GobiMin Sees Record Earnings In Q2

China-focused junior producer GobiMin (GMN-V, GMNFF-O) saw a good second quarter this year, with record revenue at its Yellow Mountain East and Xiangshan base metals mines, and the release of a resource estimate for its nearby Yellow Mountain deposit.

GobiMin saw a 510% increase in net earnings for the second quarter of the year to nearly US$5.4 million, up from about US$879,000 in the same period of 2006. Revenue, at almost US$9.8 million for the quarter, was up from US$3.5 million for the same period last year. Those figures compare to earnings and revenue in the first quarter of 2007 at US$4.6 million, and US$10.3 million, respectively.

At more than US$20 million, revenue for the first half of 2007 outstripped total revenue for all of 2006.

The average price of nickel in concentrate sold during the quarter was US$13.01 per lb., with copper in concentrate fetching US$2.93 per lb. The company is confident that it will continue to generate strong revenue and earnings, as long as nickel-in-concentrate prices remain above US$2.60 per lb. — its break-even point.

Average cash costs of US$1.59 per lb. nickel in concentrate, net of byproducts, were up from US$1.15 per lb. in last year’s second quarter. Despite the rise and the lower average grade of ore mined during the quarter (0.48% nickel compared with 0.63% nickel in the same period last year), the company’s cash profit margin rose to US$11.60 per lb. nickel, up from US$8.43 per lb. in the first quarter and US$3.91 per lb. in last year’s second quarter. Nickel accounts for 89% of GobiMin’s total revenue.

Production climbed to 73,623 tonnes processed, from 50,687 tonnes in the previous year’s second quarter, but fell from the first three months of 2007 when GobiMin processed 90,318 tonnes of ore. The company sold 663,000 lbs. nickel in concentrate and 377,000 tonnes copper in concentrate.

Despite upgrades to milling capacity at its operations to handle 400,000 tonnes per year, production at Yellow Mountain East (Huangshan Dong) and Xiangshan will not reach capacity this year, as forecast last year. GobiMin now projects production will reach 280,000-300,000 tonnes. The company processed 220,000 tonnes in 2006. It now expects to reach capacity starting in 2008.

Safety and efficiency improvements for shafts at both mines, in the Xinjiang Uygur autonomous region of China, are planned throughout 2007 and 2008, including equipment upgrades, extension of vertical shafts and improving the ventilation systems. The upgrades are expected to cost about US$3 million.

Also during the second quarter, GobiMin received a National Instrument-43-101-compliant resource estimate for its Yellow Mountain (Huangshan) deposit, which it aims to bring into production by 2010. The deposit hosts an estimated 12 million indicated tonnes averaging 0.44% nickel, 0.29% copper and 0.026% cobalt, plus 48 million inferred tonnes of 0.42% nickel, 0.27% copper and 0.026% cobalt, not far off from historic government estimates. The company is looking for potential joint-venture partners to help it develop the project.

Drilling last year encountered unexpected high-grade, near-surface gold at Yellow Mountain; the company is currently following up the discovery with a 20,000-metre drilling program and is making the shallow mineralization (up to 500 metres depth) a focus for potential early development.

GobiMin shares traded at $3.10 on the news, in a 52-week trading range of $1.33-$4.24. The company is debt-free and has US$36.6 million in cash.