Everything You Need to Know About MHM Metals

The other week MHM metals released a company presentation that in my opinion is outstanding.
I know I am biased, but if you ever wanted a single document to tell you where MHM came from, where they are now and where they intend on going in the future then this is it.

I recommend you all give it a read as it is highly detailed and very informative.

I also sent managment an email to let them know that the presentation was perhaps the best I have ever seen.

Link to the presentation.

MHM Announcement: February Monthly Report

MHM recently released a month update on their operations. As I have done in the past I will provide my comments under the headings used in the report.

Australian Aluminium Operations

The report provided confirmation that 24 hour processing is currently taking place at the Geelong Facility. This is important because once we have processed the part-processed stockpiled salt cake we can begin work on the 160,000 of landfill. The stockpiled salt cake is expected to take three months to clear.

The other important point that I am glad MHM mentioned was that the potential shut down of Alcoa’s Point Henry Smelter will have no impact on MHM. Point Henry is a PRIMARY smelter, whereas MHM processes salt cake from SECONDARY (or recycled) aluminium industry/plant. This will hopefully clear up any confusion in the market place surrounding this.

Thirdly, the export of the AL80 is scheduled to commence on the 5^th of March 2012 with customs finally approving the paperwork. Impex has exclusivity for all AL80 produced in Australia, however MHM has received expressions of interest from other countries interested in the AL80 produced from our US plant.

US Operations

The preliminary budget estimate is US$25 million for the construction of a 250,000 tonne per annum plant. However, given the property has existing buildings/infrastructure in site there is a strong chance this figure could be reduced to below US$20 million. Targeted earnings at $25 million per annum with the full capacity reached within 12 months of commissioning.

Silica Division

No new information was provided other than to say that MHM continue to engage with their corporate advisors and that a potential spin—off will take place.

Link to announcement

Kentor Gold Strikes High Grade Gold at The Murchison Gold Project

Kentor have released an announcement on some really strong drill intercepts which form part of the Burnakura Gold Project. The highlights of the announcement include:

·         5m @ 102.2 g/t gold from 43m (incl. 1m @ 474.5 g/t gold)

·         17m @ 9.6 g/t gold from 43m (incl. 1m @ 103 g/t gold)

·         Potential to increase production and lower costs for the initial 2012 operation.

Those results on their own are strong for any mine in Australia, but are even more significant when you on consider than the estimated mine ore grade is currently 1.65 g/t. (i.e. significantly lower than these hits).

Also given the Burnakura is a high cost project anything that lowers costs or increases ounces mined is very important.

I posted this on Hot Copper which accurately describes to potential of increasing the average grade per tonne mined. The 3 g/t Au grade mentioned below is the average grade for Stage 1 which will source ore from four open pits including Lewis.

“the 24,000 oz (stage 1) is based on an average grade of 3 g/t Au. Now I am not sure how much we may be able to increase the average grade (if yesterday’s results continue) But some rough maths shows that if the grade increases to 4 g/t Au (even if it was just for year 1 or 2) that would equate to production of approx 32k oz in those years.

This is an extra 8,000 oz which at $1,600 AUD POG generates an additional $12,800,000 for essentially the same processing costs.”

As it is the grade that it is increasing, not the amount of material we process, any extra gold recovered is essentially bonus money that was not initially calculated as part of the stage one feasibility.

The announcement also says that the top 30 meters of the two drill holes have not been assayed so it will be interesting to see how they turn out.

Kentor Gold - Updates 3 Emerging Near Term Projects

For those of you who keep a close eye on my blog and in particular the weekly reports you would know that since consolidation Kentor Gold has been a poor performer. It has come down off its highs of approximately $1.30 and on Monday almost hit $1.

Then came a Company Insight Announcement. I have mentioned in the past that these are a great communication tool that provides little snippets of information that we would otherwise miss out on. Anyway the market responded and the share price climbed 20% over the next two days. It settled down during the middle of the week and is now back up to around $1.20 where it will hopefully close for the week.

The report talks about each of our projects and really emphasises the fact that Burnakura is a multi-stage project and that we should not just focus on stage one. In Simon Milroy’s words “the second phase, heap leaching, oxide ore is what really makes the project perform as this will increase the gold output and reduce the operating costs”. It is also important that this second phase does not need a huge additional amount of capital expenditure as we will already have most of the equipment required.

