GobiMin back on track, CFO says

VANCOUVER — With rebounding revenues, a doubled up indicated resource at Yellow Mountain and a new copper discovery at Yanxi, summer has been much kinder to GobiMin (GMN-V, GMNFF-O) than winter.

Financial prospects had been looking good at the end of last year for GobiMin. Revenues almost doubled, soaring 97% to US$38.5 million, on increased production and sales from its two underground nickel-copper mines, the Yellow Mountain East mine and the Xiangshan mine.

But fortunes changed in January 2008, when vicious windstorms hit the region and shut down all public transit.

With 90% of employees commuting to its mines from nearby towns and villages, few could make it to work. The result, a dismal first quarter ending March 31, 2008, with revenues coming in at US$540,000 compared with US$4.6 million the year before.

But GobiMin’s chief financial officer, James Xiang, says the company is back on track. He says employees used the shutdown as vacation and now work longer stints at the mine.

And second-quarter results appear to reflect those efforts. Gobi- Min’s revenues rebounded from the half-million dollars in the quarter previous to US$6.8 million with net earnings of US$1.3 million.

This summer’s drill results have been equally kind to the company, first with the announcement of an upgraded resource at Yellow Mountain and then with results from its Yanxi copper property.

A June 2007 resource estimate pegged the Yellow Mountain indicated resource at 12 million tonnes grading 0.44% nickel, 0.29% copper and 0.026% cobalt.

But with 17,000 metres of drilling last year, the company has bumped the tonnage up to 22 million grading 0.45% nickel, 0.3% copper and 0.03% cobalt. That translates into increases of 96% contained nickel, 101% contained copper and 100% contained cobalt.

And not far from Yellow Mountain, about 115 km south of Hami city, GobiMin released promising drill results from its Yanxi property.

With about 11,000 metres of drilling in 27 holes, the company has outlined an east-west-striking copper-mineralized body 1 km long, about 70 m thick and dipping at 70.

Highlights include 64 metres grading 0.92% copper in hole 6305 starting at 332 metres depth and 58 metres of 1.03% copper in hole 7903 starting at 256 metres. GobiMin says it plans to drill a further 4,600 metres this year to test the western extension and depth of the mineralized area, as it is open in both of these directions.

The company has a 40% interest in the property with two local partners equally holding the remaining 60%.

As for Yellow Mountain, Xiang says the project is still slated for a 2011 startup.

So far, the company has developed power and water infrastructure with the co-operation of the Chinese government and sunk about 150 metres of a planned 1,000-metre main shaft.

Ventilation and safety shafts are about a third of the way to completion.

GobiMin won’t send ore to its existing mill 40 km away, as it already operates close to full capacity there, Xiang says.

Instead, he says the company will realize a savings of about US$3 per tonne on transportation costs by building a new 4,000-tonne-per-day mill. He estimates capital costs for the project of US$120 million.

At the moment, GobiMin is considering several potential partners in the region for offtake agreements. Although most of the concentrate from its Yellow Mountain East and Xiangshan mines goes to state-owned Jinchuan’s smelters, potential concentrate from a Yellow Mountain mine will not necessarily follow the same route.

“There’s competition in the region,” Xiang says.

And despite the bad winter, Xiang predicts more good news: GobiMin will better 2007 production.

“We will exceed it,” he says. On news of the latest drill results from Yanxi, GobiMin’s share price remained unchanged at $1.10. As of June 3, 2008, GobiMin had purchased about 500,000 of its own common shares as part of its plan to regain about 5% of its 73 million shares outstanding.