Rose Petroleum plc

Watshot.com

28-October-2004

VANE Holdings

Since arriving to edit WatsHot I (speaking metaphorically) I seem to have spent more time hopping about the Philippines than anything else - I speak of my labours in respect of members' investments in Toledo Mining of course. And I knew that the copper-cum-zinc story rang a distant bell - and it was this. It concerned US global mineral concern Freeport-McMoRan which made such a massive Indonesian find, that - again metaphorically - the partners just dropped everything and ran. Will Toledo do the same? Watch this space.

But this is not about the far Pacific, but about Mexico.

Freeport's legacy can be accessed through a subsidiary, to an AIM-quoted company now called VANE Holdings (VHL). The debut took place in June when £3.3 million was raised at 11p.per share. There is a weighty enough board, but the ultimate foundations upon which the company rests are the expertise and experience of Chief Executive Officer Steven Van Nort and Director of Geology L.Clark Arnold. And the reason why this observation carries more gravitas than it usually does, is that both men were deeply involved with Freeport-McMoRan. There is an agreement whereby 7,000 files can be freely perused, subject to Freeport?s having an option to acquire up to a 25% interest if and when any derivative projects reach certain stages. If Freeport then wishes to join in, it has to pay a sum equal to twice the exploration costs in proportion to the planned percentage interests which it wishes to achieve.

What VANE came the team has come up with so far is an option which it believes will give it exclusive exploration rights to nearly 30 square kilometres of Mexico ?at Guadalcazar - in an area where gold-bearing mineralization is already evident. But the team thinks that it is possible that its planned programme of intensive data analysis, sampling and drilling will indicate that the deposits identified so far are not alluvial as previously thought, but are outcrops of what may be a major, hydrothermal, find. This geological fact can mean the difference between a find which is merely ('merely!') economic, and one which is world class.

Fascinating stuff, but marred more than a bit by the fact that we?ve already heard many versions of the same tale, but few satisfactory endings. However in order to avoid relying on this single enterprise, VANE has opened up, in Mexico too what is known as the Diablito Project. As it happens, this has nothing to do with Freeport - but it is also a gold mine. The plan involves the recommencing of previous workings; there is too an agreement to send mined silica direct to an adjacent smelter, which obviates the need for on-site processing plant, and means too that a rapid production schedule can be implemented.

We?ve heard that one before as well, but here?s the rub. Based on the board?s opinions and assertions, Diablito is supposed to generate $3 million pre-tax per annum when it gets going ? within six months ? do so for up to seven years or more, and that based on present known resources alone.
On Monday the company reported that the final assay results from Diablito continued to confirm the presence of a high-grade mineralised vein.

Unlike many well-touted competitors the shares have lain fallow, and now stand at 8.25p. The hot prospect apart, the frisson of Guadalcazar, and what the unexamined files may still contain, adds real interest to what looks a solid-enough story to start. I would say that its a speculative buy.