Rose Petroleum plc



Moving up the J-curve

Userfiles/Image/mineweb.gifBy: Rhona O'Connell

LONDON ( -- Typically speaking, one of the key points on the
J-curve is when a company starts generating revenues and this is what is now happening with VANE Minerals.

For those unaccustomed to the term J-curve, it works roughly as follows (all these comments are predicated on the maxim pari passu, or All Other Things Being Equal):

a) company identifies a prospect; stock price can rise
b) company then spends a period of time burning funds in exploration; stock price drifts
c) company announces a reserve; stock price rallies
d) company spends time and burns cash developing prospect; stock price drifts
e) company announces production imminence / schedule; stock price enters phase reflecting development and quality of project
f) company starts generating free cash flow; stock price can improve further

Every analyst has a slightly different definition (including, on a more technical basis, using the Internal Rate of Return as the variable rather than the share price) but this is a broadly accurate set of parameters.

VANE Minerals has now announced that revenue is now being generated from the sale of its Diablito silver / gold concentrates with following the first shipment of concentrates in December 2005. The company expects that continuation of these revenues, which amount to an estimated US$200,000 per month on average, will allow VANE fully to fund its foreseeable exploration activities. The company is not, therefore cash-flow positive, yet, but is reducing its cash burn rate.

Mineweb readers will remember that VANE is exploring and developing precious metals and uranium deposits in Latin America and in the US. The company was listed on AIM in June 2004 (ticker VML), with a view to becoming a self-funding exploration company. This latest announcement would suggest that it is progressing down its chosen path.

The key to VANE is its management (as it should be with all companies) at the core of which is a team of former exploration experts from the now disbanded Freeport mineral exploration programme. This team, headed by Dr. Steven Van Nort, has negotiated exclusive rights to review the Freeport database, which includes over 7,000 exploration files and the company is focused on developing selected projects generated from this database. VANE has secured the rights to properties in Mexico (Diablito, Choix, Guadalcazar and Mina Charay) along with three exploration blocks in Paraguay and uranium prospects comprising 17 target areas in northern Arizona, while negotiations are at an advanced stage over additional "attractive" properties in southern Utah, of which at least two are believed to contain a defined uranium resource.

The Diablito property currently shows a measured resource of 23,300 tonnes grading 12.13 grammes per tonne of gold and 1,319 grammes (42.4 ounces) per tonne of silver and this ore can be taken directly to a smelter. There is an indicated resource of 11,700 tonnes and an inferred resource of 65,000 tonnes at the same grades.

Gudalacazar was put on the back burner for a time last year in favour of the Choix project in Sinaloa, with the result that the Choix drilling programme is now complete and with results due in the next four to six weeks. Drilling will now recommence at Guadalcazar, where first-round drilling results confirmed the presence of hydrothermal gold and the "tuff" area of six kilometres by 0.8 kilometres is estimated to contain between four and six million ounces of gold, although at the moment the grade is thought to be uneconomic.

At the Mina Charay gold / silver prospect VANE is undertaking a pre-feasibility study to assess economic viability and this should be complete by the end of this quarter.

Paraguay is further down the horizon, with the company holding exploration permits, where the initial stream sediment sampling has indicated a gold-bearing area of 14 kilometres by 8 kilometres. The government has extended the permits through to September 2006 and the company now intends to define the extent of the area more closely in the expectation of conversion of the Investigation Permits to Exploration Licences.

Meanwhile, in the United States the company has been granted the Exploration Permit for the Hillside Tailings Project in Arizona. This is a small project, (approximately 180,000 lb), but if viable then it would be a simple process to extract the tailings and deliver for treatment, thus throwing off more cashflow for exploration.

The company is still an exploration play, but is confident that there are excellent opportunities to generate significant growth; to date it has exceeded its plans as outlined at the time of the IPO and sees no reason why it should not continue to make healthy progress.