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Unloved offshore miners with tonnes of potential
Trevor Hoey, August 13 2007

In newsletter number ten we examined mining companies that are involved in the development stages and/or production of metals other than those such as nickel, copper and zinc that tend to grab most of the headlines. We discovered that the prices of metals such as tin and molybdenum have risen strongly, but companies exposed to those metals haven’t achieved the same meteoric share price increases as those leveraged to traditional base and precious metals.

Interestingly a similar disparity can be found when examining mining companies that operate outside of Australia, particularly those that are active in developing countries. While this is in a sense understandable because of perceived sovereign risk, in some instances the potential upside and minimal risk suggests that it pays to examine such companies on a case by case basis. We put forward five overseas mining companies that are in various stages of exploration and production, each with certain features that make them worthy of consideration.

Bolnisi Gold

Bolnisi Gold (BSG) is a classic example of the value that lies in mining companies with operations in what could be considered non-traditional areas. In the last three years Bolnisi Gold has been active in acquiring large highly prospective gold and silver tenements in Mexico. By September 2005, the company had confirmed a measured and indicated gold and silver resource of 9.8 million tonnes.

Though prior drilling by Bolnisi pointed to the probability of a substantial discovery and the potential for a highly profitable long life project, it wasn’t until 2006 that investors finally took a shine to the company. Consequently its share price trebled from $1 to $3, and in May 2007 a $1.1 billion merger proposition was received.

Led by Canadian based, Coeur D’Alene, the proposed merger would create the largest primary silver producer in the world, as well as a gold operation with production of 110,000 ounces per annum. Should the merger proceed, Bolnisi will remain as an Australian listed company, owning nearly 50 per cent of the combined entity. Hence, there are plenty of incentives for Bolnisi shareholders to approve the transaction, and analysts expect the transaction to be ratified.