MINMET PLC FTSE MNT

Sungem - the zinc find.

I think you are being too pessimistic on this one. Five scout holes have been sunk, only one published, but I think the results of the other four are known to the Company - but were not dropped into a Christmas-holiday market - so I expect them within a fortnight [real time - not explorer-speak!].

The whole area has, of course, been surveyed with induced polarisation [IP], and hence the size and shape of the mineralisation is known. Grade, even from the first scout hole can be extrapolated. Two journalists have had indication from the Company that it is "world class". It would be difficult to apply that term to less than 6m tons of zinc [note - metal, not mineralisation], and it could easily be double that.

I think there is nil chance of Minmet mining the zinc. A 400,000 ton per year mine [which would have 15 years supply from 6m t] producing concentrate would cost around $1b; adding a concentrator would add perhaps $1.5b. These figures seem to me to rule out any form of JV, so I hope we sell for cash. We will of course need to get a resource first - minimum inferred but the price would be better for measured. Also we do not want to sell until we know all that we are selling. However the establishment of a resource is much less complex than with gold, and will be much quicker.

Therefore I believe Minmet will sell to a major. Looking at other deals, and percentages of spot price, I think they might get $20 to $30 per ton in the ground - so for 6m tons $120m to $180m - or for 12m tons $240m to $360m. I think one should then allow for tax at 25%.

It would take a minimum of three years to get into production - probably more like five; by then the zinc price might have recovered - or might not - however the major miners have to keep replenishing their stocks so may well ignore the price cycle in making buying decisions - though not in price decisions, however.

Anyway I think Minmet deserve great credit for this find - wholly theirs, unsuspected by anyone else - even the Brazilian Geological Service. If we do sell for cash then we would have all the cash we would need for setting up the large gold mining operation I described in my last post.

Ashley is on holiday - I think Florida, but I am not sure. He certainly was vitriolicaly anti-Minmet at one stage - but has mellowed a great deal - presumably as he learns more about mining :-). I hope he does NOT miss my last post. I actively want it to be critically examined, just in case there are holes in it. So far the only off-line comment has been that I have left things out [eg diamonds] and that is certainly so - but was deliberate.

I hold lots of Minmet shares - so I may be biased - in fact I probably am; however I hope that does not interfere with the accuarcy of what I post.

Richard Dawson [Goatherd]