AAR - Astral Resources

[BUY&SELL]

Positive reference to Ramelius, base metals price increase and Koongie Park. Fundamentals my favourite topic. Ramelius only 1.7Km from the Anglo lease and 2Km's from Mandilla. With grades recorded at Ramelius of over 154g/t and Mandilla showing 300g/t in bedrock, we are potentially talking of a gold project of immense scale and profitability. What an excellent way to get a company update, very clever.

With the forecast increase in base metals prices what value could you place on Koongie Park? Clearly in ground value it is in the US$billion plus category for some time.

Seems the speeding ticket has slowed someone down. But will it stop them? Highly unlikely now.

Hi Hangseng, been going over all the old & new news from aar, and want to know your opinon on AAR statement that "Commencement this week of 2,200m reverse circulation drilling programme at Mandilla to test possible extension of priously announced high grade bedrock mineralisation that is thought to be a likely source of the gold found in the palaeochannel deposit."

1) Is it the commencement of drilling this week that has driven the sp up.(hence your thoughts of an announcement soon)
2) Is it likely that the drill will show up similar deposits of about 7.52g/t Au as already found in the area?
3) what is "the palaeochannel deposit" is it connected to the fault line that Ramelius found 154g/t Au?
4) what's your tec thoughts on todays action on the market?

Thanks for your help, I enjoy very much your dialogue.

 

[hangseng]

Hi Hangseng, been going over all the old & new news from aar, and want to know your opinon on AAR statement that "Commencement this week of 2,200m reverse circulation drilling programme at Mandilla to test possible extension of priously announced high grade bedrock mineralisation that is thought to be a likely source of the gold found in the palaeochannel deposit."

1) Is it the commencement of drilling this week that has driven the sp up.(hence your thoughts of an announcement soon)
2) Is it likely that the drill will show up similar deposits of about 7.52g/t Au as already found in the area?
3) what is "the palaeochannel deposit" is it connected to the fault line that Ramelius found 154g/t Au?
4) what's your tec thoughts on todays action on the market?

Thanks for your help, I enjoy very much your dialogue.

Thankyou for your kind words.

1) I am sure a significant aspect of this is linked to the recent announcement from Ramelius. A combination of the extreme high grades, the close proximity of Mandilla to Ramelius and the speed at which AAR decided to commence bedrock drilling indicates a strong sense of urgency to me. I have also previously provided my fundamental reasoning.

2) In short yes but with much higher grades, I would hazard an informed assumption. AAR has already indicated a bedrock drill result of 389g/t from this location and being in the same zone as Ramelius, I (and others) believe this to be an adjoining geological source.

3) The "palaeochannel deposit" is the current shallow (read surface) resource being mined by AAR. Is "it connected to the fault line that Ramelius found 154g/t Au?" Unless the good lord installed a physical barrier to these adjoining leases you could almost guarantee this to be the case. The bedrock is thought to be the source of the paleochannel gold deposit at Mandilla, which in simplistic terms is basically gold washed from the bedrock from ancient water courses.

With Ramelius indicating 154g/t and Mandilla bedrock indicating 389 g/t, this is going to be some resource and potentially one of the largest combined gold deposits ever found.

4) "todays action on the market?" If you are talking generally, it is possibly another (minor) correction of the market. If you are talking of AAR then I believe it was halted today partly due to the speeding infringement, which was unwarranted for the level of trading in one day and a down market day would have had some effect. You will see AAR travel steadily upward as there is just so much positive news about this company to communicate.

I add.
With two hugely economic projects such as Koongie Park and Mandilla, no debt and positive cashflow, rising base metal prices and led by someone like John Jones, AAR is destined to have a significantly re-rated share price in the near term. I believe the market is just starting to realise how good this company is, as I have for some time now. I am sincerely hoping that AAR becomes a producer of both projects in it's own right, I speculate that others may have a differing view.

 

[hangseng]

as a side note there has been a flow on to AAR which is right next door to the RMS site. they have turned around for another look at the deposit they have just finished assaying and is connected to the RMS one. AAR was issued a speeding ticket the other day and they blamed the RMS news - they are down a bit the last 2 days but looks like its getting ready to test 8.01c resistance. a break through would be sweet given the fact its blue sky, reasonable chart and solid fundamentals.

disarray has picked up on exactly what the market has looked at recently and I commend him for his perceptiveness.

The only thing he has incorrect is that "they have turned around for another look at the deposit they have just finished assaying". AAR have not turned around, I state this without any fear of contradiction. This was always identified and planned by AAR, what they have done is expedite the process due to the significant results recorded by Ramelius.

