KIS - MASSIVE POTENTIAL!!!!

[montymax]

Had a look at this one after a reliable friend told me these were going to fly. Did a bit of research myself and everything looked very good. As I was looking through sharescene I came accross this recent post and it just about summed up everything I had read.

Posted by Kalboy on ShareScene.

Was running my ruler over a couple of shares and came to King Island Scheelite and realised this was a sleeping giant. It is one of the most tightly held shares on the ASX, saw someone just about out the entire market this afternoon and unfortunately i just missed out, but will be looking for any decent sellers, as this is a definite winner. Directors have been buying a bundle of these and the BFS for their Scheelite mine in Tasmania is due to come out any day.

The mine is said to have 4.1 million tonnes of ore at 0.91% WO3. WO3 is approximately made up of 70% tungsten. The price of tungsten has skyrocketed since they took over the project a couple of years ago.

Now if we work this out. Tungsten is approximately US$280 per mtu on today's market. (mtu = 10kg)
4.1 million x 0.0091 x 0.70 x 100 = 2 611 700 mtu of tungsten.

2 611 700 x 280 x 1.33 = AUD$972 597 080 !!!!!!!
This is equivalent to a 1.2 million ounce gold resource,
WHICH IS MASSIVE FOR A COMPANY THAT IS VALUED AT AUD$30 MILLION!!!!

The best part is they believe the ore could extend for a long way to possibly increase ore reserves to 18.1 million tonnes and if it continues at the same grades this could equate to a project, with a value of approximately 4 billion dollars. (Equivalent to a 5.3 million ounce gold resource).

They have been drilling this quite a bit to prove resource and I said before the BFS is imminent.

This share could be worth 5 times its value in a matter of months.

Very exciting share that acquired the right project at the right time.

[whiteheron]

montymax

Time will tell , as always

And sometimes it takes a long time

Do your homework , eg cost to extract , demand , time to production etc etc
Good luck

[montymax]

JORC compliant resource figures will be released very very soon and good figures should see a significant uptrend in the share price. KIS are sitting on a significant resource and the latest completed drilling program should further extend the ore reserves. Also the information about the BFS will be released soon. Read an article about KIS and found an interesting section that further highlights the commerciability of the deposit.

"KIS directors say the project will be a reliable, low cost producer.

The capex for the project initially put at $25m is now considerably higher. The original PFS identified a cash operating cost of about $US41 a metric tonne unit (mtu) and a payback of about two years at a $US75 a mtu tungsten price.

While a long term concentrate price of $US75 a mtu is assumed, other greenfield tungsten projects under consideration in Vietnam and Portugal assume $US100 a mtu in their feasibility studies, while the current spot price is $US215, which has risen astronomically on strong Chinese demand and recognition that China’s mines, long the dominating producers, have significant production and reserve problems."

http://www.ferret.com.au/articles/07/0c03c007.asp
(if you would like to read entire article)

[montymax]

This was the announcement released by King Island Scheelite this morning. They have doubled the open-pit resource.
Great numbers with heaps more to come!!!!!

10 April 2006

King Island Scheelite Limited JORC Compliant Resource Statement
King Island Scheelite Limited (KIS) has today received a Mineral Resource estimate reported
in accordance with the JORC Code for the planned open-pit redevelopment of the King Island
Scheelite mine at Grassy, King Island, Tasmania from its consultants AMC Consultants Pty
Ltd (AMC). The resource estimate is designed to assess the resource potentially recoverable
by planned open pit mining. It comprises remnants from the previous underground operation
and other mineralised zones not mined during that operation.

The drill-hole database used for the resource assessment includes information from 593 pre-
KIS drill-holes. The core logs and assays for these have been digitised and included in a 3D
model of the deposit. Since May 2005, the company has drilled a further 39 core holes to
check and confirm key information such as mineralisation boundaries, presence of stopes and
pillars, and to recover metallurgical test samples. A further 13 holes have been drilled for
geotechnical and groundwater assessment purposes.

The drilling program has now been
completed, and the rig has left King Island.
AMC has worked closely with KIS’s geological consultant "Newnham Exploration and
Mining Services" (NEMS) to check, and to the extent possible with the pre-KIS data, verify
all of the drill-hole and assay information. AMC has developed a 3D block model of the
deposit. Blocks used are 20m in an E-W direction, 10m in a N-S direction, and 6m vertically.

