TAM - Tanami Gold

[drillinto]

Australia drops in the gold rankings
Robin Bromby
The Australian / March 12, 2007

GOLD mine failures have helped knock Australia back into third place as a yellow metal producer. And China's production surge is threatening to take us down another peg.
The closure of the new Bendigo Mining operation, BMA Gold going into administration after its Twin Hills mine was mothballed, design problems at Tanami Gold's operation[TAM] in the Northern Territory and the delays at Range River Gold's Indee project in Western Australia have all contributed to Australia's 2006 shocker, with production at its lowest since 1993.
The latest quarterly report from industry analyst Surbiton Associates shows that the US overtook us in 2006 to be in second place on the rankings, after South Africa.

Australia produced 249 tonnes in 2006.
...

 

[drillinto]

[ NOTE: 1. The article below is a good summary of TAM's troubles during the last six months.
2. Denis Waddell, Executive Chairman, said it very clearly: “What it really came down to was the design, construction and engineering,” and “Targets were set and simply not achieved.”
3. A recent ASX announcement has indicated that the troubles are being fixed and that mining is expected to recommence by mid-April 2007. ]

¤ ¤ ¤

Tanami Gets Stuck In The Desert

By Our Man In Oz / December 12, 2006 / www.minesite.com

If you think the resources boom is all good news then you haven’t spoken to Denis Waddell lately. He’s a boom victim, and so is the company he runs, the small Australian goldminer, Tanami Gold.
Over the past six months, the very time Denis should have been cracking the bubbly after 12 years exploring the wilderness that is the Tanami Desert of central Australia, he has been frantically trying to complete the construction of the Coyote gold project, and then get it to perform as promised. On both counts, timely completion and successful operation, he has struck out, forced at one stage to consider a merger with the rival Monarch Gold, and now working with a rectification engineer to make good the Coyote plant. “It’s been an awful experience,” Waddell told Minesite in his home town of Perth. “It’s just so disappointing for the company, its staff and shareholders. Everything that has gone wrong can be fixed, but none of it should have happened in the first place.”

Waddell’s lament goes to the heart of the problems being created by the skills and equipment shortage in boom-happy Australia. Some skills, especially mining engineers and geophysical professionals are unavailable at any price. Some equipment is on 12 months, and more, back order. Even rubber tyres for mining equipment is being rationed by the only two major makers of the biggest tyres, Michelin and Bridgestone. “If you’re a small company, like us, you just get blown away by the big miners who can simply toss money at whatever and whoever they want,” Waddell said. “We end up with the B or C team.”

Being pushed to the back of the queue has cut deep at Tanami. It has been forced to top up its cash balance with calls on the capital market, including an ambitious A19 cents a share call on contributing shares at the end of October when the fully paid shares were trading at around A17 cents, and which have since dropped to around A14 cents. Needless to say very few shareholders paid the call with Tanami announcing yesterday that it had suffered a 95 per cent shortfall with payment received for 3.99 million shares to raise A$759,930.09 and with 81.1 million shares heading for forfeiture sale.

It should have been so much better for Tanami. In theory, Coyote should today be producing at an annualised 70,000 ounces a year. Instead it is producing at a trickle. In a sense, that’s all most investors need to know. But, for the technically minded Waddell has a detailed explanation, but it comes with a warning: it is technical. Essentially, and before we go deep technical, a gravity recovery circuit has failed to remove as much gold as planned, the surplus gold has gone to a vat leach circuit causing longer leach time which has delayed gold recoveries. “What it really came down to was the design, construction and engineering,” Waddell said. “Targets were set and simply not achieved.”

“We started mining in May with aim being to have ore on the stockpile in late June, early July when the front-end of the processing plant should have been completed. Originally, it was the whole plant to be completed by then, but we settled on the front end.” All up, the construction delay is around five months, though as Waddell said: “even now, we’re not really complete.” Perhaps more important than the slow build are the design problems. “The metallurgy is very good in the orebody, and we were advised that we would only have to grind to 15 microns to get mid to high 90 per cent recovery of gold. With that advice we opted for a smaller mill with less grinding, and also to reduce capital expenditure, to have a smaller carbon-in-leach plant, and include a vat leach circuit which, on paper, would be a lot cheaper.

