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.
Frequently Asked Questions about this Article…
What did Kimberley Metals (ASX: KBL) announce about its first copper concentrates shipment?
Kimberley Metals confirmed it shipped its first copper concentrates from Port Botany to Yunnan in China. The shipment came from the rejuvenated Mineral Hill project and marked the company’s first cash flow since listing, helping push Kimberley shares higher on the day.
How will the Pearse gold and silver open‑cut development affect Mineral Hill production?
The Pearse open‑cut is expected to lift Mineral Hill’s annual output to about 5,000 tonnes of copper, 21,350 ounces of gold and 255,000 ounces of silver from mid‑to‑late next year. At current metal prices the article estimates that level of production is near‑on $80 million in revenue, with copper slightly the dominant metal for the project.
What are the Pearse deposit grades, mine life and why do they matter for investors?
Pearse has near‑surface mineralisation within 100 metres, grading about 6.9 g/t gold and 72 g/t silver, and is expected to have roughly a two‑and‑a‑half year mine life. Those grades and shallow geometry mean relatively high value per tonne and quicker access to revenue, which can materially improve the project economics for Mineral Hill.
What’s the longer‑term production outlook for Mineral Hill and could Kimberley be re‑rated by the market?
Adding Pearse to existing underground operations (including Parkers Hill) and new underground resources could extend Mineral Hill into roughly a seven‑to‑10 year proposition. The article suggests that confirming additional resources and demonstrating competitive costs could trigger a market re‑rating; at the time Mineral Hill was being valued at an enterprise level of about $50 million.
What is the Southern Ore Zone target and why is it important for Kimberley Metals?
Kimberley is targeting about a 1.5 million tonne Southern Ore Zone grading roughly 1.75% copper and 1–2 g/t gold. An announced underground resource there (expected before year‑end in the article) would help confirm decade‑long production potential and support claims of competitive cost of production.
Why does the article say ‘cash is king’ for exploration and junior mining stocks?
The piece notes that in weak market conditions companies that can raise cash without heavy dilution attract investor interest. Demonstrable cash flow, a solid bank balance or listed investments (rather than immediate need to dilute shareholders) can make exploration stocks more appealing to everyday investors.
What did the article report about Talisman Mining’s (ASX: TLM) cash position and market value?
Talisman was described as having a strong cash position relative to its market value: the article cites a market valuation of about $55 million, cash at bank of around $40 million and roughly $6.3 million of listed investments in Rico Resources (RRI) and Shaw River (SRR).
Why are investors watching Talisman’s Bryah Basin and Springfield projects near Sandfire’s DeGrussa?
Talisman’s Springfield project sits adjacent to Sandfire’s DeGrussa and the industry believes the Bryah Basin may host multiple volcanogenic massive sulphide (VMS) style deposits. The next step highlighted in the article is drilling the targets that have already been identified, which is the catalyst investors will be watching.
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