I have nothing more to say…
September 25, 2011
Dr. Alwi Shihab is a recent appointee to Southern Arc’s Advisory Board. Until recently, he was Special Envoy of the President of Indonesia to the Middle East. He was formerly Foreign Minister for Indonesia from 1999-2001 and Indonesian Coordinating Minister for People’s Welfare from 2004-2005.
His credentials are impressive and worth a Google search. I encourage you strongly to learn more about this man. Such enhanced understanding of Dr. Shihab will surely add colour and texture to your understanding of this Company and the calibre of people attracted to join its team.
Dr. Shihab introduced Southern Arc to Qatar Mining, now a 9.99% shareholder in the Company. He attended the Company’s shareholder information session in Toronto last Thursday, during which I posed the following to him.
“Your appointment to the advisory board, in the circles of conversation that I have, sent a bit of a shock wave into those conversations… being an awareness that Southern Arc minerals is on the radar screen at the highest levels of government in Indonesia. Given that, prior to that point, many peoples’ perspective was – there are 1,001 small exploration companies out there – yet, you’re involved and have found Southern Arc Minerals on your radar screen. My question to you is, how did that happen, and why are you here?” (Kevin Graham)
“Thank you for the question. My association to this company is not a coincidence. It has been a while since I have been involved in solving problems for mining companies. When I was Senior Minister in the government for the Social Welfare, I have been in touch with many friends in the mining community. Newmont is one of which… Freeport… as friends… and they always come to me to seek advice, or to be a trouble shooter, because I feel morally obligated to make Indonesian government commitment for securing foreign investment in Indonesia, and to make sure that the friendly environment for investor to be in place and the legal certainty to be in place, and therefore, when Qatar Mining was about to seek the opportunity of having joint venture with a mining company in Indonesia, of course, there are a number, but Southern Arc maybe is a unique one, because of the result of their due diligence. I recommend not only one. I recommend two and three, or even four. So, I’m here to continue my moral obligation to see this company, and other companies, to have that kind of government commitment to secure the foreign investment and to see the legal certainty to be in place. So, when I was requested to be the advisor, I am happy… first, because I have a moral obligation to my government, and second, moral obligation to Qatar Mining, because I was the one who also introduced Qatar Mining to Southern Arc. So, I have this commitment, and I am sure that Southern Arc will meet all their, not only promises, but commitment to see this company flourish. Even though I am no longer as Special Envoy to the President to the Middle East, I have another task, given by the President with regard to, also, a matter of Middle East affairs, but still, I am here to help with my modest… experience in my network in the government as well as in the Middle East investors. We have been talking about opportunities for a couple of Middle East investors looking at Qatar Mining participating in this Company. There is a sort of optimism and enthusiasm from other investors to look to Southern Arc before any other company.” (Dr. Alwi Shihab)
I will add that, since that meeting (which was webcast simultaneously, and is archived on the Company website), I have heard from a number of people who commented to me that Dr. Shihab’s answer to this question (spoken quietly and slowly, and clearly with much consideration) was their most important takeaway from the entire session. If you don’t agree, I would encourage you to read his comments once again. There is much there, some explicit, some implicit.
I could talk all day about this shareholder information session and the many nuggets of insight found there, but you’ll be better off if you just watch the video. It says much. Much more than I could say… if you listen carefully. I have only a small number of comments.
Properties, management, technical team, capacity, relationships. These are the five key components of this Company’s strategy.
“The property ducks are not all lined up yet.” (John Proust) This is a generative company. They will continue to look for and at new potential properties because this is the nature of the business. It is through the continuous identification, acquisition, and advancement of undervalued properties that this Company will add to shareholder value.
On the risk of a hostile takeover: “The answer is really quite a simple answer, and that is that, with five phone calls, I could probably put the majority of the Company’s shares together. And so, just to be clear about that… we have three large shareholders that are all about equal in size that are close to ten per cent of the Company. One is the Qatar Mining investment, the recent investment. One is by a large fund based in Chicago called Columbia Wanger, which is the largest fund in the United States, and the third one is me and my family. And so, collectively, we’re about 30% of the Company and then we add the other Directors and Officers of the Company together. Now, we’re at about 35+% of the shares. And again, with a couple of phone calls, we could increase that as well.” (John Proust)
De-risking assets with OPM
“The problem with the porphyry exploration is, even though these things are enormous, they’re very very hard to find and it takes a lot of drilling to put the resources together. That’s why we’ve taken the decision where, in our other projects, that it’s better to spend Newcrest and Vale’s funding to add value to what we could retain if we find a monster porphyry than risk our treasury on that.” (Mike Andrews)
This Company enjoys three levels of government support. Through Dr. Shihab (not to mention the ESDM), the Regency partnership on West Lombok, and the provincial government’s security enforcement, Southern Arc has powerful allies in its corner.