“In reality the design had deficiencies. The process means it is important to remove the fines before they go into the vats otherwise they block up, and we were assumed that classification cyclone units would separate the fines from the coarse fraction … and gold recovery would be very simple. Well, that could not have been further from the truth.” Does that mean, Minesite asks, that it goes back the original plant design? “Yep, and as a result of the fines going into the vats they’re not percolating which means we have to undertake modifications to the plant to overcome that.” Is it an insurance job? “No, it’s not.” Is it fixable? “Yes, it’s definitely fixable.” How long? “We’ve got Como Engineering (a plant specialist) working on two scenarios and costings. Basically, I think what we want to do is remove the vats. The original engineers say they can fix it, but it’s just adding to the problem.” When will you decide? “We’re just costing the alternatives.”

Complicating Waddell’s job is that the current run of mine ore comes from a heavily oxidised cap which sits atop the deeper, higher-grade, ore. “Once we get to 80 or 90 metres we hit the rich ore and that’s really what this project’s all about. The open pit is really just a box cut. We only need throughput of 130,000 to 150,000 tonnes of ore a year. We need to decide what’s the best configuration to handle the different stages of the mine.” If all goes well, fingers crossed, Waddell is confident that the current problems can be fixed in “three-to-four months”.

While working through his process plant and slow construction problems Waddell has also spent time looking at a possible merger between Tanami and Monarch Gold, a business being developed under the guidance of former Consolidated Minerals boss, Michael Kiernan. “We looked closely,” Waddell said. “The aim was to strengthen the balance sheet and combine technical expertise. We reviewed each other’s projects, with a lot of goodwill, and we decided that it was best to remain separate.” Minesite chimes in: Does that mean you’re confident of shareholder support to remain independent? “Yes, we’ve got a lot of upport from our major shareholders, and on balance, we went through the alternatives and we think both companies are better focussing on what they have on their plates. Monarch’s got a lot, and so have we.”

 

[nomore4s]

Current chart for TAM. (This is the first chart I've posted)

This is more of a educational process for me, if maybe Kennas (if you're still watching this stock) or someone else with good T/A could give me some feedback it would be greatly appreciated.

Looks to have started to move sideways with heavy resistance @ 13c and some support @ 11c (may need to test this support a bit more), it would need to keep above 11c for awhile longer (or break upwards) to confirm the breakout from the downward trend. Could also be an upward sloping triangle forming? - need more confirmation over next few days.

Please let me know if I've made any mistakes or missed anything,

Thanks

PS - I don't hold.

 

[mildew79]

Indicators are a little weak for a strong entry, especially considering the uncertainty in market direction amongst traders and investors at the moment.

I see the triangle formation as marked in green. there is also a profitable trend channel marked in red.

It is important to also chart the market, sector, and underlying commodity price if using tech analysis as your primary trading method. If all of these are indicating buys profit success is considerably more favourable.

I am currently watching TAM and believe when they eventually get their act together considerable advancements in their SP will follow. I shall need considerable volume confirmation at a trend breakout to justify my entry on this one as things look sad ATM.

 

[DionM]

I have been watching it as well. You are right, very heavy resistance to go above 13c. It has yet to make a convincing step upwards though.

I have been holding some for a while, and will continue to hold.

 

[drillinto]

I beg to differ with Nomore4s & DionM.

I would place the resistance line a little higher, at 14c.

 

[nomore4s]

Thanks for the feed back regarding the chart.

 

[Sean K]

I beg to differ with Nomore4s & DionM.

I would place the resistance line a little higher, at 14c.

I think you're both right. Resistance at 13 and 14 but hard to say which will be the hardest to take IMO. Might just depend on what the general market is doing at the time combined with a good ann.

