This scenario strategically situates the Company (www.mbmiresources.com) in an ideal geographic location to supply high-grade nickel material to refineries in Southeast Asia. And with a burgeoning global demand for nickel beginning to outstrip supply, the timing could not be more opportune for MBMI.

Indeed, the near-term realization of the Company’s mandate to launch a ‘direct shipping’ mining operation also offers the prospect of exponential revenue growth over the next few years.

This is underscored by the fact that MBMI’s extensive jointly-held land holdings now give this ambitious up-and-comer control over the Philippines’ largest portfolio of nickel properties. And this is particularly significant in that this emerging mining nation is home to vast swathes of virgin hunting grounds for one of its main mineral assets, namely nickel. 

Let’s look at the various compelling dynamics that promise to make MBMI a near-term success story in a politically stable, democratic country that has recently proclaimed its commitment to the aggressive development of its mining industry.

Robust Project Economics and Large, Mineral-Rich Land Holdings Make for a Winning Combination

With in excess of 22,000 hectares of geologically fertile land holdings, MBMI has literally only just scratched the surface in terms of outlining its various properties’ prolific potential. Indeed, most of its mineral claims remain largely unexplored. They entail a total of eight nickel projects.

 

MBMI is in the process of earning-in on options to own all four of its Palawan Island properties outright. The Company stands to earn a maximum 92% interest in four additional projects encompassing 10,000 hectares, and known as the Samar Group of properties. (An industry standard 2.5% net revenue return is also applicable on all the properties that become producers).

All these land holdings are amenable to extremely low-cost open pit mining extraction (much like a quarry operation). Moreover, the absence of any significant overburden means that mineralization is typically accessible from the properties’ surface. This all bodes well for the advent of a logistically simple, yet very lucrative mining operation.

Furthermore, most of MBMI’s various mineral claims are hosted by a type of rock that has been metamorphosized by millennia of heavy rain falls into a dense yet yielding material called saprolite. Due to the softness of this oxidized blanket, mining of saprolite rock requires no drilling or, blasting. The resulting very low strip ratio (amount of waste rock compared to ore) makes for an ideally inexpensive mining operation.

 

MBMI intends to initially directly ship the nickel laterite material from these properties to the processing facilities of nickel-hungry Southeast Asian industrialized countries. In turn, this will provide end users with a steady supply of premium-grade nickel laterite material in an era when high-grade inventories are becoming increasingly scarce. (By way of explanation, the term laterite is used to describe nickel that is found containing saprolite, as well as another clay- type of rock known as limonite).

 

Open Pit Nickel Mining on Track for Q2 of 2006

The first of MBMI’s jointly-owned properties are scheduled to see the commencement of production by mid year at a scant projected capital cost of approximately U.S. $2 million each. We’re referring to the virtually adjoining Bethlehem and Alpha Group of properties in which the nickel material will initially be very cost-efficiently excavated by way of a backhoe and truck operation.

 

All of this can be achieved in an environmentally-friendly manner, making for an uncomplicated mine permitting process. The nickel material will then be transported by barges to container ships. In turn, this material will be shipped to select refineries in either Japan, South Korea or China.

 

The Company believes that about 2.5 million tonnes of higher-grade saprolite-hosted nickel material (in the range of 1.5%-2.3%) can be recovered from each of the two properties. Likewise for the (two) Rio Tuba properties, which are also located on Palawan Island, about 40 kilometres further south.

 

Drilling Consistently Intersects Near Surface High Grade Nickel

Most of the slightly lower-grade nickel at the Bethlehem Property (in the 1.0%-1.5% range) is situated in the upper layer of limonite rock, while the high grade 1.7%-2.3% nickel is typically found 5 to 10 metres deeper in the saprolite rock.

 

In fact, one particular high grade zone measuring approximately 500 by 700 metres (35 hectares) averages 4-5 metres in thickness with drill holes returning nickel assays of up to 3.08%. Moreover, no less than 142 holes yielded intercepts with grades in excess of 2% nickel.

 

The best hole assayed nickel over 18 meters at 2.63% nickel (hole-WX45). The thickness of mineralized intervals using a 1.5% nickel cut-off ranges up to 19 meters. All told, the majority of the 500-plus holes assayed to date have received contained mineralized intercepts with grades greater than 1.5% nickel.

 

SmallCapMedia regards these compelling numbers as strong indicators that the Bethlehem Property has the right ingredients to make for a lucrative mining operation with a fast payback on invested capital. Similarly, this scenario also offers the prospect of impressive near-term revenues.

 

By comparison, a Philippine company called the Platinum Group is successfully mining nickel from its “Toronto” Property – which is surrounded by MBMI’s Alpha Property Claim area. This mine site only has a surface area of four hectares, representing a tiny fraction of MBMI’s adjacent land package.

Similarly, MBMI plans to later develop in much the same manner its most recently acquired jointly-held Samar Group of properties. Located in the southern region of Samar Province, these four project areas collectively comprise an expansive 10,000 hectares in size.

 

The Company’s financial model calls for the production of approximately 250,000 tons of nickel material per year from each of the core properties, commencing with the Bethlehem and Alpha properties. A key issue here is that there is a minimal environmental impact for such small-scale mining, as well as the preclusion of significant infrastructure.