AMC reports a Mineral Resource at a cut-off grade of 0.25% WO3 down to an RL of 308m
below sea level of:
Mineral Resource
Indicated: 13.2 million tonnes @ 0.64% WO3
Inferred: 0.2 million tonnes @ 0.35% WO3
Total: 13.4 million tonnes @ 0.64% WO3

These estimates have been classified and reported in accordance with the 2004 JORC Code.
While the Mineral Resources have been classified predominantly as Indicated Resources, it is
likely that a significant proportion would have been classified as Measured Resources had it
not been for uncertainty with respect to the precise location of underground workings and
therefore of remnant mineralisation, and incomplete records relating to some of the old
drilling data.

Shareholders are advised however, that not all of this material will necessarily be recoverable
from the planned open pit mine. Further work is required to finalise capital and operating
costs, mill recoveries, final pit slopes and other key parameters before an Ore Reserve can be
estimated. AMC has run preliminary Whittle Pit Optimisation studies using preliminary cost
and recovery parameters provided by the Company. These studies suggest that between 70%
and 80% of the resource tonnage may be extractable in an open pit at an overall strip ratio
around 6.5 to 1.

Because of the preliminary nature of these studies, your Board believes it appropriate to
report the full Mineral Resource to 308m below sea level until such time as the optimum open
pit shape and depth can be determined.
Finalisation of the Ore Reserves is dependent on completion of the Final Feasibility Study.
These resource numbers do not include the following:
• Mineralised material down-plunge in the main Dolphin deposit below an RL of minus
308m. The presence of well-mineralised material is known in this area from past drilling
and mining activities. However, it is not considered that this material can be recovered by
open pit mining.
• Mineralised material at the old Bold Head mine some 3km north of the King Island
Scheelite mine. Geopeko records from 1990 indicate that there are approximately 1.7 to
1.9 million tonnes of material grading approximately 0.8% to 0.9% WO3 remaining at
Bold Head1.

The company announced an earlier resource estimate for Dolphin (Investor Presentation,
December 2005, released to ASX 14/12/05). The n

[montymax]

Early - Mid July should be a very eventful time for King Island Scheelite. The reason for the recent slight drop in share price is because of two main reasons.
1. Drop in WO3 prices to around about US$180.00 mtu (a price correction im my opinion)
2. The dilution of the share price due to 11 million shares coming out of escrow

The decrease in grade and increase in tonnage announced in the most recent JORC compliant resource, is extremely positive and will lead to a decrease in operating costs.

The following is a personal prediction of an outcome of the Final Feasibility Study, which is due later this month.

Assumptions
• WO3 price US$120.00 mtu
• AU$40 million Capital Cost
• Operating Costs US$50 mtu
• Exchange Rate $AU = US$0.70
• Tax Rate of 30%

I have talked to the directors and they are currently looking at an operation that will process 750 000 tpa. At a WO3 grade of 0.64% this will produce approximately 4800 tonnes of WO3.

Net Profits after Tax = AU$34 million

At a price/earning ratio of 5.6, this values the company at approximately $3.60 per share.

The assumptions are fair and are based on the long term nature of the project.
• WO3 price assumption of US$120 mtu is a 33% discount to the current price of US$180 mtu
• 17% decrease in operating costs due to lower grade and higher tonnage
• 30% increase in Capital Costs due to the increased capacity required

The outcome results in the debts of the project being paid off in the first year. This leads me to believe there may be a capital raising required to fund the initial start up of the project.

The directors have also mentioned that major international tungsten corporations have visited the site and due to the quality of the product that will be produced at the King Island Scheelite Mine, I believe that an off-take agreement is a strong possibility. This would ensure the mine to be up and going by the September Quarter of next year.

The share is very undervalued and I think the market will wake up to the potential when the Final Feasibility Study is released and other details are tied up, such as the financing of the project and the sale of the scheelite concentrates.
This should all be done by the September Quarter of this year and we should see the market price per share reach the $2.50 mark.

[montymax]

Yet the share price of King Island Scheelite is in a downward trend. This a severely undervalued stock and in a couple of weeks, when the feasibility study is released, people will see that this one is worth at least $2.50. They will be generating revenues of between $60-80 million when there operations begin in mid 2007 and coupled with a strong possibility of an offtake agreement with one of our Chinese friends, it will establish itself as one of the world leaders in tungsten supply.