Interesting to note the MACD has been rising for some time and looks set to break the zero line, which is a pretty bullish sign after such a long term down trend. Poor long suffering TAM holders! (not me yet)

Breaking 13 will be very positive, but down trend might not be broken until it positively cracks 14 IMO. Might have found a bottom at 10, but too early to tell.

 

[mildew79]

Agreed. 0.13 break is positive, 0.14 break would make me alot more comfortable of a trend break. Again if I never recieved volume confirmation at this time I would be sceptical in the short term (small increase in SP at best). i.e. without volume confirmation I would take profit targets or exit the trade, if volume confirmation was present I'd hold.

 

[drillinto]

Stock Performance

Stock Price (3.16.07): 0.11AUD

1 week: -8.4%
4 weeks: -12.0%
13 weeks: -15.4%
52 weeks: -42.1%

 

[drillinto]

Stock Price (03.16.2007): 11 cps

Major Upside Objective: 13-14 cps

 

[Sean K]

Stock Price (03.16.2007): 11 cps

Major Upside Objective: 13-14 cps

Not really much upside there?? But, perhaps a 10% gain is good for a short term steal? Looks like 10 was the bottom, but stranger things have happened.

 

[drillinto]

1. Gold (bullion) major upside objectives:
a) 949 AUD/oz (+12% from current price of 845 AUD/oz); b) 1100 AUD/oz (+30%)

2. TAM's first major upside objective: 13-14 cps (+18% to +27% from current price of 11 cps. It is not bad for starters)

3. Bottom line: TAM* is readying itself to achieve a good performance in 2007 and 2008

[*The Coyote Gold Project Update (ASX / 6 March) is a must read. It was posted here, several days ago]

 

[Dr Doom]

This ones in the BDG 'coulda shoulda maybe' box, except bdg's still got a drawer full of cash.
Until they come out with an (positive) ann it's impossible to predict the future sp direction, even with TA, but it looks like they will need more cash to rectify the problems.
They will have 2 options - capital raising for more cash at less than current sp eg 10c, or merge (maybe 3, insolvency?). Is there such thing as a speculative spec?.

 

[drillinto]

Dear Dr. Doom: if you would rate TAM as a speculative buy, I would not be uncomfortable with your diagnosis, for the time being...

 

[drillinto]

Of late, the number of buyers has been growing

It is possible that soon TAM will be rewarded by some substantial interest

 

[Sean K]

Of late, the number of buyers has been growing

It is possible that soon TAM will be rewarded by some substantial interest

You're clutching at straws here drill. Volume hasn't changed for some time. Plus, even if it had, increased volume while the stock is falling is an indication that there are more sellers than buyers. On the chart, this is still a sick puppy until it gets back over 14 cents IMO, as stated previously. You might be able to make 10% or so in the short term if you're lucky, but there's still some potential downside here. The MACD is just about the only thing telling me this might have found a bottom.

 

[nomore4s]

I'm with Kennas & Dr Doom, this stock will need a very positive ann (imo) to get the sp moving in a positive direction with any commitment. IMHO it has just had too much bad news and will need to show that all its problems are behind it before buyers will touch this stock in any sort of numbers again.

The only reason I've got any interest in it is
a) as more of a educational process regarding T/A.
b) know some people who are involved/work on this site, so I just keep an eye on it as they brought in at just over 20c (only small parcels thankfully -they don't normally invest in stocks), luckily I didn't.

Good luck to all holders and I really hope that it does turn in the near future.

PS Thanks Kennas for posting your charts, it's the sort of info that helps me with point a)

 

[drillinto]

Today's last price: $0.12 (+9.1%)
Volume: 1,227,109 shares
Average Volume (3month): 1,261,210 shares

Note: It is not often that you get such a price rise on bad news

 

[drillinto]

For the more interested ==> 2006 Consolidated Interim Financial Report:

http://www.asx.com.au/asx/statistic...rchByCode&releasedDuringCode=W&issuerCode=TAM