A recent site visit to GBM Resources Limited’s (“GBM” or “the Company”) 100% owned
Milo Prospect near Cloncurry in far north Queensland has provided some insight into their
potential to discover a world class IOCG (iron-oxide/copper/gold) resource.
The Mount Isa/Cloncurry district is undergoing a renaissance with feverish exploration
and mining activity by junior exploration companies such as Cudeco Limited (ASX: CDU)
to the large foreign global miners such as Xstrata. All prospective ground has been taken
up with the goal to discover another Mt Isa, Ernest Henry, Eloise, or Cannington mine.
The world class Mount Isa Mine has been extracting silver, lead, zinc and copper ore for
nearly 90 years and has been the training ground or source of expertise for many mining
professionals and executives including GBM’s Mr Peter Thompson. Given the Mt. Isa
district‟s mineral endowment, it is no coincidence that global miners like Xstrata and
Ivanhoe Mines continue to expand their interests in the region.
As all GBM’s projects were not visited, the main purpose of this report is to outline the
potential of their Milo prospect. A brief update on the current status of their other projects
will be included for completeness.
INVESTMENT CASE
IOCG Discovery at Milo: At the Milo prospect, a scoping study and maiden JORC
complaint resource statement is imminent. The initial exploration target of between 30-
80 million tonnes of poly-metallic mineralization grading 0.8%-1.2% Cu-equivalent is
under review given the recent discovery of value adding rare earth elements (REE) and
yttrium mineralisation in recent drilling. This conceptual target is still undergoing further
drill exploration in order to better define the extent of mineralization but it is the #1
potential company making project.
IOCG Discovery at Bungalien: IOCG style copper in magnetite mineralization was
discovered at the Pan Pacific & Mitsui JV Bungalien project‟s Bronzewing Bore prospect
in the first hole drilled. A further two drillholes have just been completed and assays are
pending.
Rare Earth Element (REE) Resource Discovered: The discovery in July 2011 of REE in
drill core at the Milo prospect adds significant value to the overall economics of any
potential mining operation. Some 3,696 drill samples have been analysed for a suite of
REE with the assay results just released in November confirming that REE mineralization is extensive, open-ended, and comprising around 86% light REE and 14% heavy REE.
Phosphate discovery: Recent drilling confirms the widespread distribution of potentially
economic phosphate mineralisation on the Bungalien Project. This project can
conceivably become a stand-alone project given the joint venture partner‟s commitment to
The Brightlands tenements lie within the Eastern Succession of the Isa Block where known mines or resources are all associated with major structural features and lithological boundaries that have been the source of mineralizing fluids. Geological studies suggest that the alteration, breccia, and coincident structural features at the Milo prospect indicate the likelihood of a significant deposit in the area. A north-south magnetic low anomaly has been interpreted as a possible buried granite that gave rise to the uranium and REE mineralization. A visual inspection of the Milo diamond drill core revealed highly brecciated rock, however it was difficult to visually distinguish the higher grade mineralized zones other than an association with disseminated pyrite. The breccia is generally striking north-south and dipping to the east and is thought to be fault related. The target mineralized breccia was observed in outcrop with greenish colored secondary copper mineralization clearly visible. An old mine shaft (depth unknown) west of drillhole BTD024 had a sulphidic scree slope suggesting sulphide mineralization was extracted in the past. Drilling has suggested that higher grade copper mineralization plunges to the north and as such the current drilling campaign is targeting the northern extension. The distribution of mineralization recorded from drilling shows a depletion of copper to the south of the prospect but an increase in the distribution of REE. There was no discernable geological feature in the field or in drill core that defined the REE enriched mineralization to the south of the prospect. The presence of lanthanum is thought to occur as a halo overprinting the poly-metallic mineralization however the relationship still warrants further investigation.
The western extent of the mineralized envelope has yet to be determined as all drilling to date has been collared to the east of the outcrop and drilled to the west. GBM will consider
collaring a drillhole to the west of the outcrop and drill to the east in order to determine the western extent of the brecciated mineralization. Copper grades of 0.1% or greater are considered significant and the contained metal content of 0.4% copper equivalent is considered the base grade in determining the project‟s economics. The current concept and exploration focus is to work towards rapidly defining an open-pit mining operation on the Milo prospect.
Metallurgical Test Work
Initial metallurgical test work between April & September 2011 demonstrated that the multi-
metal mineralisation at the Milo prospect can be economically extracted to produce a copper/
gold/molybdenite concentrate, a low grade gold concentrate for cyanidation, and tailings for
uranium leaching. The poly-metallic recovery flow chart is outlined in Figure 4.
The copper component of the polymetallic mineralisation occurs as coarse grained
chalcopyrite that is 75-80% recoverable through a standard flotation process to provide a
concentrate of 24-27% copper content. Other metal recoveries returned are gold & silver 75-
80%, molybdenum up to 80%, and uranium over 90%. Cobalt, magnetite, and REE recoveries
will be determined in the next round of met test work which is expected to be completed as
early as February 2012.
Future Work Program
Given the metallurgical testing has proved the various contained metals can be
successfully extracted, a Scoping Study is now underway with a completion date in
mid-2012.
Further drilling to define the north, south, western and depth extremities of the
mineralization.
Closer spaced infill drilling to increase the level of confidence and geological data.
Further metallurgical test work on the cobalt, magnetite, and REE components.
A Preliminary Feasibility Study (PFS) is envisaged by mid-2012.
Care has been taken to define the level of risk to return associated with a particular company. Our recommendation ranking system is as follows:
Buy Companies with „Buy‟ recommendations have been cash flow positive for some time and have a moderate to low risk profile. We expect these to outperform the broader market.
Speculative Buy We forecast strong earnings growth or value creation that may achieve a return well above that of the broader market. These companies also carry a higher than normal level of risk.
Hold A sound well managed company that may achieve market performance or less, perhaps due to an overvalued share price, broader sector issues, or internal challenges.
Sell Risk is high and upside low or very difficult to determine. We expect a strong underperformance relative to the market and see better opportunities elsewhere.
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