Drilling is now confirmed as commencing this week so it will not be long and AAR will be confirmed as a genuine outstanding, producing and profitable mining company, as I and many others have known and communicated for quite some time. Not only about Mandilla but the Koongie project which will prove to be outstanding and far in excess of Mandilla' current success.

A little poetic license if I may.
I have been for some time sincerely of the belief that John Jones will achieve legendary status in the mining industry (if not already) out of Anglo Australian Resources (in particular after his excellent mining career and success with Troy). I will continue to be extremely proud to state I have been a shareholder throughout this extraordinary journey from junior explorer to successful and profitable producer.

I implore you to look beyond short term trading activities and to look at this excellent company, which in Australian terms is producing the goods. If you are purely day trading, enjoy the journey and I trust you will do well along the way.

Read this post in 2 years time and tell me if I was wrong. The only thing that would stop this occurring is a take over of AAR of which, although I will make profit, I would be sad.

I agree with previous postings the market is always right, even if wrong it is always right.

 

[ta2693]

I was moved by your words. So persuasive and I see a exciting picture. It could be a very good story. If everyone in the market read your article, the price of this share has already flied. I think it just need another drill report like RMS's to make the price break through.
You mentioned the drill has already started. May I ask where do you get this from and when does the drill result come out?

 

[hangseng]

I was moved by your words. So persuasive and I see a exciting picture. It could be a very good story. If everyone in the market read your article, the price of this share has already flied. I think it just need another drill report like RMS's to make the price break through.
You mentioned the drill has already started. May I ask where do you get this from and when does the drill result come out?

I was not really attempting to be persuasive, I meant and stand by every word. To provide balance and answer your query.

AAR (sadly) did not announce the drilling commencement until the ASX please explain this week, they had an opportunity to do so but for some reason chose not to. I would expect initial drill results within weeks, the overall resource estimate not for about 2 months. If the company doesn't announce initial drill results within weeks the grapevine will and the asx will give another please explain when the share price rises exponentially.

 

[Lucky_Country]

AAR seem too wanna run the company like a private company and keep things close too their chest.
Personally thats ok I like action more than words and hype too obtain a sustained sp.
Mandilla drilling should be a good shot in the arm not only for the results but increased mine life and profitability and AAR could easily grow off the revenues created from Mandilla.
Koongie Park is on the horizon and feel they are going it alone as time goes by but all will be revielled when the results of the PFS become public

 

[Fool]

So what sort of timeframe are we looking at before they are likely to make any announcements?

Awful lot of shares on offer too, was this share always like that or have they continuously dumped more into the market over time, further diluting the share price?

 

[Ruprect]

So what sort of timeframe are we looking at before they are likely to make any announcements?

Awful lot of shares on offer too, was this share always like that or have they continuously dumped more into the market over time, further diluting the share price?

Should expect some intial results from Mandilla drilling in the next few weeks, followed up by more extensive results in the coming months. The whole industry is experiencing some delays in getting results, but i wouldnt think more than a couple of months for that one.

They are undergoing pre feasability studies into Koongie Park in the current quarter. I would expect some results from this within a few months.

From memory i think they increased shares issued about 18 months ago, to raise funds. Thats no longer an issue for them, because of the Mandilla project. Currently have over $5 million in the bank, have gold still to be sold, and a lot more to be recovered in the current year, which should increase their cash at hand to close to or over $10 million.

I dont think the amount of shares is a big issue, given the value of the Koongie project. Companies like PEN will have close to a billion on offer in the next couple of weeks, and although i like them, they arent anywhere near the stage that AAR are at.

Market cap is what you should be looking at, only $35 million. The Koongie project has an in ground value of many many times that. I think revenue estimates for the project about 18 months ago were over $300 million. Given that commodity prices have increased significantly since then, and dont show any signs of slowing, the new estimate is probably well over $500 million, with costs of extraction/processing at about $200 million. In addition there is Mandilla, which has a strong possibility of showing more resources. A re rating is therefore a strong possibilty.

This is all off the top of my head, Hangseng has been doing some terrific reviews of this one, so check out some of those posts.

I think this one will go from strength to strength, it just requires a little bit of patience.

 

[hangseng]

Here you go Ruprect, an update based on current prices and in ground resource value for the Koongie Park Project only. Mandilla cash flow forecast you have approximately correct, although expect much bigger things out of Mandilla and far more cash than out of the paleochannel resource.

