Angle Mining (ANGM LN) 5p, mkt cap £23m - First gold imminent. Moves to raise A$8m in medium term note

• Angel Mining is close to its first gold pour at its Nalunaq gold mine in Greenland.
• This is the first gold mine to start up in Greenland in recent years and should sent a precedent for other miners in the region.
• Rehabilitation of the Black Angel mine has also started and the new funds are to be used to commission a new cable car, exploration and funding of the commissioning of this mine.

Anglo Pacific (APF LN) 327p mkt cap £356m - Company admitted to the FTSE 250

Buy

• In a significant milestone in the evolution of the company, Anglo Pacific has entered the FTSE 250 which should expose the group to a broader base of investors.
• We recommend the company to investors seeking exposure to a diverse portfolio of commodities including coking coal, gold, uranium etc whilst avoiding many of the inherent risks of mining companies as its earnings are based off revenues of its mining royalties and not the profitability.
• 2010 proved to be a strong year for the signing of further royalty agreements and this year sees new royalties starting to contribute to revenues diversifying the group from the principal Kestrel coking coal royalty. We look forward to new deals and investments in the year ahead.
• In addition to the royalty cashflow streams, the group has successfully delivered strong returns from its equity portfolio, booking a spectacular £41m in gains on this for 2010 whilst still maintaining a value of £128m as at the end of December for its investments.

China Minmetals bids $6.3bn for Equinox following the collapse of its bid for Lundin Mining

• Lukas Lundin comments that there is a greater than 50% chance of the group being sold before the summer. This is despite its decision to put a poison pill in place which could delay any bidder by around 60 days.
• The Lundin group was to merge with Inmet prior to the offer from Equinox which forced Lundin to abandon its plans with Inmet of Canada.

Cluff Gold (CLF LN) 116.5p mkt cap £153m - New exploration license granted in Mali

• Cluff has been awarded a new exploration license in Western Mali (Mamoudouya) that is 300km west of Bamako, the capital city and is in the prospective Mali Birrimian Keniba Inlier Belt which hosts some world class assets such as Randgold's Loulo Mine, and AngloGold's Sadiola Mine.
• The license covers 109km² and has a three year term renewable twice. Historical trenching has returned some promising results and airborne geophysics suggests the presences of some promising structures. Cluff has allocated US$1.5m this year on the license with ground Geophysics and 2,000m of trenching planned to help identify drill targets.

Conclusion: This is positive news for the company and provides it with additional exploration potential

Coal of Africa (CZA LN) 84p mkt cap £444m - Vele Integrated water license granted

• In a positive result for Coal of Africa this morning has been the granting of the integrated water license by the South African Department of Water Affairs.
• The development of this asset was halted as a result of issues over the water license as there are environmental sensitivities in the area. Now that the license is granted it will be possible for the company to move forward with the rectification process relating to the compliance notice issued and hopefully resume development in due course.

Mantra Resources (MRU AX) 6.68, mkt cap A$898m - ARMZ revised offer terms

New offer A$7.02/s (A$6.87/s + A$0.15 special unfranked dividend)

• ARMZ, the Russian uranium miner has revised terms for its offer for Mantra Resources from $8/s previously
• ARMZ is the world's fifth largest uranium miner and is a division of Russia's State Atomic Energy Coirporation
• This is the first major uranium transaction in Tanzania
• Uranium One also has an option to acquire the assets of Mantra Resources from ARMZ at the lower price of A$6.87/s on condition that Uranium One takes a 15% stake in the assets for $150m.
• ARMZ has agreed to buy a 51% stake in Uranium One last year with the intention of using uranium One to acquire further uranium resources.

Pan African (PAF LN) 11.75p mkt cap £170m - Government awards mining license on Manica

• Pan African has been awarded its mining license for its Manica project relating to mining the oxides and some of the sulphides following the results of a pre-feasibility study completed in December.
• A detailed pre-feasibility study is underway targeting principally the sulphides and is due completion in Q2 and by Q3 a detailed 3D mine design should also be ready.
• Manica has not been the focus of the company's activities and we wait to see whether management will push on with its development or vend it out to another party.

Ormonde Mining* (ORM LN) 10.13p mkt cap £25m - Consolidation of 100% of Barruecopardo

Corporate - BUY - TP 19p

Barruecopardo is 90% owned by Ormonde and 10% owned by government affiliated SIEMCALSA (Society of Mining Investigation and Exploitation of Castilla y Leon, SA) which is the JV partner on the asset. Ormonde has agreed to acquire its partner's 10% stake for Euro2.8m in staged payments giving the company 100% of the asset.

