Rose Petroleum plc by Alistair Ford


VANE Minerals Gets To Work On A Multitude Of Copper Porphyry Targets In The USA

VANE Minerals has always talked a good game about being an explorer funded by production, but until very recently the actual production delivered by the company had always looked pretty meagre. The producing asset in question, the Diablito silver-gold mine in Mexico has never exactly been a dog, but, as VANE’s London-facing commercial director Matt Idiens, points out, the whole set-up in Mexico has never quite lived up to its potential. Recently, though, there’s been a change in the wider operating environment in Mexico, after one of the two smelters that VANE habitually shipped its concentrate to was shut down for environmental reasons. That left the other smelter, owned by industry heavyweight Penoles, in such a commanding position that VANE and other smaller local operators began to get decidedly nervous.

VANE’s solution was simple. It decided to build a cyanide leach plant and add a Merrill Crowe circuit onto the end of it in order to produce a highly marketable precipitate that bypasses the need for a smelter completely. That development was supported by the acquisition of new production from local operators Jose and Hector Ruiz, and, most recently, by the raising of £2 million worth of new money in London. "The directors believe that VANE is at a turning point", says the press release accompanying the fundraising. Certainly Matt Idiens believes it. He’s just put £200,000 of his own hard-earned into the deal, taking his total holding to close on 4.5 per cent. At 2p a share, it might be argued that Matt got a pretty decent deal, given that once-upon-a-time the VANE share price graph spiked at over 30p, but putting up £200,000 of your own cash for any venture at any price isn’t for the faint-hearted in these unsteady markets.

On balance, most investors tend to prefer it if company directors do participate in fundraisings, so it must have been frustrating for some of VANE’s other directors that they weren’t allowed to come in on this particular raise because they are based in the US, whatever difference that makes. Especially if the company really is "at a turning point". The signs are encouraging. First off, says Matt Idiens, the first ore from La Colorada has gone through VANE’s mill, and all looks well. "It’s very exciting", he says. "It should make us a serious amount of money." So from here on in, it looks as though VANE really will be able to refer to itself as an explorer funded by small-scale production. A couple of months ago, while it still had a mining team, broker Arbuthnot was talking about revenues of the order of £4.5 million for 2012, £5 million the year after, and close to £6 million by 2014. The company should be able to deliver net profits of £128,000 by 2012, and just over £600,000 by 2014.

Given that the real upside lies in a completely different arena, that’s not a bad support to fall back on, even if it has taken a few years for the whole production side to start making sense. But looking ahead, the real activity will be on VANE’s uranium and copper projects in the USA. These are two distinct undertakings. The first involves working up uranium breccia pipes in Arizona. The company has several of these, and ought to be delivering up a million pound surface uranium resource at the most advanced, the WATE pipe, fairly soon, so watch this space for that.

The second involves a big game hunt for copper porphyry projects in what’s called the "southwest USA porphyry copper region". This is an area that’s been prolific in the past, according to Matt Idiens, and with which VANE’s founder directors Steve Van Nort and Clark Arnold have more than a passing familiarity. Clark Arnold virtually wrote the book on exploring for copper porphyrys in this part of the world, during the 17 years he spent with Lowell Mineral Exploration.

The plan is to secure and then investigate 24 targets in rapid succession, spending a total of US$2 million, and letting the statistical probabilities do the rest of the work. The company has already tied down the rights to three targets, and now that the placing has been completed will get to work drilling the most prospective, Granite Gap, fairly soon. No one’s getting sentimental about any of these targets – if one doesn’t come up with the goods it’s straight on to the next, but Matt reckons that on the basis that you might expect to hit the goods on a one-in-ten basis, VANE stands a pretty good chance of turning something up here. To date most of the major copper porphyrys identified in the district have been outcropping, but given that two thirds of the ground is covered, the expectation is that a proper exploration campaign ought to come up trumps. Having said that, VANE is well aware of its size and capabilities, and is, at least for now, drilling no deeper than 500 feet.

But for a company that was has for a long time been associated with uranium in a stagnant uranium market, a shot in the arm from success at a major copper exploration project in a rising copper market could be just the boost it needs. And, with gold and silver riding high, it can’t hurt that the Mexican production is at last being put on a sound footing. VANE’s shares are currently bumping along at an all time low of 2.13p. What’s the betting that they don’t stay there for long?