The Speculator

PORTFOLIO POINT: A few glimmers of encouragement remain on the horizon after a discouraging year.

Prospector Scotgold Resources (SGZ) should know by the end of this month whether it gets the go-ahead for its Cononish gold and silver project within a national park 75 kilometres north of Glasgow.

A positive decision will see renewed support for the company’s share price, which tumbled last year from a high of 14.9¢ to a low of 3.8¢ after the Loch Lomond and Trossachs National Park Authority (NPA) narrowly rejected (by 12 votes to 10) on environmental grounds the company’s application to begin mine development.

As previously reported in this column, after consultations with the NPA a revised development application was lodged on July 17, and last month the company announced its “delight that widespread support has been registered from a range of national and local organisations as well as local residents, politicians, academia and Scottish-based jewellers.”

Scotgold shares this week have traded between 6.9¢ and 7.4¢ in the expectation that the NPA will grant approval by the end of the month for what could be the UK’s only commercial gold mine in a cash-strapped Europe.

Dependent on the approval, Scottish Enterprise (an arm of the Scottish government) has offered Scotgold a Regional Selective Assistance grant of £600,000.

Scotgold now has 189 million shares on issue following a one-for-five rights issue at 5¢ a share in August that raised $1.6 million and took remaining cash to around $2.6 million.

The Cononish deposit has an initial JORC-compliant resource of 163,000 ounces of gold at an average grade of 11.9 grams per tonne (g/t) plus 596,000 ounces of silver grading 45 g/t.

Although it lies within the boundary of the national park, it is only one of many promising targets within Scotgold’s 3200 square kilometres of exploration tenements, 85% of which are outside the park boundaries.

In the meantime, while awaiting the appeal decision, Scotgold’s two company-owned diamond core rigs have been drilling a molybdenum/gold target to the north of the NPA ground. Director Shane Sadlier tells me the mineralisation is contained within criss-crossed veins beneath the Orchy River vein area.

-The Speculator portfolio, as at October 5, 2011
Company	ASX	No of shares	Bought	Purchase price	Current price	Current value
Image Resources	IMA*	15,000	31/12/2010* *	0.362 av	$0.320	$4,800
Viralytics	VLA	7,500	31/12/2010*	$.046 av	$0.470	$3,525
Trafford Resources	TRF	10,000	31/122010*	$0.425	$0.240	$2,400
Robust Resources	ROL	6,000	31/12/2010*	$1.49 av	$1.200	$7,200
Scotgold Resources	SGZ	25,000	31/12/2010*	$0.053	$0.069	$1,725
Scotgold Resources Options ex30/4/12 @ 8c	SGZO	2,500		$0.000	$0.020	$50
Coalworks	CWK	10,000	31/12/2010*	$0.830	$0.520	$5,200
GoConnect Ltd	GCN	200,000	31/12/2010*	$0.038	$0.024	$4,800
Minemakers	MAK	20,000	25/01/2011*	0.425 av	$0.315	$6,300
Platsearch	PTS	20,000	8/02/2011	$0.130	$0.090	$1,800
Broken Hill Prospecting	BPL	20,000	22/02/2011	$0.160	$0.085	$1,700
Austpac Resources	APG	40,000	2/03/2011	$0.060	$0.038	$1,520
Potash West	PWN	11,050	30/03/2011***	$0.200	$0.180	$1,989
Cortona Resources	CRC	20,000	13/04/2011	0.146 av	$0.135	$2,700
Golden Gate Petroleum	GGP	180,000	20/04/2011	0.011 av	$0.010	$1,800
Magnetic Resources	MAU	12,000	25/05/2011	$0.150	$0.165	$1,980
Viralytics	VLA	5,000		$0.069	$0.470	$2,350
TNT Mines	TNT	4,440	22/07/2011	$0.000	$0.250	$1,110
Orpheus Energy	OEG	19,250	17/08/2011	0.163 av	$0.150	$2,888
x
Total value of portfolio						$55,837
Cash at bank						-$18,017
Total						$37,820
x
Portfolio change since January 5, 2011 (started with $50,000)						-24.36%
All Ordinaries change since January 5 2011 (then 4846.9)						-18.80%
x
* Shares held from previous year, carried at their December 31, 2010 closing price. * * Bought extra 4000 Image March 15, 2011, at 42.5¢. Bought extra 5000 Minemaker, March 16 at 36.5¢. *** subscribed for 10,000 shares at 20¢ each - plus free 1050 entitilement from Image Resources. April 13: Bought 5000 CRC @ $0.165; sold 25,000 CRC options @ $0.05. April 20: Bought 60,000 Golden Gate Perro GGP @0.017 $20 brokerage = $3,120. May 11: Bought extra 50,000 Viralytics @ 6.2¢ = 0.046 av price. May 18: Sold 25,000 at $0.10; $2500 (less brokerage) = $2480. May 25: Bought 20,000 MAU @ $0.15 $20 brokerage = $3020. June 1: Sold 8,000 MAU at $0.25.5; $2020 (less brokerage). Will buy 50,000 VLA @ .069 plus brokerage ($20) = $3,470. July 13: Bought 100,000 GCN @ 0.08 plus brokerage ($20) = $820. July 20: Bought 15,000 CRC @ 0.14 plus brokerage ($20) = $2,120. July 22: Free TNT Mines allotted = $1,100. August 10: Bought 3,000 Robust Resources @ $1.25 plus brokerage = $3,770. August 17: Subscribed for 8,000 Orpheus Energy @ .25 (no brokerage) = $2,000. August 31: Bought 7000 IMA @ 0.31 $20 brokerage = $2,190. September 21: Bought 120,000 GGP @ 0.009 $1080 brokerage = $1,100. September 28: OEG 1250 from free 1 for 8 distribution from parent Coalworks (Sep 23) plus on-market purchase Sep 25 10,000 at 11.5 ($1150 brokerage) = $1,170

