 South East Asia's
Gold Companies
Bob Moriarty
Archives
Jul 16, 2007
One of my greatest pleasures
in this job, if you can call it a job, is revisiting projects
I have seen before. I just came back from a week in the Far East
where I visited a company again that I wrote up last year. I
called it Vietnam's
Gold Company.
In hindsight I now realize
I should have called them Southeast Asia's Gold Company because
Olympus Pacific (OYM) and their sister related company,
Zedex Minerals (ZDX.AX) [Barb's comment: "Now there's an
unforgettable name] are
well on their way to becoming a couple of the most important
players in their markets in SEA.
First of all, I must fully
explain the relationship between the two companies. Olympus Pacific
is very much a family-run company. Zedex owns 16.9% of
OYM. David Seton is the Executive Chairman of OYM while John
Seton, brother, is on the board of OYM and the Chairman of Zedex.
Third brother, Paul Seton, is the Managing Director of Zedex.
In a way, Zedex was a bit of
a holding company for the Seton family while Olympus Pacific
was the operating company. Insiders and institutions own some
80 percent of OYM and 75% percent of ZDX.
As I wrote last year, Olympus
opened their first gold mine and mill in April of 2006. The mill
was designed to operate at a 30,000 ounce per year rate
but low grade feed and a below-standard recovery has limited
production to about 1000 ounces of gold a month. That's not a
bad thing because the mill has done something far more important
for Olympus. It has given them total credibility with the government
of Vietnam. As I said in my piece last year, government officials
are wildly enthuastic about the jobs and economic benefits derived
from mining. (Much like the United States. Not.)
Olympus has become the gold
company of Vietnam by succeeding at jumping through all the bureaucratic
hoops put in place by a government unfamiliar with the
requirements of mining. They now have two major projects in Vietnam.
They have an existing gold mine and mill at Bong Mieu and the
rapidly-advancing gold project at Phuoc Son. Olympus has applied
for licenses for gold projects at Khau Pum in the north of Vietnam
and a gold project in the Southern Highlands. In addition, they
are working on a gold project in Laos. And they love Ted.
Bong Mieu has about 600,000
ounces of gold in 43-101 resources while Phuoc Son has about
300,000 ounces. Olympus has major drill programs in place at
both locations with the intention of bringing the resource up
to over 1 million ounces at each project. An updated 43-101 for
Bong Mieu should be released in a couple of months, or so.
As I suggest above, the most
important product of them getting into production has been a
vast increase in credibility. In late November of 2006, Olympus
signed a joint venture agreement with AMIC and JABEL covering
a 43 square kilometer gold project they call Capcapo on the island
of Luzon in the Northern Philippines. The project is on strike
some 85km from the 60 million ounce gold district at Baguio-Mankayan.
The option allows for Olympus Pacific to earn up to a 60% interest
in the project in exchange for them spending $5 million US In
exploration.
Olympus has begun a major drill
program at Capcapo. Hole #07-09 intersected 94 meters of $56
rock with 1.49 g/t au and .31% copper. Hole #07-12 intersected
28 meters of $156 rock with 3.06 g/t gold, .67% cu and 2.53 g/t
ag. The deposit is open in all directions for expansion and step-out
drilling is continuing.
Capcapo is the product of 40
years of work by AMIC, the Abra Mining & Industrial Corporation.
AMIC is well aware of the potential for a massive epithermal-porphyry
gold system similar to that of the Baguio-Mankayan district just
85 km to the south, on strike. But AMIC was looking for a financially-strong
partner to pay for the massive drill program necessary to prove
up the gold rich copper porphyry. Olympus Pacific's experience
in Vietnam convinced AMIC that they were the best team to partner
with.
Meanwhile, Zedex was doing
the same thing in Malaysia on a project called the Bau Goldfield
in Sarawak on the island of Borneo. Bau has been in production
since 1864 and has recorded production of 1.5 million ounces
officially and probably more like twice that. A local businessman
has put together the entire district under a company called Gladioli
Enterprises SDN BHD. In November of 2006, Zedex entered into
a JV with Gladioli where Zedex has acquired 50.05% interest in
Bau in exchange for payments of $1 million US and funding the
exploration activities. The project encompasses some 828 square
kilometers. Zedex is the operator of the project.
In addition, Zedex has a major
gold project in Vietnam they call the Tiger Mountain Project.
It consists of 150 square km in Central Vietnam. The Vietnamese
Geological Survey did work on the project and found six parallel
quartz veins. Their assays show gold values up to 157 g/t Au
and over a third of the sample showed above 3 g/t Au.
