Rose Petroleum plc

Minesite, Minews Story by Jack Hammer

13-December-2005

Vane Minerals Moves Towards Its Target Of Being A Self Funded Exploration Company

By Jack Hammer

Diablito, AIM listed Vane Minerals' high grade silver and gold project in Mexico, is now in production. The company should, according to Seymour Pierce analyst Charles Kernot, have received "a nice big cheque for their first delivery of concentrate, probably about a week ago". Taking into account a stockpile of previously mined ore built up over the past few months, Vane can expect to pull in at least US$400,000 from this initial shipment. Mr Kernot forecasts sales for the full year at US$900,000. That won't take the company to profitability, but it is a statement of intent.

Vane was always intended to be a self-funded exploration company. At its core lies a database of exploration projects brought in by the original founders, the former Freeport McMoRan exploration team of Steven Van Nort and Frank Nelson. That repository of knowledge has itself been extensively mined to produce the core of the varied portfolio that Vane has. "We are exploration, not mining," emphasises executive director Matt Idiens. Mining consultants run Diablito, as they will Vane's other potential producing asset Mina Charay, which could be in production within 12 months. The plan is for the cash generated from those assets to finance exploration for bigger projects.

On current resource numbers Diablito should produce around 2million ounces of silver and 16,000 ounces of gold over a mine life of four years. That should bring in around US$250,000 per month, meaning the company is already in a position to cover most of its costs. The mine life could also be prolonged if further exploration proves successful. The addition of gold production, if it comes, from Mina Charay, a high grade vein system, should then ensure that Vane achieves its aspiration of becoming a self-funded exploration company. Sales of US$3million are expected next year, and profits of US$200,000. Although those forecasts come from Seymour Pierce's Mr Kernot - recently voted Analyst of the Year by the Association of Mining Analysts - they should be regarded as fairly loose.

There's the issue of whether gold and silver prices stay at their current high levels. If they drop significantly then Vane could be loss-making for a little while longer. That doesn't look likely in the current climate though, and in any case, with over £1million in the bank, further dilution for anything other than a sizeable deal isn't on the cards.

Much more depends, says Mr Idiens, on how much Vane chooses to spend on its uranium assets. With uranium creating a bit of a buzz in London at the moment, Vane's November acquisition of the North Wash uranium property in Utah received a fair amount of coverage. The company hasn't divulged a huge amount of detail on its 17 other uranium "target areas" in the breccia pipe district of northern Arizona, and there wasn't extensive detail on North Wash either. "Uranium is a big kicker and will hopefully pull out a lot of value", says Mr Idiens, who plans to update the market in detail at a Minesite presentation in January. At the moment all we know about North Wash is that it contains an inferred resource of 150,000 lbs of uranium, as well as significant vanadium shows. The resource is contained in 35,000 short tons grading 0.22 per cent U3O8 with an average thickness of 5.5 feet. That's based on thirty-year old data, though, so it will be interesting to see if more recent work is presented in January.

Vane also stated when it acquired North Wash that it was in negotiations on further uranium acquisitions in the USA. It looks as though the company could end up with quite a portfolio in uranium, and it's no surprise to learn that the long-term the plan is to put them all into a new company. That's one way of creating value. Another is to sell assets outright, and this looks the more likely proposition for the 340,000 square kilometres of ground that Vane holds in Paraguay. Sampling programmes on 22 gold and 6 copper anomalies on that ground are ongoing, though the company has been short on detail on that score too. That's another thing Mr Idiens intends to put right in January.