Note: King Island Scheelite Fully Diluted Market Capitalisation = $47 million

[montymax]

Posted by KALBOY on Sharescene

As for your query regarding KIS, there was a company evaluation released by Austock securities last November, which explains the companys future operations from top to bottom. The website is: http://www.24hgold.com/24hpmdata/articles/...20060072201.pdf

There potential upside is $1.46 per share. But the following factors have not been factored in.
- Lower Head Grade (0.91% to 0.64%) but a much higher tonnage (0.4mtpa to 0.7mtpa), which means a reduction in total operating costs
-The price is based on a WO3 price of US$100 mtu, which is much lower than the current WO3 price of US$205 mtu. Industry leaders believe the tungsten price will have to maintain a minimum base level price of US$120 mtu to ensure adequate tungsten supply is delivered.
-In the latest KIS announcement it said that there would be further delays to the feasibility study due to metallurgical testwork. This is not such a bad thing, as the company is investigating the possibility of producing APT (Ammonium Paratungstate), which is currently priced at US$260 mtu. This situation will further reduce operating costs, capital costs and reduce the risk of the operation.

This announcement can be found at: http://www.kingislandscheelite.com.au/pdf/...dy_28_06_06.pdf

The project is a lot more influenced by the operating costs rather than the Capex. So with all these factors to consider and witha WO3 price assumption of US$120 mtu, (even though KIS may now produce APT), I see $2.50 a share as a very reasonable target.

A good offtake agreement is also a very important aspect of the operation and I know that KIS has talked to several Major tungsten producers in Europe, China and North America.

KALBOY

[montymax]

The Bankable Feasibility Study is due at the end of the month and results should be very exciting. This is an extremely tightly held share and there are very few available on the market. With APT (tungsten) prices at $26000/tonne and 600000 tpa operation starting late next year it is also extremely undervalued with a fully diluted market capitalisation of $52 mil. Revenues in the order of $AUD130-140 MILLION p.a can be generated at current spot prices. There is also a strong chance of a lucrative off-take agreement, which would see the company lock-in long term profits. The next few months should be very interesting for this company and $2.00 a share is a very resonable target. (Current price = $1.00 a share) :)

[cloggs]

Up 32 cts because of a joint venture agreement with Chinese company. Anyone who bought because of your post yesterday Montymax will be kissing your feet.

http://www.asx.com.au/asx/statistics/announcementSearch.do?method=searchByCode&timeFrameSearchType=Y&year=2006&issuerCode=KIS

[montymax]

Posted by Kalboy on HC.

Big news out today. 50/50 JV with a major tungsten player in Xiamen Tungsten (XTC). Agreement states that XTC will provide all working and development capital and considering initial capital requirement will be approximately $50 million, KIS has saved itself from doing a share placement and diluting the share price. This is a substantial deal and KIS is free to sell it's 50% share of the output at current market prices. This could generate initial revenues of $50 million a year, and now that finances are effectively taken care of, production should start between mid-late next year. The current fully diluted market cap of $68 million ($1.30 a share) is a joke. The JV coupled with the BFS due at the end of the month, should see the share price reach the $2.00 mark quite easily within the next month.

Here is a copy of the announcement:
www.asx.com.au/asxpdf/20060908/pdf/3ycjv236hrnsk.pdf

[montymax]

Hate to be repititive, but it appears the buyers are building up again an there is a lot of strength for this share at current prices. All indictions of a great upcoming BFS and potential offtake agreements for its 50% output of the King Island scheelite project. The partnership with Xiamen Tungsten was a great move and has taken care of the initial costs and further development costs of the project. Effectively KIS is set to make an extremely tidy profit, with minimal risk and with APT (Tungsten) at US$260, KIS is a very undervalued company that investors are just starting to wake up to. Watch out for a big month from King Island Scheelite (KIS).

[montymax]

This is looking strong. Not huge sales , but there are very limited amount on offer. I think the BFS may be released this week and we could see a lot of volatility in this share over the next couple of weeks. Could offer a very substantial return in the short term.

[montymax]

BFS has been released. 10 year open pit mine life to produce average of 3000 tonnes of tungsten a year. At current WO3 prices that would produce an average EBIT of $65 000 000 a year. If the Chinese want 50% of the project it will cost them $100 million in capital and development costs. Economic tungsten deposits are becoming very scarce and for the developing China, this is a scary prospect. Xiamen Tungsten obviously feels this is an investment in the future and is taking advantage of what the King Island Scheelite project can offer. KIS is a very undervalued share and is a strong position to be a leader in tungsten production. After the finalistion of the JV, financing agreements and development, things will start to happen for this company.

[cloggs]

you tell'em Montymax.

[Wossname]

Hi Montymax,

I understand that China last year skewed their tax regimes to favour the export of secondary tungsten products over primary.

I gather that as of last week the tax regimes have been further altered to favour tertiary product exports over secondary.

Given that China is apparently the world's major source of tungsten ores, I'm reading this as providing a supply side restriction on tungsten ores that will favour higher tungsten ore prices.

What's your take on this? And how do you think that the Chinese taxation changes might affect KIS and the joint venture?

Regards