At Tien Thuan, within the Tiger
Mountains, there is found a prominent 4 km circular depression
that appears to be a collapsed caldera and contains areas of
primary and supergene zones of copper-moly-gold mineralization.
The area is broadly analogous with large porphyry deposits elsewhere
in the circum-Pacific region such as Bougainville and Alumbrera.
 A month or so back, Jim Hamilton of Olympus contacted
me and asked if I was interested in revisiting their Vietnam
projects. Jim handles the Investor Relations work for Olympus
and did such a wonderful job of organizing the tour last year.
How could I say no? (And the place where we stay does a beautiful
job of ironing my shirts).
I arrived in Singapore early
in the morning the day before our tour was to leave. Getting
there a little early was a really great idea. From Miami to Singapore
required a 5.5-hour trip to LA, a 4-hour layover in LA and then
a grueling 17-hour leg to Singapore. I'm not as young as I used
to be and 24-hour trips leave me dragging. A day to recover helps.
In any case, there were about
27 people on the tour. By and large we pretty much had the entire
management and technical teams from both companies and representatives
from the banks and funds who were major shareholders or tempted
to become major shareholders.
I should back up just a bit.
Olympus and in turn, Zedex, are very much family companies unlike
any other I know of. Since the very beginning of each company,
the Setons have concentrated on building relationships with certain
banks and funds. It works, and business with the Setons is a
relationship first and a financial investment second.
Even as just a website operation
and writer, I was made to feel part of the family. If you buy
into either company, you are joining a family and are treated
as part of the family. That makes raising money a lot easier
for them than other companies and large shareholders play a large
role in decisions in the company.
Olympus announced a $25 million
dollar financing just prior to the trip and a major reason for
the trip was to convince the banks and funds that investing at
this time is a good idea. So I'd guess 12-15 of the people on
the trip were part of the financing. In any case, we had some
heavy hitters from Vietnam funds and from banks specializing
in funding SEA companies. It was an important group.
 I don't know how many trips I've been on, many
dozens. But I have never been on a trip so well organized. Just
the act of getting over two dozen people together from Canada,
the US, Australia, Vietnam, and New Zealand was a feat. For them
to all show up fairly sober, in time, and with all their bags,
begs normal probability. We got checked out of our hotel in Singapore
and headed to the airport to
hop on our aluminum chariot.
Our first stop was Kuching
in Sarawak on the island of Borneo. We got in late in the afternoon
and all went out to dinner. The next day we were up and out early
for our briefing.
  I had met Mike
Banks and his lovely wife, Phuong, in Vietnam in April of 2006
at the opening of Bong Mieu. Mike is now in charge of the drill
program for Zedex at Bau.
Zedex had hats and shirts and
a briefcase with some prezzies for us and we sat through about
an hour background brief on Bau. It's been mined on and off for
150 years, it's a big
area and there has been little professional exploration.
Zedex has mobilized a drill and it's turning now.
Mike and his crew have done
an excellent job of assembling all the data they have into usable
form. We were shown temperature charts that I suspect will be
very valuable in exploration. But it's an area that goes on for
miles and miles. It's a very big system.
I saw something on this trip
I have never seen before. I've seen lots of good projects that
need lots of work. And money. But Zedex and Olympus kept showing
us projects just screaming for exploration dollars. You could
throw $50 million dollars at either company and the money could
be spent wisely on exploration. The projects are that good and
that big.
One area of the Bau project
has a JORC resource of 417,000 ounces of gold. (JORC is the Australian
version of 43-101) In any case, drills are turning and I expect
a constant stream of information and drill results for a long
time.
Zedex also has a 75/25% Joint
Venture with the Binh Dinh Provincial Government covering two
major copper-gold-moly projects in Central Vietnam. In the Tien
Thuan sector, assays showed up to 157 g/t gold. Mapping and surface
sampling is taking place now and Zedex expects to begin scout
drilling by late 2007.
In the Tiger Mountains Sector,
local authority is being sought to conduct a detailed ground
mapping and soil geochemical survey prior to conducting a scout
drilling campaign. In all of the Vietnam operations, the success
of Olympus at Bong Mieu has opened doors and created a world
of credibility for both Olympus and Zedex.
Zedex has a series of other
projects in Northern Vietnam, Laos and in Australia. The stock
is undervalued and as investors digest the stream of new data,
I expect the stock to start a constant and steady climb higher.
After our Bau visit, we went
to the airport and flew to Northern Luzon in the Philippines
to visit another major Olympus Pacific project at Capcapo. We
got in late and ate a quick dinner so we could be up early to
see the project.
