Article16 Nov 2011 09:52
VANE Minerals (LON:VML) is elephant hunting, but not in Africa or India. Its stalking ground is America’s porphyry copper province. This is an area that straddles the Arizona-New Mexico border and which is home to 60 per cent of all US production of the metal. One hit could be transformational, according to newly installed chief executive David Newton, though so far the company has drawn a blank in its search for the big one. VANE’s geologists aren’t working blind as they go after these elephantine deposits. What they have is access to extensive database of the area compiled by Freeport McMoran. And in directors Clark Arnold and Steven Van Nort they have the grey-beards with the knowledge and expertise required to successfully plunder this mountain of information.
And that’s the kernel of the investment – the opportunity, the asset. The company owns uranium projects that are being used as benchmark to value the company, and Mexican gold and silver production helps bankroll the business. But copper is the major focus. It was Van Nort, taking early retirement from Freeport, who negotiated the exclusive access to more than 7,000 world-wide exploration files assembled over 85 years.
VANE’s focus is the porphyry copper systems of the south-west US, and its targets on either side of the Arizona-New Mexico border. The biggies to date, deposits such as the Morcini and El Chino mines, are outcropping at surface. There are more than 30 in total. And the theory suggests there’s a similar number hidden beneath the covered terrain of this metallogenic province. Around 60 per cent of this area is covered. Using the Freeport database and other proprietary data VANE is identifying potential hotspots and drill testing them. It is rapid and, at $100,000 to $150,000 a hole, it is relatively low cost. The only problem thus far is VANE has drilled two targets and found nothing. However this is two of 24 potential targets. It plans another six to nine in the next 18 months, starting with McGhee Peak in New Mexico, which was finally given the green light by the local mining authorities on October 31. “The cost of drilling for a negative hole is as little as $100,000,” CEO Newton says. “If we found something and we dropped another two or three holes down to scope out whether there is something big in there, then that’s $150,000. “But at that point we would be talking to a major (mining company). It is particularly cheap exploration with potentially binary returns. And there is approximately a one-in-twenty chance of finding something.” A successful hole would be utterly transformational, Newton reveals. “We could spend as little $150,000 on exploration and end up with something worth between US$2.2 and US$40 billion.” The valuations quoted by the VANE boss are benchmarked on the monster deposits that have already been discovered in the region and based on the current price
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