I have deliberately highlighted a section of this informative article. It makes a lot of sense and it is well worth taking it down for future reference.

When commodity prices are tanking, no one wants to know about mines, grades or new discoveries.

Attention is on sliding share prices, falling prices for the commodity themselves, so rarely do investors concentrate on the underlying growth or ideas behind a company’s decision to do something.

The only time heads pop up and look around when there’s some corporate activity: the chance to exit an investment because someone else has popped along with what seems to be a great offer in a falling market.

That’s the greater herd theory at work: value can only be found in what the mob sees as a good idea or investment.

And when times are tough and investors are scarce, interesting and intriguing news from the mining sector can slip past, almost unnoticed. (How true this is.)

In the past week or so we saw a couple of examples of this with Kagara Ltd revealing a very rich nickel strike in Western Australia, to go with mining plans for a big deposit it has outlined elsewhere in WA and Western Areas also revealing an upgrade to its Spotted Quoll prospect, which is in the same area (along the same strike zone actually) near Forrestania in Western Australia.

Kagara last Wednesday had its shares suspended pending an announcement about the quality of the strike at its romantically named Lounge Lizard prospect in WA.

That was done and the shares remained off the boards until Friday when it revealed that the strike was a very attractive grade of nickel (two years ago the shares would have gone mad).

Kagara, which is a zinc and copper producer said it had found an intersection of “massive and semi-massive” nickel sulphides at the Lounge Lizard deposit in West Australia.

“Kagara Ltd is pleased to announce a record intersection of massive and semi massive nickel sulphides in hole LFPD18W2W1 at the Lounge Lizard deposit in West Australia. The intersection is comprised of three zones of massive sulphide with an aggregate drilled width of 33.46 metres within a 76.50 metre section.

“The intersection lies approximately 150 metres up dip of the previously announced indicated resource of 5.7 million tonnes at 1.08 % nickel which includes an indicated high grade resource of 263,000 tonnes at 6.42% nickel

“To Kagara’s knowledge this intersection is the best in terms of contained nickel drilled, either historically or in recent times, in the Forrestania region and will result in a significant increase in the Lounge Lizard resource,” it said.

But Kagara shares have been weak and are down sharply in the past week. They finished at $2.50 yesterday, down from $3.15 a week ago on Tuesday.

They hit a 52 week low of $2.39 this week, breaching the previous low of $2.63. That’s a fall of around 19% in a week.

The sharp fall in commodity prices has been the driver as no one wants to know anything about new metal discoveries. Copper, nickel, lead and zinc remain under pressure, and so does the Kagara share price

The Kagara strike is north in the same area of Western Area’s Spotted Quoll nickel discoveries, which that company reported on earlier this month.

It too has a very significant nickel discovery, but the market doesn’t want to know.

Shareholders will be hoping for more at the AGM in Perth later today (Friday)

The shares closed at $8.60, down 98 in the past two days. Investors are treating it like all other mining companies. No talk of a ‘boom’ here these days.

Here’s part of what Western Areas said last week.

“The Board of Western Areas is pleased to announce a 118% increase in the high grade mineral resource at Spotted Quoll.

“The revised mineral resource estimate at Spotted Quoll now comprises a total 1,045,900 tonnes at an average grade of 7.2% nickel for 75,140 tonnes contained nickel to only 300 metre vertical depth. “The majority of the mineral resource (88%) is in the high confidence Indicated Mineral Resource category.

“This excellent result confirms the potential for a major underground mine below the proposed open pit. Western Areas is already considering early development of an underground mine which could produce ore concurrently with the latter stages of the open pit.

“In this event, production could significantly exceed the target 8,000 tpa nickel from Spotted Quoll. A mining proposal for the Spotted Quoll open pit has been lodged and, assuming this is approved by the end of 2008, ore production is expected to commence in the Sept Q 2009.

“The revised mineral resource rates Spotted Quoll as one of the world’s highest grade and most continuous nickel deposits, less than 12 months since its discovery in October 2007.

“Importantly, Spotted Quoll remains open at depth and open along strike. Further mineral resource upgrades are likely as drilling continues between 300m and 600m vertical depth.”

A map on page two of this announcement on Friday from Kagara shows the proximity of the two companies’ big strikes.

This was the second bit of good news from Kagara in recent weeks.

On August 22 it revealed more details about the deposit it was working on at Admiralty Bay with discussion about a possible mine. The shares rose after that, but that was very much different to the reaction to Friday’s announcement.

“Kagara is pleased to announce an initial resource estimate for the Admiral Bay deposit containing an Inferred resource of 72 million tonnes at a grade of 3.1% zinc, 2.9% lead, 18 grams per tonne silver and 11% barium reported at a nominal 2% zinc equivalent cutoff.

“This is a subset of a larger Inferred resource containing 97 million tonnes at a grade of 2.4% zinc (2.3 million tonnes of zinc), 2.9% lead (2.8 million tonnes of lead), 16 grams per tonne silver (48 million ounces of silver) and 16% barium also reported at a nominal 2% zinc equivalent cutoff.

“The model has been restricted to a 2.1 kilometre section of an 18 kilometre strike length of known mineralisation and the resource remains open to the east and west along strike.

“$35 million has been spent over the past 18 months at Admiral Bay and confirmed Admiral Bay as a deposit of world significance.

The company said the resource remains open to the west where the closest drill hole is located 2 kilometres along strike and which encountered a 13 metre intersection grading 4.3% zinc, 3.1% lead, 29 g/t silver and 9% barium and also encountered 25 metres grading 4.5% zinc, 0.8% lead, 23 g/t silver and 3% barium. Intersections of up to 20 metres at 8.3% zinc, 4.9% lead, 36 g/t silver and 21 barium from within the resource, have demonstrated the potential for higher grade zones within the overall resource.

“Scoping studies using the resource grades and contemplating a 10 million tonne per year underground operation have shown that the operation has the potential to produce 300,000 tonnes of zinc, 250,000 tonnes of lead and 4.5 million ounces of silver annually.

“Metallurgical test work has shown that coarse grained very high quality lead and zinc concentrates will be produced at recoveries in excess of 95% into very high quality concentrates.

“The cost of production is expected to be in the lowest quartile of cash costs worldwide.

“Metallurgical test work is continuing on the recoverability of barite to a saleable product and it is expected that a proportion of the 2 million tonnes of barite processed annually will be recovered which will further reduce the cash cost of production.

“A number of development options are currently being considered for taking the project forward.

“Drilling over the past 12 months has shown that defining a reserve from surface drilling is currently cost prohibitive and an exploration shaft with 2.5 kilometres of lateral development will be required to bring the project to a bankable status. At present, a diamond drilling program to obtain geotechnical information in preparation for the sinking of a shaft is nearing completion.”

So Admiralty Bay has a lot of potential, but there are higher costs than first thought in getting to them and getting them out.

But as attractive as they are, the market has gone right off resources and mining stocks in particular. It’s an old story for miners about the fickleness of the herd.

This Information is provided to you by the Australasian Investment Review (AIR).
Subscriptions are free at www.aireview.com.au

AIR reports about financial markets and investment products in the widest sense possible. The AIR website and all its contents is prepared for general information only, and as such, the specific needs, investment objectives or financial situation of any particular user have not been taken into consideration. Individuals should therefore talk with their financial planner or advisor before making any investment decision.

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