Capcapo is the diamond in the
Olympus Pacific's crown jewels. OYM has 60% of the property and
is in the midst of a major drill program of 7,000 meters. Results
are coming in already and will continue for months. OYM wants
to expand the resource and expects to have a new 43-101 resource
calculation by early 2008.
Capcapo is a Baguio Gold District
look-alike. It's an epithermal - porphyry gold-copper system
and I have never seen anything as strongly altered. The results
to date are great and Olympus geo Roger Dahn expects to be announcing
holes monthly.
After Capcapo we headed to
Da Nang. That brings back a lot of memories. I was there from
July of 1968 until March of 1970. My daughter was born in 1968
and now she's a grandmother. Lots of water has passed under the
bridge.
In Vietnam we chartered two
Russian heavy lift helicopters to travel to the Phuoc Son project
that I didn't see last year. It was the first time any company
was allowed to charter the planes that belong to the Vietnamese
Air Force. It was one more measure of the high regard the government
holds the management of Olympus Pacific.
When I revisit any company,
I'm most interested in how well the company has done what they
said they would do. Production at Bong Mieu is only 12,000 ounces
a year in comparison to the hoped for 30,000 ounces but the company
explained to me last year that the project was a proof of concept.
Before expending big amounts of money, OYM needed to know what
hurdles they would run into. But aside from a few glitches the
project has proven to be a roaring success in the eyes of the
Vietnamese federal and provincial level. So while they aren't
producing all the gold they would like, they know what to expect
as they go into production at Phuoc Son. Everything else they
promised a year ago they have done and more. To an incredible
degree, they have leveraged success in Central Vietnam into a
handful of project that could easily pole-vault them into a much
larger company.
Olympus has applications in
for a number of other major gold projects in Vietnam and one
in Laos. In my view, Capcapo is going to be the home run; it
has all the markings of a giant system, potentially ten million
ounces or more.
The trip went incredibly smoothly.
Jim Hamilton and his able assistant and did I say, lovely able
assistant from Zedex, Selena
Johnson, did an incredible job of tracking and catering to
27 different people. I was impressed.
The only real issue I have
with either company is structure. The management is identical,
the goals are identical and they trade technical staff back and
forth. If you totally ignored blue-sky potential, I'd guess Olympus
is fairly valued today with a market cap of about $125 million
US. Zedex on the other hand is absurdly undervalued with a market
cap of about $47 million. But remember, Zedex owns about 17%
of OYM worth about $22 million.
You would be foolish in the
extreme to ignore blue-sky for either company. It's enormous.
But it simply doesn't make any sense for the two companies not
to merge. Like most Americans or Canadians, I get really uncomfortable
when you start talking about hundreds of millions of shares.
But all companies hate rollbacks, even when it is in their long-term
best interest.
Olympus and Zedex should consider
merging. I've never written up an Australian company before,
not because there aren't good mining companies in Australia,
there are a bunch of them. But I work for my readers and most
of my readers can't buy Australian companies no matter how good
they are. But a merger would make a lot of sense because the
merged company could roll back the number of shares to something
Canadians would be more comfortable with and management could
focus on building value for shareholders.
OYM is more or less fairly
valued. Drill results will move them higher, eventually much
higher. Companies hate it to be called fairly valued but for
investors it means they can ease into a stock without fear it's
going to double in the next week. Zedex on the other hand is
a gimmie. It should be 200% or 300% higher. The insiders know
what they have but the Australian public doesn't. When drill
results start coming out of Malaysia, they will get it. If you
can buy Australian shares consider shares in ZDX soon or watch
it go.
A merged Olympus/Zedex has
all the ground, technical staff, management and money to become
a mining giant in the Pacific basin. Climb aboard; it's going
to be an interesting ride.
I own shares in each company,
Olympus are advertisers, and Zedex are going to advertise, and
since they are also part of my family, I am hopelessly biased.
Do your own research and invest your money wisely. There are
no gurus in mining.
By the time
you read this I will be winging my way to North Carolina and
Belize, so I'd appreciate it if you'd hold off on sending non-vital
email until the end of July.
Olympus Pacific Minerals
Inc
OYM-T $.75 Canadian (July 12, 2007)
OLYMF-OTCBB
188.3 million shares
Olympus
Pacific website
Zedex Minerals Ltd
ZDX.AX $.40 Australian (July 12, 2007)
VQB.F Frankfurt
169.2 million shares
266.5 million shares fully diluted
Zedex Minerals website
Bob Moriarty
President: 321gold
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321gold Ltd
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