Geovic Mining's Flexibility Preserves Value

By James West
MidasLetter.com
Monday, March 9, 2009

Among the hundreds of companies exhibiting at the Prospectors and Developers Convention (PDAC), finding quality near-term production scenarios in the precious metals sector dominated delegate interest. What captured my interest was a mining company quietly preparing to build one of the world's primary cobalt mines.

Geovic Mining (TSX.: GMC, OTCBB: GVCM), through its 60%-owned subsidiary Geovic Cameroon plc ("GeoCam"), owns a 60% interest in the Nkamouna cobalt-nickel-manganese project in Cameroon, Africa. The project has been advanced to the feasibility stage, and then further refined in a "Feasibility Optimization Study" (FOS) completed in September 2008.

The result is a project that can easily scale in either direction rapidly, targeting to initiate production at a rate of 4,000 tonnes of cobalt, 3,000 tonnes of nickel, and 45,000 tonnes of manganese carbonate per year. With annual consumption of roughly 60,000 tonnes per year, the Nkamouna project promises to become a significant global source of cobalt, a particularly significant amount given that Cameroon is a far more stable country than the DRC, where the majority of incremental cobalt supply is projected to emanate.

Geovic has temporarily delayed construction of the Nkamouna mine due to global economic conditions, but is using the "waiting time" to focus on further improvements to the project's economics through a series of pilot tests aimed at increasing investment returns and reducing processing risks.

With complete production costs weighing in at ~$8 per pound of cobalt (at today's nickel and manganese prices), and cobalt prices relatively stable at US $12 - $15 per pound, the Joint Venture (Geovic, 60%, Cameroonian government and investors, 40%) could immediately realize pre-tax earnings of US$ 48 million, or roughly $0.28 per Geovic share upon production.

With a current cash position of approximately US$65 million and recent share price of CA$0.61, Geovic trades at a 20% discount to its cash position. That despite its advanced project status and large proven/probable reserves, which should increase further due to completion of a 54,900 meter drilling program in 2008 (an updated 43-101 report is targeted for September 2009).

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