The phase one will also only included mining from four of the twenty open pits at the project so there is plenty of upside in future mine life. To help assist with this goal Kentor is currently undertaking a 20,000m exploration program at the Murchison project. The program is designed to infill drilling around the initial mining areas to increase confidence and extend the resource. It will then move to Gabanintha.

There wasn’t a whole heap of information provided on Andash, but if one thing stood out it was “If we meet those target numbers we will produce free cash flow each year that is equal to our current market capitalisation”. If that doesn’t highlight the potential of this project and the rewards on offer for Kentor Gold shareholders then I don’t know what would.

On to Jervois and it is pretty clear by now that management are extremely positive on the potential of the project. In the announcement Simon Milroy stated “Jervois is shaping up as a pretty major multi-metal mine, and it could well emerge as the largest of the three current projects”. Kentor plans to complete a scoping study next month and then proceed straight into a full feasibility study. The scoping study is currently examining the economics of a 1.5 mtpa floatation concentrator producing a copper concrete with significant precious metal credits. Kentor is also investigating the production of a magnetite concentrate from the floatation tailings, which is pretty significant in my opinion.

Overall it was a well written and fairly well detailed report. The market obviously approved as we saw the share price respond strongly.

Linkto announcement.

Kentor Gold Approves Murchison Gold Project

On 7 February 2012 Kentor Gold released an announcement on the Murchison Gold Project in WA. This is the new working title for both the Burnakura and Gabanintha mines.

The project will commence production in June 2012 and will eventually involve a four stage expansion program.

Stage one will produce 24,000 ounces of gold from a combination of open pit and underground mining at Burnakura over an initial three and a half years. Further drilling is expected to increase production and extend mine life.

The capital costs of this first phase is $14.8 million, with $2 million already spent. I believe this came in substantially higher than where the market expected and is most likely due to the underground mining component that was a recent addition to the study.

The second phase is targeted to commence production during 2013. This will involve the additional of a parallel heap leach operation which will allow for an expansion in production and the ability to process the lower grade ore.

The third phase will be an expansion of the CIP plant from 260,000 to 500,000 tonnes per year. As yet there is no date mentioned for this. I would assume that this could also happen in 2013, depending on the amount of capital available for KGL’s disposal at the time. (keeping in mind that Andash will hopefully be being constructed at this time as well).

The fourth phase will be the floatation of copper-gold ore to produce a copper concentrate. This is where the Gabanintha project comes in.

The major negative of the announcement was the high cash operating costs for $1,223 per ounce. If you take an average AUD gold price of $1,550 this only leaves a margin of $327. At 24,000 ounces this only equates to $7,848,000. Although not a huge sum of money it should go some way in covering administration costs and part of our exploration program.

The next feasibility on stage two is due in April. It is expected that this will reduce operating costs.

Link to Announcement.

Kentor Gold Clarification to Quarterly Report

As I just mentioned in my post on the Kentor Gold Quarterly Report there had been some discussion about the timeframes for the Burnakura feasibility studies. As chance would have it Kentor have just released a clarification.

The project is planned over two stages. Stage 1 is the expansion and restart of the CIL plant. Stage 2 is the addition of a heap leach operation to treat the low grade ore.

The feasibility study for stage 1 will be completed and released to the market in the next two weeks. Stage 2 of the project will be completed in April 2012.

So there we have it, we can expect another announcement on the Burnakura project very shortly.

Link to announcement.

OBJ Quarterly Report to 31 December 2011

OBJ released their Quarterly Report to 31 December 2011 and as per their previous reports they provided zero commentary. This is something that I plan to raise with the management team. I understand that they operate under a number of confidentiality agreements but a couple of paragraphs on what the company has done throughout the quarter would not be too hard to put together in my opinion.

Anyway, the main information to come out of the quarterly was that cash burn remains extremely low with a net cash decrease of $258,000 in the quarter. Now this is important on two fronts. Firstly it indicates that our internal pain patch development program is not requiring a significant amount of cash and suggests that their A. OBJ is utilising research provided by one of our partners to further their own efforts or B. that this project is in some way funded or supported by someone else even though OBJ call it an “internal” program. The only other option is that very little work is being carried out in this area. This would however contradict the purpose of the program which is to push the project through at a faster rate.