 

Of equal importance, such small scale, quarry-like mining operations do not require capital intensive and extremely time-consuming feasibility studies (a comprehensive blueprint for a mine).  

 

(Readers, please note that none of MBMI’s resource estimates are yet compliant with National Policy 43-101 guidelines – a federal-government recognized standard of a ‘measured resource.’ However, the Company is taking steps to update all of its resource calculations while also ensuring that they abide by National Policy 43-101 standards).

The Company’s objective is two-fold. First, it aims to outline the zones with the highest concentrations of high-grade nickel. Drill rigs have been busy punching 15-metre holes into the soft host rock with a focus on areas where historic drilling and test pitting have outlined some of the richest and most prospective targets zones (with grades running greater than 3% nickel).

Second, the program’s ultimate objective will be to validate the commercial viability of a direct shipping mining operation from this property with a view to commencing production by mid year.

MBMI’s Other Regional Properties Offer Comparable Promise

The Company’s two remaining projects on Palawan Island involve the adjoining Rio Tuba properties. They are also contiguous to (adjoining) the Coral Bay Nickel Mine Facility which is operated by a consortium of Japanese nickel producers, including Sumitomo Metal Mining Co., Pacific Metals Co., and Mitsui Ltd. & Co.

 

This group has been operating a successful direct shipping ore facility for approximately 25 years. MBMI believes the location of the Rio Tuba properties presents an excellent opportunity for a cooperative resource development. The Company is therefore in discussions with the consortium about such a synergistic business relationship.

 

In the interim, a wide-spaced drill exploration program is being prepared for the Rio Tuba properties in order to define primary high-grade nickel target zones consisting of 2%-plus nickel.

     Global Demand/Supply Imbalance Bodes Well for Up-trending Nickel Prices
Now might be an appropriate juncture to discuss the appeal of nickel to investors, particularly in light of an investment climate in which most resource sector speculators are fixated on gold.

     The reality is that, unlike gold, nickel prices are driven by supply/demand economics. And in an era in which most industrialized nations are enjoying a sustained economic recovery, the demand for nickel is already beginning to outstrip supply.

This imbalance is exacerbated by the fact that nickel is found in large quantities in only a few places around the world. In fact, most nickel deposits are concentrated in Canada, Australia, Indonesia, New Caledonia, Russia, and Cuba. And some of these nations are experiencing dwindling production due to the exhaustion of existing inventories. This makes the need to discover and develop new supplies all the more pressing.

 

Nickel is an indispensable industrial metal with no viable substitutes, mainly due to its use as a protective coating for other metals. Therefore, its status as the most sought after anti-corrosive metal is fueling a huge spike in demand from Asia’s booming stainless steel sector, particularly in China.

 

In turn, this is precipitating a global shortage. Then there is also competing demand for nickel as an important component of many types of batteries. In fact, the advent of a worldwide surge in the demand for cellular phones is further heightening the supply/demand imbalance.  

 

This reality is not lost on the Philippines’ pro-business government which has recently made a public commitment to develop the country’s major mineral assets. This mandate is expected to go a long way towards paying down much of the Philippines’ U.S. $56 billion in foreign debt.

 

In fact, the nation’s total known mineral assets are worth an estimated U.S. $90 billion, according to the President of the Philippines Chamber of Mines, Benjamin Romualdez. Already, with little historic mineral development, the Philippines ranks as the world’s fifth largest producer of nickel.

 

“There are certainly enough minerals to pay our foreign debt,” Romualdez said at a Philippines conference earlier this year entitled: ‘Open for Business: Mining and Minerals – the New Drivers of Growth.’ This is where he acknowledged that the systematic exploration of the nation’s geologically fertile mineral territories could lead to enough significant discoveries to increase its mineral wealth almost ten-fold to U.S. $840 billion. This figure is equivalent to the Philippines’ gross national product.

 

Investment Summary

On a corporate note, MBMI is presided over by Michael Mason, who holds a B.S. in Metallurgical Engineering, as well as an M.B.A. An accomplished businessman and veteran of the mining business, he benefits from 35 years experience in the marketing of precious and base metals. He is also a specialist in risk management and international trading.

 

Among his past and present credits, he has consulted to such internationally renowned major mining companies as BHP, Phelps Dodge, Western Mining and Apex Silver, to name a few. He is also a managing partner of a U.S.-based resource exploration and development consulting company, Mineral Services, LLC.

From a technical perspective, MBMI has an attractive share structure that lends itself to reasonable liquidity with about 44 million shares outstanding (approximately 48 million fully diluted). However, with many shares controlled by insiders, the stock is still quite tightly held. Such a situation, matched with positive news flow, typically acts as a catalyst to higher share price valuations.

In this regard, the advent of near-term nickel production promises to build considerable intrinsic value into the Company’s share price, while also fueling a long-term upwards trajectory for the stock. Also, there exists considerable ‘blue sky’ potential for the discovery and development of significantly more high-grade nickel resources among MBMI’s eight largely-untapped Philippines properties.

 

Such a reality provides this Company with one of the best risk/reward ratios that SmallCapMedia has ever seen. This added value driver further underscores the Company’s prospects for much higher share price multiples. Accordingly, we are confident that this intrepid mining is primed for a banner year in 2006.