Rose Petroleum plc


Vane Still Focused on Mexico After Paraguayan Acquisition

LONDON ( -- Vane Holdings, listed on London's alternative market, [VHL.L] this week released interim results along with announcing the acquisition of a new gold prospect in Paraguay.

The company has been listed since June 2004 and is soon be re-christened Vane Minerals. Vane reported a £316,000 operating loss, although it retains a cash pile of £2.64m.

The company recently acquired 'investigation permits', which are subject to the grant of environmental licenses, on three parcels of land totalling 3,800sqkm in south eastern Paraguay. Two years of stream sediment analysis has identified 22 gold anomalies which will now be traced to source, work that will begin early in 2005. Access to the area, which is quite remote, is being eased by the encroachment of intensive agriculture in the area.

Paraguay as a nation is under explored despite its location in a geological region with a record of gold and other mineral deposits, but having been seen as isolated and politically difficult. This has begun to change over the past decade and the country has eased its mining laws, spurred by the rich mineral rewards it glimpses being distributed amongst its neighbours. The investigative permits are valid for one year and can be extended by six months, but any actual explorations can only take place after conversion of their status to 'Mining Concessions', which allow for drilling and construction of roadways.

Vane's other interests are in Mexico, where it currently holds 100% of the Diablito mine and the options to acquire 100% of the Guadalcazar and Mina Charay prospects. Diablito is anticipated to be producing gold and silver ore by the first quarter of 2005 at a target rate of 50t/day to yield a projected pre tax income of $200,000. The mine life is estimated at 6-7 years and the project is projected to cover its start up costs within six months. Output from Diablito is of a high enough quality to be shipped for smelting without concentrating, so reducing capital requirements to an extent that should offset the costs of transport by truck over several hundred kilometres.

The known resources at Diablito amount to 23,300t at an average of 0.39oz/t gold and 43.4oz/t silver, with an inferred resource of treble the size at similar content. Contained metal values are $464/t with silver at $7/oz and gold at $425/oz. Two thirds of the resource is yet to be evaluated and a program of infill drilling is on the table for the future to flesh out the deposit.

Drilling at Guadalcazar, to be funded by revenues from Diablito is scheduled to begin in Q1 2005 and will attempt to define a large hydrothermal precious metal system. A total of 4500 m of drilling has been budgeted for at a cost of around $100/m.

A 1948 USGS report put reserves here at around 176mt mineralized material containing an estimated 14,800t tin, 2,640t mercury, 53.5moz silver and 328,600oz gold.  In addition to these commodities, Arsenic, bismuth and antimony anomalies have been defined by Vane sampling In 1948 a weak global recovery and depressed metal prices made development unviable, but today it is hoped that Guadalcazar can be developed into an extensive concern. A $300,000 option payment is due in June 2005, by which time Vane expects to know whether or not it will be worth proceeding. In June 2006 the concession must be bought for $5m or abandoned, and if the project reaches this stage the company expects to come back to the market and issue more share capital. The option agreement stipulates a combination payment in cash and net smelter returns. A possible caveat with Guadalcazar is that the Arsenic that may have heavily infiltrated the ore and in that case will need to be processed out before smelting.

At Mina Charay an average of 9-10g/t of gold and 125-150g/t of silver mineralization is indicated within a 250m exposed vein open in all directions Output will either be custom milled on site or sold raw to a miller, either way it will likely be shipped to Japan. There is also the future possibility of a sizable heap leach operation. Anomalies of lead, zinc, molybdenum and mercury are also present. A 6-10 hole drilling program will begin this month as soon as a rig can be mobilized and the company will bring this asset, which it hopes will prove larger than Diablito, into production fairly swiftly so that it can focus on its big hope at Guadalcazar.

Vane's primary strength is its privileged access until June 2005 to the exploration database of North American major Freeport-McMoRan, which contains over 7,000 files covering between one and ten prospects apiece and spanning the world with the exception of Indonesia, on which Freeport has now decided to focus exclusively. CEO Steven Van Nort was Senior Vice President of exploration at Freeport until 2000, and other personnel have significant prior involvement with the company. The files have accrued since 1907 and are focused mainly on the Americas They have been 85% reviewed by Vane personnel searching for prospects upon which technological advances or an improved market climate may have bestowed viability. Freeport retains the option on a quarter of any project derived from its portfolio when reserves are announced or a feasibility study is begun, but buying in will cost Freeport double whatever has already been spent by Vane on exploration. Guadalcazar was derived from the Freeport database, and Vane has identified a further fifteen targets for which it may attempt to gain mineral rights, and some of which are being aggressively pursued.

Vane is something of a unique proposition among AIM listed mineral explorers, in that it describes itself as a ?self funding exploration company? on the back of cash flow from Diablito and Mina Charay with which to fund the search for an 'elephant'. This is the essence of the company's strategy according to Van Nort, who states categorically that the company 'does not wish to be a miner', and that they eventually hope to find a deposit that the majors 'will be begging for', a hope that Vane would love to see realized in Guadalcazar.

RAB Capital and Commerzbank have both taken stakes in the company.

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