The second important impact of this low cash burn is that the company remains well funded for another couple of years. The cash at the end of the quarter was $3,959,000.

Link to announcement.

Kentor Gold - HeliTEM Survey of Gabanintha Gold-Copper Project

Yesterday Kentor Gold released the results of a HeliTEM Survey of the Gabanintha Gold-Copper project. As a result of the feedback received from this survey Kentor will proceed with a exploration drilling program.

Modelling of the targets will commence this month and will provide Kentor with estimates of size and orientation to help direct follow-up drilling. The proposed drilling with Gabanintha will form part of Kentors overall 20,000m RC program across their Burnakura and Gabanthina projects.

In is also important to note that this regional exploration is in addition to the drilling planned to increase the upgrade the existing Gabanintha inferred resource which currently stands at 203,000 oz of gold.

Overall it was a positive announcement, but certainly not enough to exit the market by any stretch of the imagination. We all eagerly await news on Andash and the Jevois upgrade.

Link to announcement.

MHM Announcement: Monthly Update

Yesterday MHM released a company update. As is to be expected with these monthly announcements most of the information contained in the report is just a re-hash of past announcements. It is however, well worth reading as there are always snippets of additional information provided.

Some of the most important information is about our Australian Operations. Now the company has continuously stated that an EBIT of $8.6m should be achievable from the plant once everything is up and running and we are able to process the salt slag landfill. We can now put a clear time frame on when this should occur with 24 hour processing commencing in January 2012. It is then expected to take three months to clear the back log of partly processed landfill. So by the end of Q2 2012 we should have one full quarter (April – June) of the plant operating at capacity and processing all material (Sim and Alcoa contracts, as well as landfill).

We also received some important information relating to the export of AL80 and why it has been delayed. Basically it is a bureaucratic matter than Impex Metals (our customer) has been trying to handle. MHM has now assumed responsibility for finalising the custom documents/process so hopefully it will be resolve shortly. A poster on Hotcopper was also able to shed further light on this issue. In a nut shell Customs classify the AL80 as a “waste Product” because it is generated from a waste stream (salt slag). Whereas, Impex and MHM view it as a commodity because it has an economic value. As a result the product basically needs to be re-classified. Management also stated that other options are available to sell the AL80, although they are not as profitable.

In regard to the US operations there was not a great deal of additional information provided. It basically summarised what we had been told via the earlier site selection announcement. MHM also confirmed that they continue to talk with a number of companies to secure additional contracts. A number of these companies are also likely to sign on once the plant is finalised.

The income projections associated with the US operations will also be released in due course. It appears that they cannot be released at this time due to the confidentiality agreements with our partners and the chance that they be identified by the volume of material provided under each contract. This is somewhat annoying because if the market cannot value our projects then it is likely that the SP will remain stagnant/under pressure for a little bit longer than I would like.

An Australian and International road show is however going to take place in early 2012 and this could offset the markets inability to value our operations appropriately. A number of broking houses are also interested in publishing research on the company.

MHM also provided an update on the Silica Division and Exploration Division. As usual the Silica division is going nowhere fast and is now, in my opinion, at least 12 – 24 months off. It appears as though the complex nature of the product, requirement for a large power supply agreement (for the future plant), additional feed and supply of charcoal needed for the process means that work on this project is anything but straight forward. Luckily I attributed no value to this Division of the company during my research/analysis and it is now something to place in the “bottom draw” and consider as a bonus if and when it comes off.

Finally management have made a decision to divest the exploration projects. This is very positive in my opinion as not only was it taking up time, but draining $300,000 in wages each year for the Geologists/exploration staff. I would not expect a significant amount of money for this project (if at all) and we may just retain a free carried stake in lieu of cash. Either way removing this project from our books will give management even more time to focus on what is important: Our US expansion and salt slag/black dross recycling efforts.

Kentor Gold: Andash Update & the Kurulti Process

A couple of days ago Kentor Gold released an update on their Andash project in the Kyrgyz Republic. The announcement stated that a general village meeting was held on the 16^th of December and that this meeting was attended by a number of village stakeholders including the council of elders, the women’s committee and the youth committee. The outcome of this meeting was that a formal Kurulti (a traditional decision making meeting) will be held regarding the development of the Andash project.

