gold .. good quarterly .. , page-12

re: bargain .. emerging gold producer The faint-hearted may miss out, but a bold punt in Africa should help steady a nervous profile.....

Following the recent shakeout, Adamus shares fell away to 65¢. Coincidentally, Adamus chairman John Hopkins and managing director Hamish Halliday were in Sydney at that time to embark on a roadshow to brokers and investors....

Adamus has been active in the African republic of Ghana for the past four years. It began with 42sq km of prospecting tenements and has since amassed a ground holding of 500sq km.

When we bought earlier this year, the company had announced a resource of 1.2 million ounces of gold. Since then, further drilling on its three prime deposits has boosted the resource to 1.5 million ounces within 22 million tonnes of 2.1g/t ore, much of it from surface or at shallow depths.

Infill drilling has confirmed a measured and indicated reserve of 7.2 million tonnes at 2.6g/t, for 600,000oz of contained gold. A scoping study, based on a gold price of $US575/oz, suggests a pit design to extract 11 million tonnes of the measured ore plus resource extensions with an average grade of 2.35g/t to yield 860,000oz.

According to the study, such a project would produce a pre-tax, net free cash flow of $120m during the life of the mine, calculated on the gold price at $US550 and the present exchange rate of $US$0.74 to the dollar.

With the gold price at $US650/oz, nearer its present level, net free cashflow after allowing for capital expenditure is estimated at $200m over a mine life of 6.5 years. (Life-of-mine cash cost is estimated at $US286/oz.)

That looks attractive with the company carrying a market capitalisation of around $74m. Some shrewd investors are in there, including Macquarie Bank (13%), Dundee Precious Metals (11%) and African Lion (5%).

The company has more known deposits yet to be drill-tested within identified strike lengths extending over many kilometres. A completed bankable feasibility study on the pit project is due around the end of the year. Punters who get in below 70¢ should be safe for a ride upwards.

The Speculator
Tuesday, June 20, 2006
Full article at http://bulletin.ninemsn.com.au/article.aspx?id=141264