Rose Petroleum plc, Minews


Vane Minerals Is Doing What It Said It Would When Listing, And More.

/images/minesite logo.jpgWhen it listed on AIM at 11p per share in June, Vane had three main assets; a talented exploration team, access to over 7,000 well-documented exploration targets in the Freeport McMoran database and a clear strategy. Minesite covered the management and the potential of the Freeport database in an article on 20 May.

The company?s strategy is first to identify high grade mineral projects which can provide early cash flow to fund a sustained exploration programme. Secondly it intends to build a portfolio of exploration projects with major discovery potential. And third it wants to boost the value of those discoveries before disposing of them to third parties. In short, underwrite, uncover, upgrade and unload. The company?s name will be changed next month from Vane Holdings to Vane Minerals to reflect its status as a pure exploration company.

Vane?s first cash-generating acquisition, the Diabilito gold mine in Nayarit State, western Mexico is advancing fast towards first extraction of saleable ore, now expected in early February next year. In October the company released the final assay results of extension drilling at the property, further confirming high grades of up to 33.53 g/t gold and up to 6,250 g/t silver and proving that mineralisation continues down-dip. The mine contains 23,300 tons of measured reserves and a total of 76,000 tons indicated and inferred resources at average grades of 12.13 g/t gold and 1,319 g/t silver. This is equal to metal values of US$464 per tonne with gold at US$425 per ounce and silver at $7.

Vane will mine 50 tons of ore at Diabilito per day and transport it to smelters up to 700 kms away all for a cost of some US$135 per ton including the 5% vendor royalty. After smelting costs, pre-tax income will be at a rate of at least US$200,000 a month, payback of Vane?s capital expenditure will be achieved after some six months and there is a project life of 6/7 years. A most useful first cash cow.

In August, Vane acquired an option to give it 100 per cent ownership of a similar project at Mina Charay in
?s Sinaloa state, 300 kilometres to the north of Diabilito. This prospect contains an exposed natural vein at least 250 metres long and exposed in all directions plus other known but unexplored veins. Rock chip sampling and trenching has indicated values of 9-10 g/t gold and 125/150 g/t silver and the imminent arrival of a drilling rig onsite will allow quantification of the economics. Dependent on drilling progress and permitting, the development of the mine will be fast-tracked to become a second substantial source of cash flow. If Vane decides to take up its option, it is able to make agreed stage payments totalling US$2million in cash and US$1million in shares until January 2007.

So the first part of the strategy is in place. However it is the exploration part that will make or break the company?s reputation. So far there are two projects. Guadalcazar in the state of
San Luis Potosi state in central Mexico was originally found in 1944 when the US
was urgently looking for resources of tin to use in the war effort. Vane found the records in the Freeport McMoRan database, noticed the high concentrations of mercury which belied the description there of a placer deposit and has since then proved the deposit is not alluvial but a hydrothermal gold system developed in volcanic tuff.

Since May, Vane has concentrated on outlining the mineralisation. Unusually, this includes widespread geochemical sampling of not only rock chips but also water wells and the mesquite trees growing in the near-desert surroundings. The mesquites have very long taproots which relay indicator minerals up to the surface. As a result, a 29 sq kms district has been identified in a closed valley site, drilling targets have been defined and a 4,500 metre drilling programme will start early in the New Year.

The second exploration project was announced on 17 November. The
Freeport database contains over 500 separate target records in Mexico, a conveniently short commuting distance from Vane?s base in Tucson, Arizona. However further records are focused throughout the Americas and while investigating a prospect in central Paraguay, which turned out to be of little interest, the company?s attention was drawn to three blocks totalling some 3,800 square kilometres in the mineral-rich Brazilian Pre-Cambrian Shield which intrudes into Paraguay near its eastern border with Brazil.

As a result, Vane has obtained an option on the mineral rights over the three blocks which are held on Investigation Permits, subject to environmental licences which are expected to be granted by the end of this year. A two-year past programme of extensive surveying and stream sampling has revealed 22 distinct gold anomalies, all of which are significant in size. Note that
Freeport will not have a 25 per cent back-in right here as the prospects optioned were not in its database.

CEO Steve Van Nort, Director of Geology Clark Arnold and Vane?s team of very experienced support geologists are adamant that they are explorers and will never become mineral producers. They continue to leverage the
Freeport databank. So far some 85 per cent of the files have been preliminarily reviewed, always looking for established mineral occurrences with previously unrecognised potential. Right now, several serious exploration targets in the Americas are being pursued aggressively.

The share price was adversely affected by some initial-subscriber selling at the time of the float in May and is still under the float price. However to the extent that exploration operations are funded by cash-flow and not exterior fundraisings, shareholders who stay the course will not be diluted. Cumulative newsflow in 2005 will detail progress on all four existing projects and is extremely likely to include news of further identified potential deposits. As long as it continues to meet and exceed its objectives, as it has done admirably so far, Vane Minerals could be one to follow.

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