Iron ore study cheers Magnetic Resources

Magnetic Resources (MAU) has revealed positive results from an independent concept study on the potential development of its 100%-owned Jubuk magnetite project in Western Australia.

The project envisages an initial production of 500,000 tonnes a year of magnetite concentrate, to be road-freighted in containers to the port of Kwinana from the Jubuk deposit near the wheatbelt town of Corrigin, 200 kilometres south-east of Perth.

Consulting engineering firm Engenium Pty Ltd has completed a conceptual mining and economic study, which projects a capital cost of $153 million and net present value (NPV) on the project of $40 million, an internal rate of return (IRR of 18%) and nominal payback of four years.

The Jubuk tenements host the Jubuk coarse-grained magnetite deposit with an exploration target range of 50–200 million tonnes of magnetite-banded iron formation. Magnetite has completed 68 drill holes totalling 7720 metres and 532 Davis Tube Recoveries on RC drill samples that indicate potential to produce high grade concentrate suitable for direct reduction furnaces.

DTR studies show an ore feed grade of 24.1% iron can yield a concentrate of 69.6% iron with low impurities of 1.2% silica and 1.1% aluminium oxide.

For anything to come of the project, Magnetic will need to attract outside co-venturers such as potential end users who, I believe, are showing some interest in this and other early-stage company projects such as Magnetic’s hematite-goethite banded iron project near the northern wheatbelt town of Wubin, south of Geraldton.

Magnetic carries a market capitalisation of about $12 million, with its 67.5 million shares fully-paid shares priced at 16.5¢ and its 17.4 million contributings at 0.5¢. Remaining cash stands at about $2.3 million.

During the latest quarter, Magnetic appointed a fourth director to its then three-man board – chairman and lawyer Peter Thomas, managing director and geophysicist George Sakalidis, and executive director Roger Thomson.

The new director is Singapore-based Eric Lim, head of wholesale banking finance in Southeast Asia for Standard Chartered Bank and a former finance director for GE Money, Japan.

Lim owns 3.35 million Magnetic shares and an associated company, Ava Cartel Sdn Bhd, another 3.93 million, totalling just under 10%.

Only two days left to buy into free share offer

More than 39.55 million shares traded last week our internet entertainment investment GoConnect (GCN), with prices up from a week’s low of 1.5¢ to a high of 2.4¢.

Massive turnovers have continued into this week as investors holding a minimum of 55,000 GoConnect shares get set for a free issue of shares in the soon-to-list affiliate Priority One Network Group Ltd.

Buyers of GoConnect have until the close of trading on Friday of this week to earn their entitlement to a distribution from GoConnect, of approximately 0.13 Priority One share to be issued at a face value of 30¢.

GoConnect chairman and managing director Richard Li points out that both GoConnect’s monthly and daily share price charts broke out of their resistance at the end of the month as drawn from the respective all-time high. Turnover for the month of September totalled 195.33 million shares, the highest volume in the company’s entire trading history of 11 years.

A lot of that was no doubt due to day traders, but remaining shareholders buying into strength this week suggest keen support for the new affiliate of GoConnect, which was discussed in the Speculator columns on August 31, September 7 and September 14.

David Haselhurst writes a monthly column for Money magazine. Please note that he is not able to provide personal replies to emails.