At first glance it appeared that this announcement was just saying a meeting had taken place to arrange another meeting and that Kentor Gold was prepping us for a slight delay in the outcome of the project. This belief was compounded by the fact that management had previously stated that a decision was expected before the end of the year and I therefore thought that this was their polite way of saying that a decision was close, but not here yet.

Anyway I have done some research into the Kurulti process and re-read the announcement a number of times and the thing that strikes me is that “Representative of government, parliament, regional and provincial administrations will be invited to attend. The one item to be considered at this meeting is the granting of a social licence for the development of the Andash project.” This now leads me to believe that this Kurulti process is more likely to be a formal way of the village saying “yes” to Kentor Gold. This obviously makes sense as whenever a decision is made a formal announcement/commitment to that decision needs to be released. I.e. It’s not like every member of the village is going to contract Kentor directly and let them know how they feel.

My opinion towards the announcement has therefore changed and I feel a lot more comfortable about the process. Obviously we don’t have any idea of timing, although Simon did hint that it may be in the New Year when he said “we anticipate moving the Andash project forward with a full social licence in the New Year” but it certainly seems like a positive outcome is almost within reach. But as they say a deal is not done until you see the signature on the dotted line so I’ll hold my excitement for the time being.

As always please do your own research and consult a financial advisor.  The above comments are purely speculation on my part.

Link to announcement

Kentor Gold: AGM Announced Along With Details of a Share Consolidation

Kentor Gold announced the details of their AGM yesterday, along with a resolution to consolidate the number of shares on offer by a ratio of 10:1.

Obviously, this has no effect on the company’s value because if you had 10 shares worth 10 cents each (total $1), they just become one share worth $1, but I don’t know why so many companies proceed down this path. In my experience it results in some short term pain as the share is dropped by short term holders and traders. It then takes time for longer term investors or funds to pick up the slack.

I can only hope that news on Andash and Burnakura comes out well before the consolidation, which is scheduled to take place on 10 February 2012. The reason why I would prefer  no consolidation, or at the very least consolidation after a major news items, is because the share price has the potential to run a lot hard (in the short term) when it is priced in the cents, rather than dollars. (i.e. selfish reasons associated with wanting to see the value of my holds increase as much as possible on each announcement)

Long term it will matter little and we need to trust that management know what they are doing. I can also see the benefits of consolidation, with the main one being that investment funds and institutional investors may be more inclined to purchase stock. I do however wonder if it is to position to the company for future acquisitions? The reason why I ask this is because Kentor Gold have recently stated that their aim is to identify, acquire and develop advanced stage projects.

Feel free to let me know your thoughts on this issue and if you have recently experienced a share consolidation plan with any of your holdings.

Link to announcement

Kentor Gold: Air Core Drilling Results From Burnakura

Yesterday Kentor Gold released a report on the results of a 60-hole air core drilling program at Burnakura. This was really the first round of exploration in areas where there are currently no known resources/reserves.

The exploration area was 2km north of the known gold Resource and it targeted a magnetic structure interpreted as containing a repetition of the Burnakura Thrust zone. The results were disappointing with low levels of gold anomalies (<0.2g/t) being identified.

There is however a more substantial 20,000 m RC drilling program that will commence in January 2012 which should yield some more promising result.

All in all it was a “nothing” announcement and the market moved on.

Link to announcement

MHM: If It Was Such A Good Announcement Why Did The Price Go Down?

I have just posted my thoughts on the MHM US site selection and incentive announcement below. I do however, want to talk about the share price movement, because at the moment it appears as though it will close at around $1 or down almost 10%, and some of you may be wondering why I can call the announcement positive when the price goes down so much.

Well a couple of days ago I posted my thoughts on the upcoming announcement and in that post I said that it was quite good that the share price had not risen too much. At the time it was around the $1.00 - 1.04 mark and I felt that if is could hold that level it would mean that there was not too much “short term money” coming into the stock. Everything was looking good on that front until yesterday when some strong afternoon buying pushed the share price up 7.39% to $1.09. As a result there was probably an element of “buy the rumour, sell the fact” taking place today.

