Exploration Insights by Robert Tyerman

As the market digests the arrival of the Glencore metals trading giant and awaits the first moves of the oil fund started by Nat Rothschild and Tony Hayward, some parts of the smaller resource company sector are showing signs of life.

Even Zimbabwe play African Consolidated Resources, a spec and far from risk-free at 6.63p, is making cheerful noises after encouraging exploration drilling results from its Gadzema gold project.

Chief executive Andrew Cranswick intends to lift the current 746,000-oz gold resource there significantly, noting that Zimbabwe has deregulated its gold market. The government’s indigenisation policy remains a problem and private talks on progressing the rich Marenge diamond field are mired in politics, but Afcon, which is negotiating potential funding from local Zimbabwean investment funds, is enthusiastic about Gadzema, the Chishnaya phosphate project
in northern Zimbabwe, and a rare earths joint venture in neighbouring Zambia.

Touching the market
Mining entrepreneur Bob Buchan is seeking £10 million with an AIM float for Colombia-focused Touchstone Gold. Broker Collins Stewart aims to put a value of £29 million to £35 million on the company, which is targeting
near-surface gold prospects in the Segovia gold belt.

Buchan – who previously founded Kinross Gold, Katanga Mining and Allied Nevada Gold – and friends have already put £3 million into Touchstone. As yet, Touchstone has only put a rough estimate of 400,000 oz on its wholly owned prospect, but Buchan is going for many times that.

He says grades in the prospect seem to be in the order of a respectable 6 to 7 grammes of gold per tonne of ore, more than adequate for an open-pit mining operation. Colombia, once considered to have too many security risks for exploration and mine development, now presents a safer picture to the world.

While pro-gold feeling persists, Touchstone's float should go well.

Goldstone in demand
Goldstone Resources says gold sampling in Senegal and Ghana has yielded ‘positive’ early results. The company’s Sangola permit in eastern Senegal has shown promising gold indications, with results as yet in from only 2,500 of the 8,150 samples taken, while soil samples taken from the Manso Amenfi permit in Ghana clearly reveal the presence of ‘robust’ gold anomalies at up to 2.4 grammes of gold per tonne of ore.

Project partner Unity Mining (formerly Bendigo) has emerged with a 33.5 per cent stake after recent buying at prices from 6.5p to 9.5p and the shares, highlighted by Growth Company Investor at 3.88p last year, now trade at 9.28p and could go further.

Blue sky
After returning to profits last year, blue-violet gem producer Tanzanite One is upgrading its resource and eyeing new gem prospects. The former AIM star, now headed by geologist Bernard Olivier, sees the recovery in tanzanite prices from their 2008 credit-crunch low to have 25 per cent more mileage yet, after turning a $4 million (£2.5 million) loss into pre-tax profits of $251,000 last year on turnover up 28 per cent to $15.9 million.

TNZ, which notes that tanzanite prices tend to follow moves in now strongly-recovering rough diamonds, lifted production from Merelani in Tanzania – the world’s only significant source of tanzanite – 8.3 per cent to 609,737 carats in the first quarter of this year with an average grade up 29 per cent to 77 carats a tonne. With rising prices, this translated into a 48 per cent first-quarter sales gain to $3.96 million.

Already talking to potential Chinese investors, Olivier is marketing at China and South-East Asia, diversifying into tsavorite (an intense green gem) in Tanzania and considering other coloured gemstones, such as  sapphires in Queensland and rubies and sapphires in Ireland.

With diversification could come a new name for the company, whose shares soared from 2004’s 42p float price to 265p in two years, before later collapsing to 6.5p. Now 12p, despite the clear risks it could now reward a
strong-nerved punt.