AAR Koongie Park Project
‘Jorc Indicated’ in ground resource value
Indicated resource - 4,650,000 tonnes

Zinc - 533,077,700 pounds @ USD$1.85lb = $986,193,745
Copper - 123,017,931 pounds @ USD$3.63lb = $446,124,526
Lead - 82,011,954 pounds @ USD$0.94lb = $77,189,651
Silver - 3,641,328 ounces @ USD$13.20oz = $128,777,668

Total Resource Value - USD$1,638,285,590 - AUD$1,916,794,140

Current Share Price - .07
Shares on Issue - 500,000,000
Market Capitalisation - AUD$35,000,000
Value per share - $3.83

 

[sleeper88]

Here you go Ruprect, an update based on current prices and in ground resource value for the Koongie Park Project only. Mandilla cash flow forecast you have approximately correct, although expect much bigger things out of Mandilla and far more cash than out of the paleochannel resource.

AAR Koongie Park Project
‘Jorc Indicated’ in ground resource value
Indicated resource - 4,650,000 tonnes

Zinc - 533,077,700 pounds @ USD$1.85lb = $986,193,745
Copper - 123,017,931 pounds @ USD$3.63lb = $446,124,526
Lead - 82,011,954 pounds @ USD$0.94lb = $77,189,651
Silver - 3,641,328 ounces @ USD$13.20oz = $128,777,668

Total Resource Value - USD$1,638,285,590 - AUD$1,916,794,140

Current Share Price - .07
Shares on Issue - 500,000,000
Market Capitalisation - AUD$35,000,000
Value per share - $3.83

your valuation of 3.83 per share will make AAP a $2billion company..10% of inground value is a better estimate imo, which puts the company at approx $190m MC.

 

[hangseng]

your valuation of 3.83 per share will make AAP a $2billion company..10% of inground value is a better estimate imo, which puts the company at approx $190m MC.

I agree with you completely. The $3.83 is only in ground value so is not the actual mined value. A share valuation of $0.38 would be fine with me, 7 times my buy price and 5 times the current price. Not a bad return one would think.

A key point Zinc is a valued commodity when calculating mined cash cost. Similar mines have varying costs however if you use a combined base metal cost of .60lb of processed resource it will give you a very good idea of how valuable this project could be with their own process plant. At this point how the processing will be done is yet to be finalised, however the Nicholsons Find Plant is a distinct possiblity with upgrade or the TeckCominco plant at Pillara (this would bear a larger cost base obviously though).

Also keep in mind Koongie Park has recorded grades of 7%, 7.7% and 14%, which would reduce cash cost. The value I have indicated is only based on the Indicated JORC compliant 5.4% Zn.

"Cash Costs
Mining industry cash costs have been pressured upwards for a number of years now. The cost of steel, labour, tyres and consumables has been rising, putting upward pressure on cash costs. These rising costs have been absorbed by miners, as the prices received for their product (metal) have also been rising at a greater rate than costs. When we look at the relativities of who can cope best with rising cost pressures, it would have to be the producers of nickel, copper, zinc and lead. The prices received for their metals have increased over 300% since march 2003"
source: Aegis Equities Research, 10/5/2007, http://markets.news.com.au/net/Public/ViewReport.aspx?id=60833&username=IntAegisWS

 

[Lucky_Country]

Dont forget in ground value and mined value of Mandilla that could radically change soon with drilling underway and 10 million in the bank

 

[hangseng]

Dont forget in ground value and mined value of Mandilla that could radically change soon with drilling underway and 10 million in the bank

An under statement Lucky_Country, in a postive sense. Mandilla is about to embark on something extremely significant in the overall evaluation of the company. Expect a positive re-rating very soon, with a lot of attention from more than just the likes of us. People believe RMS and MLS are good, wait until all of this is out on the street and we will see what is good.

 

[Fool]

AAR is having a good day today, but there is lots of resistance ahead, need an announcement to get it to push through.

 

[hangseng]

Chart now looking a lot stronger.

.08 will be the next target, once this is broken it will go through to new highs very easily. If any news comes out any time soon (and that is likely with Mandila) it may even break straight up to new highs. Clearly way undervalued but the market is slowly identifying with it.

 

[Fool]

Good volume today, but not much price movement.

Nevertheless, good support for this stock at current price levels, and it can only go further from here on in.

Just hope they can get the announcement out sooner rather then later, or we might see a lot of profit takers get bored and jump ship !

 

[hangseng]

Volume today is Ok but it isn't high and I wouldn't get to concerned with profit takers just yet. AAR will go into the low teens easily on the announcment of the latest on Koongie Park, let alone what is going on at Mandilla.

Get excited when volume starts breaking away from the 10m+ mark.

