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Well guys with the recent drop in LME stocks for Zinc/Lead approaching critically low levels. Zinc now at 16 year lows below 70,000 tonnes and Lead trading at all time price highs. I have been searching for an undiscovered gem that covers both metals, and I certainly have found a little beauty here in Sipa Resources (SRI)
With tight supply starting to drive prices forward, (both metals spot prices up 3.5% overnight) SRI looks good.
Now for a look at Sipa Resources (SRI)
Shares 297,865,090
Share Price 13.5c
Market Cap $40 million
Cash $8.4 million
Reasons to Buy into the SRI Story
- Exposure to Zinc/Lead with fundamental for both metals very strong
- JV's with market heavyweights Newmont/Newcrest/CBH
- Royalty Payments from CBH's upcoming Sulphur Springs Mine($350k on decision to mine and $2 a tonne of ore mined up to $3.7 million)
- Large Cash Reserves
- Upcoming Drilling Results (results from 3 prospects within a couple of weeks)
- Upcoming Resource Upgrade (huge upside due to recent exploration success)
- Free Carried to mine decision on Panorama Exploration Project Targets (CBH)
- Huge exploration upside (will discuss below)
- Already begun re-rating due to upcoming development of Kangaroo Caves Mine (to be treated at Sulphur Springs treatment plant 6km south)
- Very high grade zinc deposit, very robust profit margin
- Strong cashflows once mining begins at Kangaroo Caves/Bernts deposits
- SRI story very similar to that of SMY/THX (follow the SP benefit to THX once the Copernicus Nickel mine was announced)
Now A Closer Look at its Projects
Panorama Exploration Project (CBH 60%,SRI 40%)
The Panorama project contains several JORC classified deposits that will be used as open cut ore feed for the Sulphur Springs treatment plant which will be operational late 2008.
The Panorama Joint Venture covers a mineralized Archean volcanic horizon that extends for 25km south along strike from CBH's planned Panorama base metal mine which is located 160km by road southeast of Port Hedland, in Western Australia's Pilbara region. The project is regarded as one of the best base metal exploration properties in Australia, with a number of known base metal occurrences and the demonstrated potential to host large deposits with >30Mt of mineralization.
Kangaroo Caves
Jorc current resource of 1.7 mt @ 9.8% zinc and 0.6% copper with lead credits
Kangaroo Caves has around the same tonnage as that of the Jaguar Mine for JML(although slightly lower grades), and is the subject of a resource upgrade to include the recent high grade exploration hits, and the potential to substantially increase the resource.
Recent Drilling Results include some spectacular hits
-56m @6.8%zn and 1%cu
- 9m @13.3%zn and 1.9%pb
-15m @11.6%zn and 0.3%cu
-20m @13.7%zn and 0.2%cu
-13m @7.6%zn and 0.8%cu
-6m @12.2%zn and 1.6%cu
Bernts Prospect
Jorc Resource of 0.6 mt @ 7.8% zinc 1.7% pb 0.3%
Another mine ready resource to be use as ore feed to the Sulphur Springs treatment plant.
Also included in the Panorama Exploration Projects are the following very exciting prospects that are in varying stages of exploration
-Jamesons (drilled awaiting assays)
-Breakers (drilled awaiting assays)
-Anaomaly 45 (drilling commencing in september)
-Man O' War (drilling commencing in september)
-Nambucca (drilling commencing in september)
-Roadmaster (drilling commencing in september)
ASHBURTON GOLD PROJECTS
Newcrest Operations Limited (Newcrest) 80% - Sipa 20% carried; including four participation Joint Ventures where Newcrest/Sipa is earning an interest with third parties.
CONCEPT
The Ashburton Gold Province (see figures below) is a relatively newly recognized region of gold mineralisation in which Sipa’s Paraburdoo Gold Project mined the Mount Olympus, Zeus, Peake and Waugh oxide gold deposits between 1998 and 2004, for a total production of about 350,000 ounces of gold.
The Ashburton may be compared to the ‘Carlin Trend’ of Nevada - host to more than 110 million ounces of gold production and resources. This style of mineralisation is characterized by bulk-mineable sediment-hosted gold deposits, with very distinctive types of alteration and trace element signatures, whose location is controlled by combined stratigraphic and structural features.
Sipa’s judgment is that the Ashburton has a very high potential for discovery of very large gold deposits. Clearly if anything approaching a similar potential to the Carlin Trend can be realized in the Ashburton, the commanding tenement position enjoyed by Sipa and its Joint Venture partner Newcrest in the district would be highly advantageous.
