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London mining wrap; Ariana Resources, Orosur Mining, EMED Mining, Thomas Cook, New World Oil and Gas


The mining sector generated plenty of interest today with Proactive Investors dedicating two main stories to precious metals focused mining companies, while another report focused on embattled tour operator Thomas Cook (LON:TCG), which lost more than two thirds of its value in today’s session.

Starting with the miners, Ariana Resources (LON:AAU) said this morning that surface sampling of the Karakaya vein on the Kepez project in Western Turkey has identified higher than previously anticipated concentrations of silver.

Rock chip and float sampling revealed the average grade was 65 grams per tonne of the precious metal to a maximum of 277 grams per tonne.

This is in addition to the existing high gold grades found in the area, and could potentially lead to a doubling of the indicated resource estimate at Kepez.

The indicated resource currently stands at 60,000 tonnes at 4.6 grams of gold for a rather modest total of 8,900 ounces of gold.

Fellow AIM quoted mining stock Orosur Mining (LON:OMI) was the subject of a feature story by Proactive Investors. Orosur has ambitious plans to double output in the coming years.

The firm produces nearly 60,000 ounces of gold each year. Currently all of that comes from the San Gregorio operation in Uruguay.

Thirteen historical pits have been mined at the San Gregorio operation producing more than 1,000,000 ounces of gold over the past fifteen years.

The main San Gregorio operation still has a life of 5 -6 years from open pits but grades have reduced to an average of about 1 gram per tonne, and the mine currently operates at a cash cost target of about $810 an ounce. Sustaining capex is low.

Operating costs in dollars per tonne benchmark the industry.

With current gold prices the firm can net almost $800 an ounce. While this is a tidy sum, San Gregorio is not a low cost operation in terms of dollars per ounce cash costs. But this is changing.

Before the end of this year the Uruguayan government is expected to rubber stamp permits for Orosur’s newly developed Arenal Deeps underground mine. And potentially its first ore could be processed at the plant this month.

“We are in excess of 1,500 metres of development in the mine, in the main decline,”chief operating officer Luis Tondo told Proactive Investors.

Proactive also published an in depth report on EMED Mining (LON:EMED, TSE:EMD), which is preparing to restart the development of the Rio Tinto copper mine in the Andalucía region of Spain.

The project has been mired in a permitting process as a result of legacy issues from previous ownership, said Fairfax analyst John Meyer However Meyer added that Rio Tinto is one of the world’s greatest copper mines. And he believes that the valuable brownfield copper project could be restarted within a short time frame at a low capex.

He highlights that the mine could produce 37,000 tonnes of copper each year after an initial capex spend of around $160 million.

In a note to clients today Meyer said that EMED was a ‘buy’ and the shares were worth 32p each. The analyst's valuation is some 350 per cent higher than the current price of 7p.

A large share of today’s news coverage by Proactive Investors was dedicated to mining companies with

Meanwhile, tour operator Thomas Cook emerged as the most actively discussed company in the FTSE 350 after losing more than two thirds of its value as it announced it was in talks with its banks.

The response of City analysts to the news that Thomas Cook is in talks with lenders has, as could be surmised, been generally negative.

The tour operator’s shares fell more by as much as 80 per cent in opening trade following the revelation that trading had deteriorated further meaning it required short-term funding to cover the Christmas period.

Downgrading his recommendation to ‘sell’ from ‘hold’, Peel Hunt analyst Nick Batram said: “The group is clearly in a very difficult position and it would appear that the route to recovery will have to be a lot more painful for equity holders than previously thought.

“Thomas Cook needs further assistance from its banks and this is unlikely to come cheaply or without preconditions which could involve equity. Therefore, the shares are best avoided until the picture clears.”

In oil and gas, updates from New World Oil and Gas (LON:NEW) and Mediterranean Oil and Gas (LON:MOG) showed upp among the most popular stock exchange announcements of the day.

New World Oil and Gas announced the completion of its Phase 2 seismic acquisition programme at the Blue Creek project in Belize.

The junior explorer has now carried out seismic over a total of 139.15 line kilometres in the Peten basin.

"We continue to make excellent progress at our Blue Creek Project since its acquisition in June of this year,” said chief executive William Kelleher.

“The completion of the second phase of our seismic acquisition programme is another significant milestone for New World as we progress towards anticipated phase three completion in Q1 2012.”

Moving to Mediterranean Oil & Gas, the company said the contribution from the 20 percent owned offshore Guendalina gas field has quadrupled the company’s production from 40,000 standard cubic metres per day to 160,000 scm/day.

Operator ENI – which owns the remaining 80 percent of the field – started gas production from there on October 25.

In an operations update, MOG said since the production start, aggregate gross gas production from the field has been approximately 630,000 scm/day (22 million standard cubic feet per day), representing approximately 120,000 scm/day (4.2 mmscf/day) net to MOG.


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