• The deal is a good result for the company, particularly in light of the exciting dynamics in the tungsten market which sees tungsten intermediate prices (APT) at record levels in excess of US$400/mtu. The agreement is for an initial cash payment of Euro 0.1m on signing, Euro0.9m in two tranches over 18 months with the balance of Euro1.8m payable in 3 tranches over the first three years of production. A further benefit to shareholders is that minimal cash is required to fund the deal pre-production. SIEMCALSA has proved to be a helpful partner in the development of Barruecopardo and will continue to work on a consultancy basis with Ormonde's local wholly-owned operating company Saloro.
• In consolidating a 100% interest in Barruecopardo, the deal also gives the Company flexibility in discussions with parties regarding funding options for the capital development of the project.
• The JV between Saloro and SIEMCALSA covers 6 investigation permits covering a total area of 272km² in the Salamanca province of Spain. Significant tungsten / gold prospects and targets on these ground holdings are therefore also now fully owned by Ormonde.
• Valuation: We have updated our numbers accordingly as we had assumed that the company would end up paying a royalty to SIEMCALSA. The net result on our base line assumptions has not changed our target price of 19p; however, inputting current APT prices would have a major impact on valuation. Using US$400/mtu takes the target price to 46p/share or an NPV of close to Euro200m.
• Our valuation of 19p uses a 12% discount rate and assumes that Barruecopardo is debt funded later on this year (capex of Euro33.8m) with equity funding ongoing development work and overheads until cashflows are self sustaining. We forecast production starting at the end of 2012 at an annualised rate mining 500ktpa of ore ramping up to 800ktpa by 2016. Production will average around 155k mtu/year of WO₃ (tungsten units within the concentrate) at full operating capacity ramping up to produce around 230k mtu/year at the 800ktpa of ore treated rate. Underground mining at 600ktpa is then to phase in as the mine becomes too deep for open pit operations. We have also used conservative tungsten prices of US$261/mtu long term (price of tungsten intermediate APT), with current market prices in excess of US$400/mtu as the fundamentals for the metal are particularly robust there is significant upside to our valuation target. Even at our lower tungsten price assumption, operating margins are expected to average above 60%.

Conclusion: The deal with SIEMLCALSA is a good result and gives full control to Ormonde. SIEMCALSA has proved to be a useful partner and it is encouraging to note that they will remain involved on a consultancy basis which should help with development and permitting. Both Ormonde's commitment to take full ownership of Barruecopardo and SIEMCALSA's agreement to defer the payment of two thirds of the purchase price until the project comes into production are strong votes of confidence in the project. The Barruecopardo deposit is set to be a substantial western supply of Tungsten, and a secure strategic supply source of this high value specialised metal for which the fundamentals are particularly strong. Ormonde's consolidation of a 100% interest in the project will now allow it much greater flexibility in discussion with any third parties in relation to funding the project.

Source: Fairfax & Ormonde Mining

*Fairfax acts as broker for Ormonde Mining

Mining last week:

Sable Mining (SBLM LN) 23.5p mkt cap £217m - Results from Lubu indicate coking coal potential

Triple Plate Junction (TPJ LN) 6.5p, mkt cap £19m - Long gold intersection in PNG

European Nickel (ENK LN) 15.38p mkt cap £40.28m - Operational update

Fortescue Metals (FMG AX) - considering listing in Hong Kong

Mount Burgess Mining (MTB AX) - 15.5c, mkt cap A$6m - Copper cobalt anomaly defined at Tsumkwe, Namibia

Rio Tinto (RIO LN) 4,279p mkt cap £87,802m - Bid for Riversdale declared unconditional

Baobab Resources* (BAO LN) 39p mkt cap £64.8m - 3.5km magnetic anomaly may add substantially to resources

Horizonte Minerals (HZM LN) 20.5p mkt cap £57.3m - Drilling update from Araguaia returns high grades

Firestone Diamonds (FDI LN) 30.5p mkt cap £98m - Operational progress

Hambledon Mining* (HMB LN) 4.13p mkt cap £21.35m - Drilling update from underground programme

Central Rand Gold (CRND LN) 1.36p mkt cap £22m - Survival steps facing acid mine drainage

Perseus Mining (PRU AU) AUS$3.10 Mkt Cap, AUS$1313 -

African Aura (AAAM LN) 290p mkt cap £250m - Institutions and directors over 40% supportive of restructure

Petropavlovsk (POG LN) 1035p, mkt cap £1953m - Results show impact of higher costs on lower grade prod'n

BUY - Target 1368p

Solomon Gold (SOLG LN) 28p, mkt cap £75m - Newmont takes Guadalcanal jv forward on high grade results

Mwana Africa (MWA LN) 7.4p mkt cap £39.4m - Funding cancelled and gold production update

Petropavlovsk (POG LN) 992p, mkt cap £1,863m - Results meeting highlights costs and exceptional charges

⁺Fairfax employees may have previously held, or currently hold, shares in the companies mentioned in this note.

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