The Speculator

With demand for cobalt increasing and supply limited, Broken Hill Prospecting is looking to cash in.

PORTFOLIO POINT: Broken Hill Prospecting (BPL) has advanced plans to mine its extensive cobalt deposits 25 kilometres south-west of Broken Hill. We top up our holding.

Investors attending a mining symposium at The Establishment in Sydney on Friday will learn about Broken Hill Prospecting (BPL) and its ambitious plans to establish a cobalt mine in the far west of NSW.

Managing-director Dr Ian Pringle confirmed this week a scoping study would be launched aimed at establishing an open cut mine to extract 7.5 million tonnes of ore a year to yield annual production of pyrite concentrate containing about 7,000 tonnes of cobalt.

Cobalt has traded on the LME since February 2010, with an average price now of $14.50-$15/lb, or around $30,000/tonne. At those prices, the envisaged output would be worth more than $200 million a year.

Dr Pringle told The Speculator the company had begun a resource assessment using recent drilling data from the company’s 100%-owned Railway Prospect following a drilling program completed during April-May. Results of the resource assessment are expected in late July as a prelude to the scoping study. That will focus on mining and milling costs to upgrade the cobaltiferous pyrite through gravity and flotation processes to a pyrite concentrate of about 0.5% cobalt.

Dr Pringle said: “Assay data from the last eight holes of the 20-hole program continue to add thick intersections of cobalt mineralisation to the Railway Prospect, which is shaping up to be a very large cobalt deposit.”

Highlights from the final holes included:

  • 9m of 2.01lb/t cobalt, 8m of 2.08lb/t and 10m of 4.15lb/t in BER013
  • 27m of 2.23lb/t in BER14 (28-55m)
  • 75m of 2.22lb/t in ber16 (25-100m) including 16m of 3,58lb/t
  • 41m of 2.20lb/t in BER1
  • 22m of 2.54lb/t in BER19 (34-56m)

As well as being close to Broken Hill, the Railway Prospect is within sight of the main Sydney-Adelaide railway and the east-west highway within Exploration Licence area 6622. Also included in the EL are two granted mining leases embracing two other emerging projects:

  • # Pyrite Hill (ML86): with an inferred resource of 16.4 million tonnes of 1.83lb/t cobalt (plus a claimed 14-24Mt potential),
  • #Big Hill (ML87: Inferred resource of 4.4Mt at 2.00lb/t, open to the north-east and at depth.

The world cobalt market
In his presentation, Dr Pringle points out that deposits of cobalt of significant size are few and geographically isolated. Cobalt is mostly produced as a by-product from some copper and nickel mines.

From an estimated 98,000 tonnes (216mlbs) produced in 2011, 60% came from the Democratic Republic of the Congo and 40% was refined in China. No cobalt was mined in the USA, Japan or the EC, but more than 80% was consumed in those countries.

Cobalt is integral to defence, aerospace and any disruptions to supply can lead to wild fluctuations in price. According to Dr Pringle’s paper, the cobalt price has ranged over the past five years from $US12-$US50/lb, or $US22,000 to $US110,000/t.

All of the good news that has been filtering out of BPL in recent months has done nothing for the share price, as is the case with most smaller resource stocks in this nervous market.

BPL has traded down from a 12-month high of 20c to a recent low of 8c. Last week a mere 70,000 shares went through the market at prices from 9c to 9.1c for the company’s 82.58 million issued shares, of which only 29,257,011 are listed. All the company’s options are well out of the money, with exercise prices of 20c or more.

At the end of the March quarter the company had remaining cash of 2.065 million, with expectations of expenditure totalling $640,000 in the current June quarter.

Quite clearly, there will have to be a cash raising in the next few months so Pringle and associates will be doing their best to get some investor interest in their stock. We added another 10,000 to our 20,000 holding, bringing our “in” cost down to 13.2c a share.

Quickstep to open Bankstown aerospace plant
American aerospace and defence technology company Northrop Grumman has sent the president of its Aerospace Division, Gary Ervin, to Australia for Friday’s opening in the Sydney suburb of Bankstown of Quickstep Holdings’ advanced carbon fibre composites factory.

The plant, which holds contacts to build vital parts for America’s Joint Strike Fighter, is billed as the most advanced in the southern hemisphere.

This will hopefully give a fill-up to Quickstep’s share price, which has languished from a 12-month high of 37.5c to a recent low of 12.5c, with 502,000 traded last week between 14.5c-15.5c.

Hopefully the crowd will get the message that the already multi-billion dollar carbon fibre composites market is expected to expand tenfold over the coming decade as aerospace, defence and car makers incorporate more structural composites.

-The Speculator portfolio, as at June 20
Company
Code
No of shares
Bought
Purchase price
Current price
Current value
Image Resources
IMA*
15,000
31/12/2010*
0.362 av
$0.280
$4,200
Viralytics
VLA
19,995
20/12/2011
$0.308
$0.255
$5,099
Robust Resources
ROL
6,000
31/12/2010*
$1.49 av
$0.970
$5,820
Scotgold Resources
SGZ
27,500
31/12/2010*
5.5 av
$0.067
$1,843
GoConnect Ltd
GCN
250,000
31/12/2010*
0.034 av
$0.031
$7,750
Minemakers
MAK
20,000
25/01/2011*
0.425 av
$0.150
$3,000
Platsearch
PTS
20,000
8/02/2011*
$0.130
$0.060
$1,200
Broken Hill Prospecting
BPL
30,000
22/02/2011*
$0.132
$0.091
$2,730
Austpac Resources
APG
40,000
2/03/2011*
$0.060
$0.031
$1,240
Potash West
PWN
11,050
30/03/2011*
$0.200
$0.250
$2,763
Cortona Resources
CRC
25,000
13/04/2011*
0.146 av
$0.090
$2,250
Golden Gate Petroleum
GGP
408,500
20/04/2011*
0.0145 av
$0.013
$5,311
TNT Mines
TNT
4,440
22/07/2011*
$0.000
$0.250
$1,110
Quickstep Holdings
QHL
20,000
23/11/2011*
$0.185
$0.150
$3,000
Orpheus Energy
OEG
19,250
17/08/2011*
0.164 av
$0.110
$2,118
Black Mountain Resources
BMZ
10,000
17/04/2012
$0.300
$0.230
$2,300
Gullewa
GUL
40,000
22/05/2012
$0.063
0.078
$3,120
 
Total value of portfolio
$54,852
Cash at bank
-$7,530
Total
$47,322
 
Portfolio change since January 3, 2012 (started with $50,000)
-5.36%
All Ordinaries change since January 3 2012 (then 4155.22)
-0.29%
 
*Shares held from previous year, carried at their December 30, 2011 closing price.

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