But what else happened? Well the most obvious thing is the US and Euro markets taking another dive, but on a company level I think the announcement failed to “excite” short term holders. And really these are the people who would be pushing the price up on a day like today because most long term holders are already set and/or are happy to accumulate over time (not just on one day). I do however want to clarify the word “excite”. Just because it wasn’t exciting for short term holders, does not mean that it was not positive. I just think it told us/the market what we had already expected.

In my earlier post I listed a couple of things that could have resulted in some “excitement” and a spike in the share price. These included:

1.   Any solid confirmation of financing or that no capital raising would be required.

2.   Anything that mentions a second plant or a potential upgrade to plant one happening in the future.

3.   If the value of the cash/land/contra incentives exceed more than 10% of the plant construction cost (i.e. >$2m).

4.    Any other incentives that may provide cheap financing or long term tax benefits (10 years plus).

These were not predictions, but information, that if mentioned, could have put some fire under the share price today. If we review the list we didn’t get any mention of financing, the announcement hinted at expansion but didn’t confirm it and incentives at the moment equate to less than 10%. We did however come close to number four, because the tax incentive does apply over a ten year period.

Without getting many of these big, new statements it was likely that the share price performance would have been muted even on a green day for the ASX. Those who hold for the long term know the strength of this announcement and should not worry too much about the performance of one day’s trade in my opinion. Once news is released on the financing and construction timeframe I expect the share price will start to march on again.

MHM: US Site Selection & Incentives Announcement

MHM Metals announced the location of their site US processing plant this morning. Contrary to most speculation the plant did not end up being located in Tennessee but ended up further north in Russellville, Kentucky.

There are a lot of positives to take from the announcement. Firstly the 115 acre site which MHM have selected is correctly zoned and has some existing buildings in place. This will help minimise the construction timeframe and may also allow some costs associated with the project to go through as “repairs and maintenance” rather than capital expenditure. From an accounting point of view this is beneficial as it will allow costs to be offset against profit, instead of being capitalised over time.

Secondly, the announcement details how this site was chosen because there is over 350,000 tonnes of salt slag and black dross produced within an economic radius, with the rail link offering the potential to expand this further. This clearly underlines the potential to increase the capacity of the plant over time and I would not be surprised to see a 300 – 400,000 tpa plant there in the future. MHM also mentioned that the original site they considered in southern Tennessee was close to two large salt slag producers, however the continuity of supply was in question as they operate on shorter term contracts. As a result it appears as though management took the more prudent approach by locating the plant in an area where demand should exceed supply (of the plants initial capacity).

Thirdly, management lived up to their word with both Local and State Government representatives, including the Governor of Kentucky, attending. They were on hand to detail the incentives that will be available to MHM. These include tax incentives of up to $825,000 through the Kentucky Busines Investment program and a $250,000 infrastructure grant The City of Russellville, Logan County and the Logan Country Industrial Development Authority. There is also the potential for further incentives to be forthcoming and I am sure that the company will be pushing for these now that the plant has been announced. All up I think the incentives came in where most people expected. For a $25m outlay to get circa 5% in grants is not bad at all.

Lastly, it is important to mention the number of aluminium company’s operating in the area and the access that we will have to a skilled workforce. Our operating costs will also be fairly good in my opinion as a number of articles have mentioned wages around the $12odd mark, considerably lower than what we would be paying in Australia.

My post above really does not do the announcement justice as there is a fair bit of information to take in. As a result I would recommend that you all take the opportunity to read it and do a quick Google search of some of the articles that have been written over the last few hours.

MHM also plan to release a conservative timeframe shortly. Note the use of the word “conservative”. I think management are finally learning to under promise and over deliver in regard to announcements and projections they make. The plan capacity also remains 200-250,000 tonnes with a budgeted cost of US$25 million.

 Link to announcement.

Kentor Gold Announcement: MD Updates on Company Projects

Yesterday Kentor Gold released an announcement to the ASX in the form of a Company Insight report. Normally I find these quite informative as they follow a more conversational tone and provided snippets of information not usually included in a standard company announcement. Unfortunately, yesterday’s one was fairly plain and did not offer too much additional information.

