The Speculator

PORTFOLIO POINT: I top up my holding in emerging heavy minerals miner Image Resources and quit my stake in fertiliser hopeful Minemakers Ltd.

Image Resources (IMA) has more than trebled the JORC-compliant resource on its Boonanarring heavy minerals (HM) Block B target on the North Perth Basin .

Better, the most valuable zircon content of the HM recovered has been significantly boosted from an earlier conservative estimate of 11% of HM content to 17.4%.

This will greatly improve the net return when mining eventually begins on this rich project. Zircon – an ore of the metal zirconium in demand for refractory coatings and ceramics – has been selling in recent months between $US2200-2500/tonne, up from around $US850/tonne 12 to 18 months ago.

By contrast, the other heavy mineral fractions, while still valuable, fetch lesser market prices. Rutile has been priced around $US600/tonne for the past 12-18 months and ilmenite around $US350/tonne, up from about $US150 a year ago. Both are ores of the metal titanium used to cast strong, light metal alloys and white pigment for paints.

I last discussed Image in this column on September 5 after the company reported new assay results confirming earlier indications of high-grade HM extending over a full 2.3 kilometres on the new Block B zone.

That extended the strike length of the heavy mineralisation to more than 12 kilometres on the Boonanarring project area. The area is located within Image’s 2000 square kilometres of mineral tenements stretching north for around 200 kilometres from the town of Gingin, about 100km north of Perth.

Image’s managing director, mining engineer Peter Davies, then reported the grade, thickness and widths of the mineralised zones provided a strong indication that they had identified a viable mining target.

He then predicted a maiden JORC resource would become available for Block B in late September, to be added to be added to the company’s initial measured and indicated resource estimate on the block of 3.1 million tonnes of 7.2% HM for 221,000 of HM.

The latest report now boosts the currently defined Boonanarring total resource to 10.5 million tonnes at 7% HM containing 740,000 tonnes of HM at a 2.5% cut-off grade.

The new resource  adds 90,000 tonnes of zircon to the previously defined 33,000 tonnes, to bring the total zircon endowment on the Boonanarring project to 123,000 tonnes defined over 4.6km of the prospective 12km strike length within Block B and further south within Block D (see map).

Click to enlarge

More drilling and assays to come

Drilling has been recently completed on the 3.3 km strike length on the intervening Block C. Davies said: “While assay results are not yet available, the combination of magnetometer results and visual estimates from the drill samples provides a high degree of confidence that similar grades of mineralisation are continuous through Block C.”

The potential for further extensions to the mineralisation into Blocks A, E, and F are to be fully drill tested in the future, with drilling to begin this month of Block A.

More than 10% of the ground now being drilled tested was acquired earlier from heavy minerals giant Iluka Resources (ILU) when the properties were still virginal and untested.

Davies added: “This results is a major step towards demonstrating the viability of this particularly high-grade deposit.

“Not only are the zircon and rutile grades higher than the estimates used in the work carried out in May and June, but the resource tonnages are also higher. This gives increased confidence to Image being able to establish an initial mining operation at Boonanarring with a mine life of around eight years, as the foundation for building other elements of the North Perth Basin project.”

He added that recent up-dates of project economic analysis confirm the robustness of the project, particularly given the high zircon grades and relatively low initial capital cost. The company’s target for initial production is mid-2014.

Image shares closed last week at 30c, well down from its 12-month high of 47c despite all the encouraging news.  With 106.5 million shares on issue at a price today of 26.5c, the company carries a market capitalisation of around $28 million. With remaining cash in mid-August of $2.1 million it need to top up the bank shortly. Among Image’s assets is a 10.7% equity in the listed Magnetic Resources NL (worth on market around $10.7 million.)

Image stake lifted, Minemakers sold

I topped up my Image holding with another 5000 shares in the expectation the present depressed price won’t last long.

At the same time, I quit my holding in Minemakers after it sold its 42.5% direct interest in the Sandpiper submarine phosphate deposit held with UCL Resources Ltd in offshore Namibia for $25 million cash to Mawarid Mining LLC.

Minemakers plans to maintain its 14.2% holding in UCL, which has a 3.39% equity in Minemakers as well as a plainly failed all-paper takeover bid for Minemakers that will close on October 15.

Minemakers will now concentrate on its Wonarah phosphate project in the Northern Territory, which last week it upgraded by 11% to a combined measured and indicated resource of 300 million tonnes at 18.3% phosphorus pentoxide at a 10% cut-off grade.

The Speculator portfolio, as at October 9, 2012