The Speculator

PORTFOLIO POINT: Early days yet ... but investors in Image Resources and its affiliate Magnetic Resources may raise their hopes of a profitable deal emerging to finally become producers.

Sightings of a group of “inscrutable Oriental gentlemen” in the company of Image Resources (IMA) director George Sakalidis in Western Australia last week cannot do any harm to the heavy minerals developer’s share price.

Readers of this column telephoned The Speculator in Sydney to report the first sighting at the Diggers and Dealers’ conference in Kalgoorlie … then days later at the tiny bush pub of Gingin, around 100 kilometres north of Perth.

The hamlet of Gingin is sited at the southern end of Image’s extensive heavy minerals (HM) discoveries stretching north for around 200km, embracing more than 2000 square kilometres of minerals tenements on the North Perth Basin.

I tracked down the veteran geophysicist George, who was reluctant at this stage to reveal the identity of his guests, except to confirm they were associated with a mainland Chinese company involved in “the downstream processing of raw materials.”

Since boyhood days, I developed fond memories of the Gingin pub. Sixty-odd years ago my maternal grandmother, Beatrice Plint, was the cook there and also further north at the Three Springs pub. Every six months she would arrive back in Perth with a four-gallon ex-kerosene drum of honey from the local beekeepers. My four younger brothers and I always kept sweet with our Old Nana, who in the next few days would blow the rest of her holiday pay at a “bridge club” poker school in a boat shed by the Swan River at the foot of the City of Perth. Enough of the family impecuniosity.

The Speculator was last in Gingin with George, his wife, pre-high school son and others for lunch at the pub some four years ago, having spent the morning inspecting rutile/zircon samples extracted from the company’s continuing drilling programs on its exploration tenements.

Image shares were then trading around $2.50 as I recall. George ran a sweep on where they would be by Christmas. What a loyal son. The boy over-optimistically tipped $3 – but they’ve since drifted progressively south in common with the overall market. Despite continuing exploration success, Image shares have slipped from a 12-month high of 63.5c to a recent low of 22.5c and last week closed at 30c.

At that price, Image’s 106.5 million shares carry a market capitalisation of $31.95 million. Remaining cash, following a recent placement of 6.3 million shares at 30c, stands at $2.75 million.

Image has made no secret of the fact it is willing to trade assets to fund an initial producing HM mine, probably on its Boonanarring discovery near Gingin, which so far hosts a measured and indicated resource of 3.1 million tonnes of 7.2% HM for 221,0000 tonnes of HM. The resource may well be three times that size, dependent on recent and current field work, with a new JORC-compliant resource estimate due next month.

Magnetic regarded as a star asset

Among Image’s core assets is a 10.7% interest in the listed Magnetic Resources NL (worth on market around $10 million) and its extensive portfolio of magnetite iron ore prospects in WA.

As many readers will be aware, magnetite generally occurs  as a low-grade ore (25-40% iron content) which, nevertheless, can be simply upgraded through magnetic separation from its silicate host rock to rival the more highly prized hematite ore (60-65% iron content).

That may well be of interest to George’s recent guests, since many magnetite projects have been acquired or joint ventured by Chinese companies with an eye on the future as hematite availability tightens.

Certainly, Magnetic’s recent June quarterly report confirmed the company was prepared to farm out its various gold projects in the south-west of WA while maintaining a focus on its iron ore targets.

George Sakalidis, also managing director of Magnetic Minerals, claims the company has identified 220 kilometres of iron ore potential strike over the south-west of WA. They include four projects with near-surface, large scale, coarse-grained premium quality magnetite and direct shipping ore (DSO).

Among Magnetic’s 10 prime targets is its Ragged Rock project, centred 10km south-east of the central wheatbelt town of Northam (60km east of Perth), with a targeted tonnage of more than 500 million tonnes. It is claimed that all 12 identified targets in the 200 sq km of exploration tenements at Ragged Rock are within 15km of both the Albany railway and TransAustralia railway, which would link it to the port of Kwinina.

Last green tape snipped for goldminer Cortona

After nearly half-a-decade of battling red tape and green tape obstacles to open a gold mine at Dargues Reef, NSW, it appears the regulatory hurdle has been overcome for our portfolio stock Cortona Resources (CRC).

Cortona’s shares have fallen from a 12-month high of 21c to a new low of 8.1c last week – before an announcement on August 9 that the final regulatory approval for development of the mine had been granted.

On June 6, the company confirmed all hurdles to proceed had been overcome – bar one. So another two-month wait.

At last, the Parkes Shire Council, in the central west of NSW, finally granted approval for Cortona to cart its ore concentrate from the mine site 63km south-east of Canberra to be processed in the idle and disused London Victoria processing plant at Parkes.  

Managing director Peter van der Borgh said he was “delighted”. What else could he say?

The shares rallied from a year’s low of 8.1c to close the week at 9c.

The Speculator portfolio, as at August 14, 2012

Company	Code	No of shares	Bought	Purchase price	Current price	Current value
Image Resources	IMA*	15,000	31/12/2010*	0.362 av	$0.290	$4,350
Viralytics	VLA	19,995	20/12/2011	$0.308	$0.280	$5,599
Robust Resources	ROL	6,000	31/12/2010*	$1.49 av	$0.770	$4,620
Scotgold Resources	SGZ	27,500	31/12/2010*	5.5 av	$0.062	$1,705
GoConnect Ltd	GCN	250,000	31/12/2010*	0.034 av	$0.021	$5,250
Minemakers	MAK	20,000	25/01/2011*	0.425 av	$0.160	$3,200
Platsearch	PTS	20,000	8/02/2011*	$0.130	$0.070	$1,400
Broken Hill Prospecting	BPL	30,000	22/02/2011*	$0.132	$0.105	$3,150
Austpac Resources	APG	40,000	2/03/2011*	$0.060	$0.330	$13,200
Potash West	PWN	11,050	30/03/2011*	$0.200	$0.200	$2,210
Cortona Resources	CRC	25,000	13/04/2011*	0.146 av	$0.089	$2,225
Golden Gate Petroleum	GGP	408,500	20/04/2011*	0.0145 av	$0.010	$4,085
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	$0.110	$2,118
Black Mountain Resources	BMZ	10,000	17/04/2012	$0.300	$0.270	$2,700
Gullewa	GUL	40,000	22/05/2012	$0.063	0.077	$3,080
Total value of portfolio						$63,301
Cash at bank						-$7,530
Total						$55,771
Portfolio change since January 3, 2012 (started with $50,000)						11.54%
All Ordinaries change since January 3, 2012 (then 4155.22)						3.90%
*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.