Gippsland coming to Aim - catches my eye

Minesite article today:
January 02, 2007

Gippsland Offers A Combination Of Project Development And Blue Sky.





Tantalum is not a metal that figures regularly in these columns but with demand growing at 7 per cent a year perhaps it should. This growth comes from its applications in turbine blades and electronic capacitors where its properties of high melting point, corrosion resistance and ductility are highly valued. But it is a small business, of the order of 5 million pounds of tantalum pentoxide a year, and because it is priced on a contract basis there is no terminal market. In a niche market, though, a small player can makes a difference and AIM listed Gippsland’s 50 per cent interest in the Abu Dabbab project in Egypt could make it the world’s second largest producer if its plans all come to fruition, and it should have plenty of political support as its partner is the Egyptian Geological Survey and Mining Authority.

Executive chairman Jack Telford gave Minesite a little bit of background to the story just before shooting off for Christmas. The resource at Abu Dabbab is 40 million tonnes grading 0.0252 % Ta2O5, although only 12 million tonnes of that is currently in the measured category. A bankable feasibility study was prepared by Lycopodium in 2004 for a two million tonne a year operation that would produce 650,000 pounds of product a year as well as 1,530 tonnes of tin. That was followed shortly afterwards by offtake agreements with unnamed partners for the first five years production. As is usual in the contract metals market pricing arrangements are not detailed.

The financing for the project seems to be taking some time, as might be expected. Initially the IFC was involved and participated in an equity financing by contributing US$2 million. Jack Telford decided to terminate its role as lead arranger for the debt funding after an approach from Linden Advisory and Consulting Services of Frankfurt which specialises in resource projects world-wide. Linden was then appointed in IFC’s place and the logic of this lay in the fact that the Germans are market leaders in tantalum processing. Talks are therefore likely to be in process about an offtake agreement or a direct interest in the project in return for help with debt funding.

Close to Abu Dabbab is another deposit called Nuweibi that contains 98 million tonnes at a grade of 0.0143% Ta2O5. This is bigger, but of a lower grade, and could take over from Abu Dabbab after that deposit is exhausted. But as this will not happen for the next 30 to 40 years it is not a major consideration at the moment. What investors seem to have missed in all this talk about tantalum is the potential of the Wadi Allaqi gold project to the south east of Aswan in the Eastern Desert. Maybe they should take on board the fact that Centamin Egypt has been exploring for gold in the Eastern Desert for some years and recently confirmed a resource estimate of 7.7 million ounces. Seiga, which is the most advanced prospect at Wadi Allaqi, is about 300 kms south of Sukari and both are located in a similar geological setting - same geological province, same age and rock types.

Both are also based on sites of ancient historical gold mining, but the Gippsland exploration programme is at a much earlier stage. In October the company announced that it was starting Phase 11 drilling at Siega, having delineated zones of gold mineralization there which were up to 75 metres in width and had an open-ended strike length of 800 metres. The initial results from this drilling, announced just before Christmas, included an intersection of 48 metres at 1.6 g/t gold which included 8 metres at 7.75 g/t. At least three zones of mineralization are now thought to to occur over at least 900 metres within the shear zone and this strike length looks like being extended.

Part of the drilling was designed as infill along the main zone of mineralization adjacent to ancient workings. This should provide the data required by the company’s geologists to prepare a JORC compliant resource estimate in time for Jack Telford to announce it when he speaks at our next Forum on January 16th. This could be the moment when investors catch on to the fact that Gippsland has one project – Abu Dabba - moving along to the development stage and another – Wadi Allaqi – offering plenty of blue sky. This makes for an ideal combination so progress on both projects will be worth watching. After all the company is still only capitalised at just over £8.25 million.

Lets hope the run up to Jan 16th sees a resurgence in the share price. Centamin should be announcing their BFS this month so this should also spark interest in the region.