Woodline Gold/Base Metals (Newmont 70%/Sipa30%)
The Woodline Project is located near the southeastern margin of the Yilgarn Block about 150 kilometres southeast of Kalgoorlie in Western Australia. The Project covers a large area of Archaean greenstone belt rocks considered by Sipa to be prospective for typically Archaean large gold and basemetals deposits, like the Golden Mile and the Golden Grove deposits respectively. The Archaean greenstones and the Archaean ”” Albany Fraser Orogen boundary within Woodline are generally obscured by thin sand deposits There are few indications of historic prospecting activity within the tenement package with very little previous drilling.
Woodline in part sits astride about 70 kilometres of the same northeast trending structural position as AngloGold Ashanti-Independence Group’s Tropicana Project, which is one of the most exciting new greenfields discoveries in Australia in the last decade. Tropicana is situated about 300 kilometres northeast of Woodline, but a more recently announced prospect ”” Beachcomber ”” where 4 metres at 45.5g/t gold was intercepted in a similar geological setting, is only about 70 kilometres northeast of Woodline. AngloGold Ashanti took out a large ground holding contiguous to, and to the southwest, of Woodline at about the same time as the Independence Group’s announcement of Beachcomber. Tropicana and Beachcomber are both situated on, or close to, the boundary between Archaean-aged rocks and the Proterozoic Albany-Fraser Orogen.
Highlights of the Farm-in and Joint Venture
Newmont will reimburse about $500,000 of Sipa’s exploration expenditure incurred up to December 2006
Newmont may earn a 70% interest in Sipa’s tenements and a 51% interest in each of the Comet and Image tenement blocks by exploration expenditure of a further $4 million
During the initial period of 18 months Newmont will spend $1 million. In order to remain in the Farm-in and to progress beyond the initial 18 months Newmont will also subscribe for $450,000 worth of Sipa shares, at a 10% premium to market. If the initial period of expenditure is extended, Newmont will continue to subscribe annually for a further $450,000 worth of Sipa shares at a 5% premium to market to remain in the Farm-in
Upon the $4 million expenditure being completed, a 30% Sipa ”” 70% Newmont Joint Venture will be formed and Sipa will then be free carried to commencement of a Bankable Feasibility Study (Discovery JV)
Sipa will be then be carried by Newmont through to production in the Discovery JV by way of loans which will be paid back out of 80% of positive cashflow to Sipa from its share of production, whilst continuing being free carried for exploration outside the Discovery JV
At Decision to Mine Sipa may elect to participate, or sell its 30% share to Newmont
After 3 years, Sipa may elect to sole-risk non-precious metals exploration within the Project
Sipa technical personnel will be seconded to the Project, including Chief Geologist Leigh Bettenay who will be Project Manager
Exploration Completed and Planned by Sipa
Geological mapping and regional and detailed soil sampling by Sipa over the last year has discovered significant outcropping gold mineralisation, with assays as high as 7 g/t gold, associated with shear zones at several localities within the Sipa 100% ground.
More than 20 gossans, which represent oxidised massive sulphides, and which have strong multi element geochemistry indicative of basemetals mineralisation, have been discovered throughout an area of poor outcrop of at least 4 kilometres by 3 kilometres in extent which is surrounded by sand cover. These gossans are associated with strongly altered volcanic and intrusive rocks with widespread oxidised disseminated sulphides.
A helicopter-borne electromagnetic survey, comprising 1450 line kilometres and covering 270 square kilometres centred on the Socrates prospect, was completed in January 2007. Results are awaited.
All new data generated at Woodline is being collated and interpreted and drilling will commence in the first half of 2007.
All in All a very exciting time for SRI with the continuing draw down in Zinc/Lead LME stocks prices are set to run much higher, with SRI to benefit greatly from the Royalty from Sulphur Springs and the development of deposits in the Panorama Exploration Projects.
Also has extremely good short term value given the impending release of drilling results from Kangaroo Caves,Jamesons and Breakers Prospects which have the potential to significantly move the shareprice(as has been proven by recent releases)
Mick, I gained a lot of insight into SRI from your very informative post. Thanks for the research. I haven't jumped in mainly because of no available funds at present. Hope i don't miss the boat! How far away does anyone think the announcements are? I'm thinking there must be something any day now? What are peoples thoughts?
Cheers
Paul