Angus & Ross - The Black Angel

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It has been a busy month for Angus & Ross. The group kicked off the period by unveiling interim results for the six months to 31st August. There was nothing out of the ordinary, and so losses of 1.771 million pounds were hardly a surprise. The group maintains a solid balance sheet, buoyed by cash of 5.4 million pounds.

Significantly, the company has now received the Wardell Armstrong Resource Report following four months of drilling at its Black Angel prospect in Greenland. Most significantly, the drilling programme established at least 1,995,000 tonnes of additional mineral resources around the Black Angel mine. The additional mineral resource does not include the 1.57 million tonnes of proven and probable reserves of an average combined Zn/Pb grade of 21.6% that remain in the Black Angel mine, as reported this time last year. Furthermore, there is a strong likelihood of the "inferred" resource category being converted to " measured and/or indicated" with infill drilling. The resource estimate for the Glacier and Ark prospects was predominantly at the Inferred category.

A further ongoing full exploration and drilling development programme is being planned for 2007. Elsewhere, the group has also issued a positive update on its Brazilian activities. Firstly, two key appointments, namely Dr Jayme Leite and Adrian Mackenzie, significantly strengthen the existing management team. Of course, near term gold production continues to be the company's focus as well as building a substantial resource base. Exploration and confirmation drilling are now taking place on three of the company's projects. At northern Mato Grosso state, an ongoing shallow diamond drill programme totalling 3000 metres has confirmed the presence of three main sets of essentially parallel sub-vertical gold bearing shear zones, two of which - Otta and Tata - have a surface expression exceeding 500 metres. On the Otta shear zone, assays are available on three out of eight drill holes, with one 2.5 metres intersection grading 8.94 g/t gold. Two of the three holes on the Tata shear zone show intersections of 0.7-1.0 metre with grades of 10.6 and 6.7 g/t gold respectively. The first drill hole to intersect the third shear zone, Rato, is especially encouraging, with assay returns over a 1.9 metres intersection of an impressive 37.2 g/t gold. A second drill hole, crossing the first one 40 metres below, returned a 20 metre intersection of intensely veined material with visible gold, chalcopyrite and pyrite. Assay results should be in by mid January 2007.

Meanwhile at Santa Elena in northern Mato Grosso, a contract has recently been signed and the first stage payment made, to acquire the exploration rights and title to a project with an "indicated" resource to 100 metres depth of 1 million tonnes at 0.1 oz/t. containing up to 100,000 ounces of gold. This Resource is based on work carried out by Rio Tinto Brasil in the 1980's. A diamond drilling programme of 1,000 metres to confirm the initial resource calculation and to extend mineralization down to 250 metres, as well as additional surface sampling work, commenced in the first week of December. Significantly, an independent pre-feasibility study of the existing and potential "resource" is being contracted for completion prior to 1st March 2007.

2007 will clearly be a very active year indeed for the company. Our valuation of Angus & Ross could well be in excess of 80p for the Black Angel mine alone. With its Australian unit, QGM on track for an IPO in the short term and - more significantly - its Brazilian units (St Andrew) preparing for a pre IPO financing ahead of a listing on AIM and the TSX, a definable value for its other assets should become clearer in due course. We believe that these non core units could, perhaps, be worth 8p per share and that successful IPOs would crystallise that value for Angus. At 15.75p, there remains considerable upside potential and thus we stick with our stance of " speculative buy''.