 

[ta2693]

Sellers
Price Quantity Number
0.070 8725 1
0.071 621540 1
0.072 332223 2
0.073 484000 5
0.074 535912 6
0.075 1362500 9
0.076 1380000 3
0.077 453000 3
0.078 145000 4
0.079 777000 7
whenever the price come to 0.075 it will be sell back to 0.07?
who are they? any asf member here offer to sell at round 0.075?

 

[hangseng]

Sellers
whenever the price come to 0.075 it will be sell back to 0.07?
who are they? any asf member here offer to sell at round 0.075?

The trading pattern you have observed has not gone unnoticed and has occurred quite distinctly, ever since just after a certain company did the last $12m cap raising (they didn't need) a few weeks ago, is this coincidence? Maybe it is and I just think about things far too much.

Every time AAR takes a run up someone pulls it right back again. At times you will clearly notice exactly the same amount being bought and sold with no attempt to hide this. I only notice this because I watch the individual trading patterns very closely to see what is occurring. I believe we will be finding out very soon why this has been trading in this way.

 

[BUY&SELL]

My quick summary:

Firstly I believe many positives have come out of this update which in my view has understated the potential of this company.

• $5,220,000 now in the bank and it just keeps coming.
• Nil debt position continues
• Testwork on Koongie Park has moved from Pre-feasibility to definitive comprehensive stage. This is a major advanced move and display of confidence by management.
• The complex mineralisation requires additional processing to extract the best grades possible for Zn and Cu.
• Enlisting Kwan Wong, arguably one of the best metallurgists in the country (the inventor and acknowledged expert in CPS), to conduct the selective flotation testing. They could not have made a better decision.
• The Controlled Potential Sulphidisation (CPS) method of flotation is a proven and widely utilised successful method of extracting high % returns from complex mineralisation and oxidised deposits such as the surfical deposit at Onedin. If this will be successful then Kwan Wong will be the person to definitively prove it. This will confirm the Koongie Park prospect in the eyes of experts and will make the s/p move upward exponentially. I say again, great move AAR management.
• The majority of the Koongie Park mineralisation is indicated as unoxidised at depth in the high grade primary and transitional zone and will probably be extracted using conventional flotation techniques.
• Mandilla has proven to be a major cashflow producer and continues to be so.
• Mandilla is indicated high grade gold mineralisation at depth and expansion is highly likely in my view and the company is indicating this.
• Underground mining is almost a certainty to occur. Recommending progressing to DFS to prove this is not done lightly.
• Open cut will occur easily if the testwork of Kwan Wong is proven.

Summary:
Excellent update and I see mainly significant positives to move AAR to a higher level. The only negative to come out is the (not unexpected) oxidised surfical deposit.

Both Mandilla and Koongie Park are displaying excellent company making qualities. Basically AAR is indicated as going from strentgh to strength and is now showing a 1c per share earning, at .06 s/p this now places AAR at a 6:1 P/E and is clearly looking at having over $10m cash in the bank this year.

I also believe that AAR has had discussions with TeckCominco over the possibility of processing through the Pillara plant at Halls Creek. This concurs with John Johns public statement on boardroom radio that they were looking at processing options with a nearby plant 26kms from Koongie Park.

If the definitive testwork is proven as expected and the Pillara plant is utilised then I believe AAR could be mining Koongie Park as early as mid 2008.

Where is all this heading is anyones guess, however I am firmly of the opinion that AAR will now clealry be in the sights of Troy Resources and even possibly TeckCominco or other suitors. TRY have to do something with the recent $12m raised and they didn't raise this purely for working capital when they alreay have over $56m in the bank already. $12m would obtain TRY approximately a 44% controlling holding over AAR. This paragraph is completely my view and please realise I am speculating on this aspect. I just believe it is a real possibility especially now AAR is displaying so many consistently positive outcomes. Or possibly the 12m will provide additional funding for the development of Koongie Park

The market still has not identified with Koongie Park but this will come. I am a long term holder of AAR so I can wait for for what I believe will be a significant re-rating in the not to distant future.

I have purposely discounted the uranium mention and will not speculate or provide comment on this. I believe it is irrellevant to the positive current position of AAR.

I have to say with so much positive news about about AAR and the immense of the markets realization of the true worth of it's projects, I had come to the conclusion a couple of days ago the the market (AAR) was being held back unduly. My theory is that a company such as Teckcominco or other hasn't yet got there TO plan fully in place, which is unfortunate for them as AAR are up-up and away, so they have no choice but to play the market. This does seem to happen alot these days. One such example being Qantas. I for one am not prepared to sell my parcel anywhere near it's current price. I also belive that AAR is not your typical day trader stock and investors in AAR are just that "investors"
Time will tell.
PS good luck all and don't sell cheaply