the surface and grades 6.9 grams of gold a tonne and 72 grams of silver a tonne. That's $427-a-tonne dirt at today's prices.

Although Pearse is not the biggest show in town, it is part of the perception change that Wall and his management team are hoping to achieve in the market's thinking on Mineral Hill. Under previous owners, the project led a kind of hand-to-mouth existence.

Add Pearse to the existing underground development at Mineral Hill (1.9 per cent copper from the Parkers Hill development) and the success Kimberley is having in outlining new underground resource positions, and the market can start thinking about Mineral Hill as at least a seven to 10 year proposition.

That should trigger a market re-rating for Kimberley, currently valued by the market at the enterprise level (equity and debt less cash) of about $50 million.

Helping convince the market it needs to reprice the value of Mineral Hill to Kimberley will be an expected announcement before year end of a new underground resource in the so-called Southern Ore Zone.

It's a 1.5 million target grading about 1.75 per cent copper and 1-2 g/tonne gold and would confirm the decade long production potential at Mineral Hill. By the time that announcement comes, Kimberley should be in a position to confirm Mineral Hill's expected competitive cost of production - one that gets even more competitive once Pearse kicks in.

TALISMAN LEADS

The ability to raise cash without serious dilution in the present weak market conditions means that more than ever, cash is king. So expect punters in exploration stocks to drift towards those that have a decent bank balance.

Talisman Mining (ASX: TLM) falls into that category and it was a message that came across loud and clear last week during an eastern states roadshow by the company.

At Friday's closing price of 41.5? a share, Talisman is now valued at $55 million. That compares with its cash at bank of $40 million and the $6.3 million value of its listed investments in Rico Resources (RRI) and Shaw River (SRR).

Talisman is best known for its work in the Bryah Basin copper/gold region, home to Sandfire's DeGrussa mine development.

Talisman's Springfield project is adjacent to DeGrussa, which the exploration industry is convinced is but one of multiple volcanogenic massive sulphide-type deposits that will be uncovered in the Bryah.

Now comes the fun part - drilling the targets identified.


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