The update mainly focused on the Jervois project and mentioned that the first metallurgical test work conducted by Kentor Gold produced a 26% copper concentrate grade at a recovery of 94%. “This is a very good result and indicates that the ore is very amenable to concentration by flotation”. It was also achieved using a relatively coarse grind size of P80 90 micron. The benefit of this is that the coarser the grind size the lower the capital and operating costs. Obviously it is early days for the Jervois project so we really need more information and analysis before you can confirm any of the above.

The announcement also provided some details on the drilling that has taken place. The previous resource estimate was limited to a depth of 200 m below surface, with recent drilling going as far down as 470m. The ore body does appear to get narrower at depth, but is also higher grade. As a result of this drilling the insight report states “We expect to complete an updated Resource estimate for Jervois later this month”, so that is something we can all look forward to. Simon Milroy also stated that “the Jervois project has the potential to be the largest project for Kentor Gold. However further drilling is required”.

Secondly, onto Burnakura, the feasibility has been delayed for a number of reasons including the fact that it will now also examine the potential of resuming underground mining operations. It is now anticipated that this study will be release in January 2012, however it is important to note that this will not delay production which is scheduled to commence in June 2012.

The report then goes on to talk about the Kyrgyz Republic operations where Simon Milroy states that “The number 1 priority for Kentor Gold in 2012 is to get Andash into construction”.  Originally we were expecting approval on this project prior to Christmas. But the tone of the announcement was not as bullish as in the past so I feel this may be pushed into January 2012.

Finally, one of the more interesting parts of the announcement occurred at the end where Simon Milroy reaffirmed that the company’s strategy is to acquire, develop and operate advanced projects which have existing resources. He then goes on to say that “There will be more volatile times ahead, and we look forward to the opportunities that they will undoubtedly present to Kentor Gold”. This leads me to wonder if, once we are in production and generating cash, the company will look at further acquisitions.

Link to announcement.

MHM Press Conference Scheduling

Last Friday MHM announced the scheduling for their US press conference. Now many people may simply skim over this and not think too much about it (given that we were told about it a week or two ago in one of the US supply contract announcements). However, the most important piece of information is that it will take place on 12 December in the US.  This means that there are only 15 trading days left for anyone who wishes to take a position in MHM before this announcement is made. This is not a lot of time and could help support the share price over the next three weeks.

The press conference will be held with senior state and local government officials. Again this is a very important statement. I have previously said that you do not bother holding a press conference unless you have important information or news to outline. Also senior state officials do not tend to align themselves with projects that are likely to face public backlash or delays. Their involvement should not be underestimated in my opinion.

The event is scheduled to outline government grants and incentives that are expected to be formally approved prior to this time, together with information regarding MHM’s property acquisition. Again none of this is new, but I think these incentives have the potential to really surprise the market. In MHM’s previous announcement they said that they were looking at rail access for their plant. This led me to speculate that they may build a plant that has the potential to be upgraded to two or three times its original capacity, rather than build two or three smaller plants. From a state and local government point of view I am sure they would rather see all the jobs stay in their area rather than share them with other states. If this is the case then they may be willing to throw some nice concessions our way.

Finally the details of the press conference will be released prior to the commencement of trading on Tuesday 13 December and another press conference is scheduled in Melbourne for later that day. It is interesting that they are also holding a conference in Australia. I guess they want to generate additional news content in Australian based publications for Australian investors. It all helps!

MHM: Third US Processing Contract

Last week I wrote a blog article on MHM’s second US processing contract. At the time I thought it was a great result by the company to secure two contracts within a matter of days. You can therefore imagine my surprises on Monday when they announced their third contract. Unfortunately I was not able to comment straight away as I was at the Gold Symposium. It was however very nice to see the share price rocket past $1.

The announcement was very similar to our second US processing contract and was structured as a “tipping arrangement” over a twelve month period. This will give the customer the opportunity to see how well our technology works and hopefully move onto a tolling arrangement in the future.

As per the earlier announcements the usual confidentially agreements are in place and no additional details will be released on the parties’ identification for the time being. MHM also stated that they continue to engage with a number of other companies for additional salt slag and black dross supply.

