Otter nosedives but NZ Oil & Gas and Summit looking up

Friday 10th August 2001

MINING STOCKS' SHARE PRICES

Company	28.7.00	29.10.00	2.2.01	4.5.01	3.8.01

Cue	8.5	4.6	5	5	10.5
Heritage	8.1	6.1	4.5	4.9	4
GRD¹	78	90	122	117	142
NZ Oil & Gas	28	28	30	36	42
Otter ²	59	40	36	17	12.8
Summit	9.5	7	10	10	16.5
¹ converted from Ac ² adjusted for 2:5 issue London gold
($YS/oz)	279.85	265.45	266.70	266.15	268.85
2001 high	$US286.10		2001 low	$256.20

GRD's next big venture will be the Reefton Gold Project, provided Conservation Minister Sandra Lee signs off the appropriate approvals

By Peter V O'Brien

The contrasting share-price performance of goldminers Gold & Resource Developments (GRD) and Otter Gold Mines was the feature of the mining sector in the past three months.

Another increase in NZ Oil & Gas' share price and a 65% gain for Summit Resources, although from a low base, were also worth noting but the goldminers stood out.

Otter differed from GRD in that the latter company diversified beyond the mineral extraction industry while the former's activities were confined to mining.

Nothing went right for Otter in the quarter ended June 30, either in Australia (its main operational area) or in New Zealand.

The company's equity share of gold production for the quarter was 18,293 ounces, compared with a budget figure of 29,457oz. It followed the slump to 18,191oz in the March quarter after outputs of 30,156oz and 24,860oz respectively in the September and December quarters.

Otter's latest quarterly report said production was down due to suspension of milling at the Tanami mine in Australia's Northern Territory from March 26 to April 25 and restricted access to higher-grade ore bodies. Ore at the bottom of several Tanami pits was abandoned following flooding, the pit wall failures resulting from the "severe" wet season from December to March.

Any investor who watched television news knew what happened in Australia from New South Wales through Queensland and the Northern Territory in the period. Mines and mineral exploration areas were no less immune to the weather than major cities and flat-sited towns in the area.

The company's share of operations at the Martha (Coromandel) mine was down because low-grade stockpiles were milled.

Things got worse when administrators were appointed to Otter's 57% "in-substance" subsidiary Allstate Explorations. Otter's report said it would no longer account its interest in Allstate as an in-substance subsidiary on a consolidated basis.

The latest fall in Otter's share price was also related to that matter, because the company said it would make full provision in respect of its Allstate loans ($NZ2 million) and its equity investment of about $NZ10.5 million in the financial statements at June 30.

Costs rose, hedging contracts hit 100% of gold production and operations were being scaled down.

Otter could come again but it is likely to be a long time before the shares get above the $1 level they enjoyed in recent years.

GRD has been on a roll over the past year, following a dull time in earlier days, before and after the former New Zealand subsidiary Macraes Mining became wholly owned.

The company is involved in property development, mining industry services and "biodigestion technology" which relates to the breakdown of waste to compostable material.

GRD's goldmining activities at Macraes Flat in Central Otago continued steadily.

The next big venture will be the Reefton Gold Project, provided Conservation Minister Sandra Lee signs off the appropriate approvals.

Apart from the obvious impact on the West Coast economy through job creation and the injection of GRD's overall spending in the region, development of the Reefton Project would eventually have considerable benefits for the company.

The goldminers always have top place in any discussion of the mining industry but two other companies, Summit Resources and NZ Oil & Gas, could be worth an investor punt.

Summit seemed to have postponed continuing its battle with the Queensland government over uranium mining.

The June-quarter report said future development of Balhalla and Skal uranium resources was dependent on a Queensland government more favourably disposed to uranium mining and processing than the current Labor government.

"Any further development of the resources will require a change in this policy or government."

Summit's deal with Canadian mining heavyweight Notanda gave the company access to promising base metal prospects in Queensland and was probably the reason for relative "surge" in the share price.

NZ Oil & Gas is getting on, with relatively little hype, in extracting oil and gas, proving up potential reserves and developing its Pike River coal project on the West Coast. The last was another proposal requiring access through conservation land and consents under the Resource Management Act.

Assuming necessary approvals, NZ Oil & Gas would have another branch to its mining structure, with an eventual effect on profitability.

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