GobiMin posts solid 2007 results; dividends up 150%

It was a big year in China for GobiMin (GMN-V). The Canadian junior’s two operating mines in northwestern Xinjiang province, which borders Tibet, drove up revenues by nearly 100%.

Revenues soared 96.8% to US$38.5 million in 2007, up from US$19.6 million in 2006, enabling GobiMin to declare a dividend of CAD$0.03 per share.

Production at its Xiangshang and Yellow Mountain East mines climbed to 330,000 tonnes, up from 220,000 tonnes in 2006. The two mines about 10 km apart are located roughly 600 km east of Urumqui, the provincial capital.

GobiMins sold 3.26 million lbs of nickel last year (up from 2.56 million lbs in 2006) and 1.62 million lbs copper (up from 1.31 million lbs in 2006).

It sold the majority of its nickel and copper to the Jinchuan group, a state-owned enterprise about 1,000 km away in neigbouring Gansu province.

The Xiangshang mine has been operating since 1999 and has an estimated mine life of another two to three years, estimates James Xiang, GobiMin’s chief financial officer. “Nobody knows for sure because there is no National Instrument 43-101 resource,” he says.

Yellow Mountain East, which commenced production in 1992, is a much bigger mine based on Chinese historical resources, he says, and will serve as the basis for the company’s growth over the next three years, until the planned start-up of a new mine at Yellow Mountain in 2011.

GobiMin received permits from the local government to start building the new mine at Yellow Mountain last year and has already commenced development. Xiang of GobiMins says he expects the Yellow Mountain deposit to start operating as a mine in 2011.

GobiMin is negotiating with engineering consultants and contractors for the planning, designing and construction of the mine site and mill, which the company believes will have a capacity of 3,500 to 4,000 tonnes per day.

It is expected that construction will last about four years and cost a total of about US$120 million. The mill alone will cost an estimated US$15 million, Xiang says.

The Yellow Mountain deposit, 10 km away from the Yellow Mountain East mine, released a National Instrument 42-101 compliant resource last year.

At a 0.2% cut-off, indicated resources are estimated at 12 million tonnes averaging 0.44% nickel, 0.29% copper and 0.026% cobalt.

Inferred resources total 48 million tonnes averaging 0.42% nickel, 0.27% copper and 0.026% cobalt. That translates into an estimated 113 million lbs nickel and 73 million lbs copper in-situ.

The potential for the Yellow Mountain project to host nickel-copper mineralization was identified by the No. 907 Team of the National Geology Survey as early as 1977.

The zone was pinpointed as a magnetic high anomaly on the same aeromagnetic survey that helped identify the Yellow Mountain East zone.

Last year’s diamond drilling campaign extended the known mineralization at Yellow Mountain by 300 metres to the west.

This year GobiMin hopes to secure a listing on the Shenzhen Stock Exchange for its Chinese subsidiary, Xinjiang Yakesi Resources, by the third or fourth quarter. It believes it can raise US$100 million.

Yakesi plans to issue about 25% of its shares to the Chinese public. Proceeds from the listing will help pay for the development of the new Yellow Mountain mine.

On the exploration front, GobiMin set up four new joint ventures with subsidiaries of the Xinjiang Bureau of Geology and Mineral Resources to acquire quality projects in the province.

So far the joint ventures have nailed more than 25 exploration licences for copper, nickel, lead and zinc projects all over Xinjiang region.

GobiMin is also exploring for nickel laterite in Indonesia.

GobiMins is trading at $2.70 per share and has a 52-week range of $1.65-$4.24. The company has about 65.2 million shares outstanding.