This refers me back to my previous comments where I stated that the first contract we signed was in my opinion around 100,000 tonnes per annum as it allowed management to state that sufficient supply had been secured the justify the plant’s construction. Based on a 200,000 – 250,000 tonne p.a. plant I then said that we may get one more large contract, two more medium contracts or three smaller contracts. As a result I expect that contract number 2 and 3 and probably sub 50,000 tonne per annum contracts and probably closer to 25,000 tonnes. If they are only 25,000 tpa each then that would still leave anywhere from 50,000 to 100,000 tonnes of capacity at the plant. I will therefore alter my opinion and state that we could expect one or two more contracts for this plant.  Whether they come now or at a later date is another question.

Finally the announcement mentioned that the company is engaged with a rail provider and has commenced preliminary planning and engineering for construction of a rail spur. The availability of rail is an important consideration for MHM as it provides flexibility of transport and can potentially increase the radius for which salt slag and black dross can be sourced. This leads me to question whether MHM has changed its preference from opening more than one plant (i.e. two or three plants at 200-250,000 tonnes p.a. each) or one larger plant that will originally operate at 200-250k tpa and then be expanded over time to 500k tpa or higher.

Link to company announcement

MHM: Additional US Processing Contract

First up sorry I did not get this post up yesterday as planned. With the Gold Symposium running tomorrow and Tuesday I have been working over the weekend so that I don’t have to worry about completing any clients work between presentations.

Any way on to the announcement! As I speculated in one of my earlier posts on MHM I thought a couple of the interested parties (suppliers) may not be interested in paying a fixed charge per tonne and would only consider coming to the table if we assumed ownership of the processed materials. From the suppliers view point they would then belive we are taking on all the “risk” associated with the processing contract. Obviously, those who have followed MHM closely know that the recycled components are actually very valuable and can deliver the same, if not better return than a standard tolling (or fixed price per tonne) agreement.

Last week’s announcement on the first contract was a tolling arrangement, however, Thursdays announcement was in line with my original thinking and is a “Tipping Arrangement” (MHM assumes ownership of the recovered materials). The contract runs for one year and will provide the customer with the opportunity to explore a tolling arrangement in the future.

The announcement then goes on to say that neither the name, nor the amount of salt slag/black doss supplied can be provided for confidentiality reasons. MHM are also engaged with a number of other companies with substantial slat slag and black Dross volumes.

Now, if we dig into these numbers a bit further we know that the first contract must be at least 100,000 tonnes per annum, because management stated that it was sufficiently large enough to justify the plant construction. At a minimum I think that would equate to 50% of the plant’s capacity (keep in mind the capacity will be between 200 and 250,000 tonnes p.a.).This second contract is most likely for a smaller supplier, under 50,000 and probably closer to 25,000 tonnes p.a. in my opinion. However, I could easily be wrong and it may be a large producer who only wishes to supply us with a small amount of slat slag/black dross to test the concept. Although they would then risk missing out on utilising our technology if the plant does not have enough capacity to meet their full needs.

If the above figures prove correct that means we have room for one more large contract or two medium contracts or three smaller contracts to make up the remaining 100,000 tonnes per annum capacity. After that they will have to start lining up for our second plant.

The second part of the announcement focuses on site due diligence and the land acquisition which is now expected to be completed by the end of January. MHM is also working to finalise the date of a press conference which will be held with senior government offices, during which details of the property purchase and availability of government incentives and support for the project will be released. Now in my opinion you don’t go to the trouble of announcing a press conference with “senior government officials” for some minor incentives here or there. You only do this is you have real news to report and if the impact on the local economy is going to be significant. I think these incentives have the potential to really surprise the market.

Finally, I just wanted to comment on the MHM share price. It did finish the week very strong, up 10 cents to 97c on Friday alone. I know I have stated that I would buy more shares after the plant announcement, however, I feel the train is leaving the station so to speak. If I can buy anywhere at or under 85 cents I will probably double my stake. If not I may have missed out on this occasion and will have to consider the size of my holding at a future date.

Link to announcement.

Kentor Gold – Exploration Results for Bashkol Licence Area, Kyrgyz Republic

Kentor Gold have released two announcements on the Bashkkol Licence Area and Bekbulaktor Gold Prospect (situated within the Bashkol Licence area) over the last two days. As a result I am going to combine my analysis into the one post.

