Rose Petroleum plc, by Sally White


Vane Minerals Can Now Use Production Cash Flow To Accelerate Exploration

Just one year on from its float, and one circuit of its fantastic data bank, Vane Minerals is about to deliver on one half of its strategy at least. Mining has started at its Mexican gold-silver Diablito project, and should soon be generating sufficient cash to cover its exploration costs going forward. Housebroker Seymour Pierce says that output of 50 tonnes a day is expected to generate some US$250,000 a month of pre-tax profit. In the meantime Vane is still sitting on over £2million of its net £3.3 million float money.

As chairman, Michael Spriggs says, Vane is rare among the mining juniors in managing to be ??within budget and ahead of schedule and with a cash flow!?

Latest addition to the Vane portfolio has been the first quarter?s diversification into uranium. As commercial director Matthew Idiens, formerly a broker with Laing and Cruickshank, says, there seems attractive upside for uranium given soaring oil prices. ?Some people are suggesting US$100/lb against today?s US$29, and while I think that may be a bit too far, there seems to us to be plenty of potential.?

Nuclear power may not be too much in favour in the West, but in China and South East Asia there are no such qualms. So, given past lack of exploration, says Spriggs, Vane?s strategy is based on the view that it may not be too long before uranium supplies, too, could be experiencing shortfalls.

Vane is now looking around for more uranium prospects. The first has just been disclosed as being in Arizona. Vane has exploration rights to 16 properties there, and has a number of other uranium properties under review. Vane will probably restrict the search to the US, as the country has user-friendly uranium policies.

That, and the rest of Vane?s portfolio of projects, has been extracted from the vast pile of exploration files accumulated by Freeport and its subsidiaries since 1907. There are 7,000 files, each containing data on more and more mining projects ? the spread is global. The deal is Vane gets to explore the files, and in return Freeport gets an option to become an equity partner.

Given the home team?s copper expertise, a copper mine is the next target. Clark Arnold, one of its executive directors, worked with the legendry David Lowell at the time his porphyry copper prospecting method led to discoveries of Arizona?s Santa Cruz and Chile?s Escondida.

Idiens thinks they have probably got the top picks out of the Freeport list. Vane?s method has been to home in on low production years, such as the World War II time, when mining activity was at low ebb. But they are giving it another run through, just in case! Since so much of Vane?s team has a Freeport background, renewal of the annual agreement is unlikely to present problems.

Second part of Vane?s strategy has been to build a portfolio of major mineral discoveries that could tempt the majors. Work on this is coming along nicely, too.

Last month it announced that the first round of exploration drilling at its Guadalcazar project in Mexico had confirmed widespread gold and silver mineralisation ? as high as 0.5 g/t of gold and 38 g/t of silver. So more work is being done exploring there. Vane is also ?very encouraged? with progress being made at Mina Charay, also in Mexico. ? Its a good safe place to work, not like some of the funny places mining minors get to? says Spriggs. It, too, shows strong mineralisation - a vein of up to 38.82 g/t of gold and 706 g/t of silver has been indicated.

Vane has also identified gold and copper targets in Paraguay. It has gone for three large concessions in east central Paraguay, totalling 3,800 sq. kilometres. At least 22 gold and gold/copper geochemical anomalies have been identified there. The company has started life on AIM at a fast pace and should now be well funded to accelerate exploration.