Qatar Mining conducted a review of some 20 Indonesian companies before choosing just one. According to their CEO, Mohammed al Shahwani, they have aspirations to be a producing miner within a decade. These people do NOT care what the share price is now. They invested in the projects, not a fluctuating share price. Their interest is in seeing this Company carry its projects forward to fruition.
Joint Venture properties are moving forward
Taliwang (Newcrest JV) – “final motions with the Regency government – shareholders’ agreement… this week, hopefully.” (Hamish Campbell)
Sabalong (Vale JV) – “We will be drilling next month… We do not require a forestry permit. As of yesterday, the permit sits on the Minister’s desk. ” (Hamish Campbell)
West Lombok is ready to step into one of the most aggressive drilling programs in the country (and perhaps worldwide). “At the moment, we have three rigs on site, two in trucks halfway to site. So we’ll have five rigs. As soon as the area is freed up, we’ll have five rigs drilling by the end of this month. The Company is currently building four more, which will be certainly on their way within the next two to three weeks down to Lombok The drilling company… can build three rigs a month… their priority is supplying rigs to Lombok… at least five rigs turning first week of October and potentially another four or five by the end of October…” (Mike Andrews)
Google Ok Tedi. “Kevin’s question is: How do you reconcile the development of a near surface, maybe smaller, mid-tier gold target with an underlying major world-class porphyry open pit target? Well, firstly, in the context of development of a major porphyry copper open pit, the economics of an overlying epithermal deposit aren’t significant… If there was a couple of billion dollars worth of gold there that could be extracted, that would be a Phase I part of the mine development.” (Mike Andrews) That these high-grade epithermal gold deposits may be ultimately termed of little economic consequence was a novel notion for me.
“The property is target rich.” (Bob Bishop to me on site in 2007) The Company has identified 21 km of mineralized structural breccia (MSB) and currently have mapped an additional 9.6 km of structural breccia (SB), awaiting the conclusion of geochemical testing to verify whatever proportion of this increment will also assume the label, MSB. While past performance is no indication of future success, I learned last week that the 21 km of MSBs displayed a 1:1 ratio from mapping to inclusion in the total. In addition, there are four separate mapping teams now working on the task of identifying more SBs in the space between Pelangan and Mencanggah. I’ve also been advised that this is anticipated to take another 60 days. Do the math, folks. In the first single kilometre of exploration at Pelangan, they’ve already identified three high-grade ore shoots, each representing potential for a small open pit mine. What’s three times 21?… 30?... 40?... 50? The scale of the epithermals on this property, alone, is absolutely monstrous. With prospects for drilling out as much as 7 km of these MSBs for inclusion in the compliant resource estimates (per Mike Andrews), you can be assured that there will be a lot of calculator fingers punching up the extrapolation to the total kilometres in MSBs as will have been mapped out by that time. Forget about the porphyry potential. Well, actually, don’t forget about the porphyry potential. Just think epithermals for now. Stay tuned for more on the porphyry potential.
Let the drills tell the rest of the story. The two Mencanggah holes, interrupted midstream in August, were hitting grades of 3, 4, and 5 gpt a full 100 metres short of the target structure. Holy smackers, Batman! The country rock is mineable. Upon resumption of drilling, these holes will be completed through to the target structure. Can’t wait to see what they find. Do I have a choice?
Access to the property is secured. 60 elite Mobile Brigade personnel, assigned by the provincial police chief, are now on site. Two of these have been assigned to accompany each mapping team. I take it from Mike Andrews words, “As soon as the area has been freed up…” that the balance of personnel will be responsible for gently guiding any remaining illegal miners from the target zone at Waterfall before the company will resume drilling. Let’s hope this process is a smooth one, with no new casualties. Do it right, rather than too quickly, I say.
Any nagging doubts should now be gone. This will go forward. No question of it. Anyone who worries that drilling will not resume shortly and progress strongly toward compliant resource estimates next June was not listening last Thursday. From the conclusion of last Thursday’s presentation, there’s not a great deal to talk about. Everything is lined up to move forward. The drills will tell the rest of the story. It’s time now just to sit back and watch.
Finally, Rhylin Bailie put together a top-notch meeting last week. Presentations were tight, substantive, and all tied together well for attendees and online participants to fully catch the story. There was no time wasted here. She impresses me as professional, capable, energetic, and very approachable. She has also introduced a Q&A forum on the Company’s website. My encouragement for her is to consider maintaining this forum indefinitely. It bears the potential to save us all an immense amount of time now wasted on the out-of-control Stockhouse BullBoard. Take your questions to Ms. Bailie, rather than asking others who also don’t know the answers. The quality of your understanding of this investment can only improve. I strongly encourage you to contact Rhylin Bailie. Her arrival brings a whole new character to the conversation between Southern Arc and its shareholders, not to mention prospective shareholders. Insofar as grahamanalytics has, in some small way, filled a need for Southern Arc shareholders, I can say comfortably that this need is now more than answered in the person of Rhylin Bailie.
So… I have no more to say…………………………………………..… for now.
Best regards,
Kevin Graham