Firstly I will focus on the Bekbulaktor Gold Prospect where channel sampling returned high grade gold and copper results. This zone of mineralised granite was originally studied in 2009 and 2010 field seasons (access is restricted by snow in winter months). It had however fallen off my radar (and the general markets) due to the focus on Andash and the Burnakura Gold Project. The results included:

Central Zone

·         37 m @ 3.65 g/t Au

·         24 m @ 1.72 g/t Au

·         13 m @ 4.90 g/t Au

·         8 m @ 5.65 g/t Au and 0.6% Cu

·         20 m @ 2.54 g/t Au

Eastern Zone

·         10 m @ 2.53 g/t Au

Northern Zone

·         11.5 m @ 2.83 g/t AU and 0.13% cu

·         15 m @ 1.51 g/t Au and 0.1% Cu

·         10 m @ 2.77 g/t Au and 0.43% Cu

Western Zone

·         12 m @ 14.07 g/t Au and 1.83% Cu

Based on these encouraging results Kentor Gold now plans to undertake a drilling program in 2012 with the view to establishing a gold-copper resource.

To the south of the Bekbulaktor Prospect is the remaining area of the Baskol Licence Area where a reconnaissance program comprising geological traverses, chip sampling and one channel sample took place. The most encouraging results from the reconnaissance exercise included:

·    A continuous channel sample reporting 14 m @ 5.75 g/t Au, 1.03% Cu and 97 g/t Ag in the valley of the Molo Stream.

·    Widespread presence of Gold and Copper in mineralised granite in numerous locations between Bekbulaktor and Sharkratma, a distance of 15 kms.

A geological and geophysical program will take place next year to identify drill targets which are complementary to the developments at the Bekbulaktor prospect.

Now obviously this project is a fair way down the list when it comes to the project development pipeline for Kentor Gold and there is still a long way to go in term of defining a resource, conducting environmental studies and feasibilities before we can even talk about the potential of a mine, but it is good to see that Kentor Gold’s determination to succeed in Kyrgyzstan may be rewarded in more ways than one (i.e. in addition to the Andash Project).

If next year’s drilling is able to define a resource that warrants further exploration and consideration then we may have another project to add to the list in 4 or 5 years time. Until then I do not expect this announcement to generate much buying support as there is still uncertainty over the Andash Project and much more exciting news on the Australian operations due shortly.

MHM: First US Processing Contract

Well we didn’t have to wait long. MHM released their announcement shortly after my post earlier this morning. So what has MHM achieved:

1.    The first contract for our US operations has been secured.

2.    It is a five year contract

3.    It is structured as a tolling arrangement where a fixed price per tonne is charged to the customer with MHM returning the aluminium and flux to the customer while retaining ownership of recovered aluminium oxide.

This is a pretty solid outcome in my opinion. There had been some concern that US companies were concerned about signing a tolling arrangement where they effectively assumed the risk associated with the project. That concern has now been put to bed.

The other interesting point highlighted in the first paragraph is this statement “MHM’s first US salt slag and black dross processing facility.” This confirms that we will also be processing black dross. This is a complimentary product identified by John Pough and further strengths our expansion plants.

The announcement did however throw up a few issues which I think will keep it from surpassing $1 in the short term. These include:

1.    The company and details of the contract must remain confidential and MHM must refrain from revealing the counterpart or contract terms. This is due to the fact that the companies we are dealing with also landfill salt slag and if their ability to recycle material at a cost effective rate becomes public that could put undue pressure on their current operations.

2.    MHM cannot reveal the tonnages to be processed under the contract, however they did confirm that there is likely to be a number of contracts signed by various parties and the first US plant will process between 200,000 and 250,000 tonnes per annum.

3.    The supply contract is subject to a satisfactory visit by the US aluminium company to MHM’s Australian operations in the near future.

4.    The contract contains clauses that permit the contract counterparty to cancel the contract should information as to its identity become public prior to commencement of MHM’s US operations.

There was also a second 3B Announcement which shows the US Aluminium company has purchased 300,000 options at 10cents each with an exercise price of $1.

Link to US Processing Contract Announcement

Link to 3B Options Announcement