The Speculator

Cortona gets a green light for its gold mine and good news lifts Potash West.

PORTFOLIO POINT: Cortona Resources overcomes final objections to its planned NSW gold mine, and Potash West surges on enthusiastic report.

NSW gold mine developer Cortona Resources (CRC) confirmed this week it has negotiated a settlement with the final objectors to its Dargues Reef gold project, 60 kilometres east of Canberra.

This clears the way for the completion of a 50,000 ounces-a-year gold mine with an initial life of six years and expectations of significant increases in the resource from new discoveries within the project area.

Due to a series of now-overcome environmental objections, Cortona’s shares tumbled last year from a high of 21¢ to a low of 10.5¢ and this week stand at 15¢. That gives the company’s 220.7 million shares a market capitalisation of $33.1 million, with remaining cash of $2.33 million.

That greatly undervalues the Dargues Reef potential, with a current JORC-compliant resource of 327,000 ounces of gold, including a mineral inventory of 257,462 ounces of gold grading 7.24 grams per tonne.

The Dargues Reef feasibility study has confirmed the technical and economic viability of a start-up gold mining operation, forecast to produce an average of 50,000 ounces a year at a cash operating cost of $A697 an ounce (including a 10% contingency). At the current world gold price of $US1738, that leaves a gross operating margin of more than $1000 an ounce.

The JORC resource does not include recent gold discoveries at Ruby Lode, Chinamans, Dargues West or Carmine, all of which are within 250 metres of the planned development. The development is being accessed via decline through ore that extends continuously from 35 metres below surface to 480 metres, where it remains open at depth and along strike.

The Dargues Reef mine is within Cortona’s larger Majors Creek Project area, which is the largest historic goldfield in NSW, having yielded more than 1.25 million ounces from mainly surface and near-surface workings dating back to the 19th and early 20th centuries.

Cortona managing director Peter van der Borgh described the settlement of the objections as a major breakthrough, clearing the way for approval from the NSW Land and Environment Court without the need for a protracted court hearing and lengthy determination period.

Initial development consent for the Dargues Reef mine was granted in early September, 2011, from the NSW Planning Assessment Commission. That was endorsed shortly afterwards by the federal Department of Sustainability, Environment, Water, Population and Communities.

Then, on October 7, Cortona was advised that two objections concerning ground water issues had been lodged against the NSW Government’s approval from:

  • The Eurobodalla Shire Council; and
  • A joint objection from two environmental groups, the “Coastwatchers’ Association Inc” and the “South East Regional Conservation Alliance”.

After lengthy discussions, the shire council withdrew its objections in mid-December and on January 27 last week the two environmental groups also agreed to settle their concerns.

In the meantime, 34.4 million Cortona options exercisable at 20¢ by January 31, 2012, appear to have missed their deadline and other 8.4 million options exercisable by February 12 and July 5 at prices between 25¢ and 50¢ remain well out of the money.

Shareholders may well look forward to a possible non-renounceable entitlements issue in the months ahead as work continues on bringing the mine into production. The final application for a mining lease has been submitted and is awaiting approval. We’ll stay with it and may yet buy more.

-The Speculator portfolio, as at February 1, 2012
Company
ASX
No of shares
Bought
Purchase price
Current price
Current value
Image Resources
IMA*
15,000
31/12/2010*
0.362 av
$0.300
$4,500
Viralytics
VLA
19,995
20/12/2011
$0.308
$0.390
$7,798
Robust Resources
ROL
6,000
31/12/2010*
$1.49 av
$1.175
$7,050
Scotgold Resources
SGZ
25,000
31/12/2010*
$0.053
$0.065
$1,625
Scotgold Resources Options ex30/4/12 @ 8c
SGZO
2,500
$0.000
$0.008
$20
Coalworks
CWK
10,000
31/12/2010*
$0.830
$0.750
$7,500
GoConnect Ltd
GCN
120,000
31/12/2010*
$0.038
$0.047
$5,640
Minemakers
MAK
20,000
25/01/2011*
0.425 av
$0.280
$5,600
Platsearch
PTS
20,000
8/02/2011*
$0.130
$0.081
$1,620
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
$0.042
$1,680
Potash West
PWN
11,050
30/03/2011*
$0.200
$0.265
$2,928
Cortona Resources
CRC
20,000
13/04/2011*
0.146 av
$0.150
$3,000
Golden Gate Petroleum
GGP
270,000
20/04/2011*
0.013 av
$0.022
$5,940
TNT Mines
TNT
4,440
22/07/2011*
$0.000
$0.250
$1,110
Quickstep Holdings
QHL
20,000
23/11/2011*
$0.185
$0.165
$3,300
Orpheus Energy
OEG
19,250
17/08/2011*
0.164 av
$0.115
$2,214
x
$63,225
Total value of portfolio
$63,225
Cash at bank
-$9,554
Total
$53,671
x
Portfolio change since January 3, 2012 (started with $50,000)
7.34%
All Ordinaries change since January 3 2012 (then 4155.22)
4.10%
x
* Shares held from previous year, carried at their December 30, 2011 closing price.

Potash West shares soar on last week’s report

Our West Australian fertiliser hopeful Potash West (PWN) traded between 20¢ and 22¢ in the week to January 25 on a comparatively tiny turnover of 128,600 shares.

Then last week we reported in this column that a boutique New York research company assessed the company as having a “fair share value bracket” of between $2.07 and $4.82 a share.

Although I cautiously adjudged it to be a “very far-sighted stretch”, the mob rushed in and last week 1.543 million shares changed hands to a week’s high of 28¢.

Golden Gate fund-raiser in the wind

Our West Texas oil explorer Golden Gate Petroleum (GGP) highlighted a string of five successful discovery wells on its Permian Basin targets in the latest quarter to December 31, 2011.

During the quarter market capitalisation following a series of placements and issues increased from $15.3 million to $35.8 million at December 31, when net cash remaining stood at $2.8 million.

The company’s quarterly report released late last week also foreshadowed a fully-underwritten one-for-7 entitlement issue at 1.7¢ a share to raise $4.5 million during February.

This follows the raising of $1.7 million on January 5 at the same price of 1.7¢ in a placement to professional investors.

The ex-entitlement date for the planned new 1-for-7 issue has yet to be disclosed by the latest company announcement says it expects to release a prospectus for the issue “very soon”.

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