Rose Petroleum plc by Alistair Ford


VANE Minerals Sorts Out Its Cash Flow: Next Stop, Elephant-Sized Copper Porphyry Targets

Shares in VANE Minerals leapt by a dramatic 26 per cent a couple of weeks ago, after it announced good, solid progress on its’ new gold mining operations in the La Rastra district of Mexico. These four mines aren’t by any stretch of the imagination big, but they are at least capable of providing cash flow substantial enough to support the company’s wide-ranging fieldwork across a number of projects. And VANE now has enough faith in them to deliver on a consistent basis that it’s signed up to a formal joint venture with the project’s owners, the Ruiz brothers, a deal which also allows ore from the four mines to go through VANE’s San Dieguito de Arriba mill, known as SDA for short.

London’s always liked it’s exploration to be supported by cashflow, and VANE’s got some pretty bumper copper exploration prospects in the USA that it’s about to get down to work on, amongst other assets that are also on the go. But to date, its efforts to generate real cash flow to pay its running costs have been haphazard. The company’s other operating mine, Diablito, has never really delivered on that score, hampered by the amount of waste that it needs to mine to get to a particularly thin vein, and by grades that haven’t always lived up to expectations.

This time round, it should be different. Broker Fox Davies talks of a likely rise in throughput at SDA from the current 900 tonnes per day to a targeted 2,000 tonnes per day, a rate likely to be reached next year. As part of the due diligence process, before VANE finalised the deal, it initiated a two week test run of operations. This processed a total of 1,132.7 tonnes of ore from the Colorada mine, at average grades of 6.1 grams per tonne gold and 485 grams per tonne silver, a result which was considerably better than the anticipated five grams per tonne gold and 150 grams per tonne silver. Overall, the mill run produced just over 22 tonnes of concentrate carrying 169.7 grams per tonne gold and nearly 15,000 grams per tonne silver.

No wonder Matt Idiens, VANE’s key man in London and one of its cornerstone investors, says it’s going well. It looks as though VANE’s finally landed on a project that will deliver decent throughput at decent grades. “It’ll be nice to get some decent revenues coming in at last”, he says, on the phone from the USA, where he’s been visiting some of the company’s copper exploration targets, and having meetings with other company directors, most of whom are geologists and are wary of straying too far from the field.

Revenues would be nice, no doubt about it - and, dare we say it, profits too? That might just be a case of wishful thinking, but in one sense, it might be achievable. Work is afoot at SDA to have a Merrill Crowe plant installed by the second quarter of next year, and once it’s in place, VANE will be able to cut out the need to sell to a smelter. There’s only one in the neighbourhood these days, following the demise of a Grupo Mexico plant on environmental grounds earlier in the year, and VANE is not alone in feeling that it is somewhat in hock to this lone monopoly operator. The Merrill Crowe circuits will get round that issue very nicely, allowing the company to produce a precipitate that can be sold directly onto the open market.

And the development plans for VANE’s producing operations don’t stop there. Longer term, the idea is to build a new mill in close proximity to the La Rastra operations, on the basis that production will continue, and new projects in the district might very well be brought to the company, allowing for expansion and greater economies of scale. It could end up becoming a nice little profit centre in its own right, a thought which obviously held some appeal for investors who bought in heavily once the participation in the La Rastra projects was confirmed.

So, at a time of soaring gold and copper prices it’d be nice for VANE’s patient shareholder base to feel that the company was able to generate income as efficiently as it’s been able to generate exploration and development targets. Matt Idiens is certainly confident, and enjoying the high metals prices. “Long may it last”, he says. Next stop, the elephant-sized copper porphyry targets in the south west of the USA.