Research Report: International PBX Ventures 

Monday, March 14, 2005. 

World commodity prices for base metals have surged during the last year or so, primarily driven by increasing demand from China, and there are indications that the multi-year highs for molybdenum and copper, along with gold and silver, are not only sustainable, but have yet to peak.  With limited new supplies forecast to enter the market before 2008, a window of opportunity exists for junior mining companies that have the potential to develop mineral deposits of these metals and advance to production.  International PBX Ventures is a junior exploration company focused on discovery of new precious and base metals deposits in Chile.  The foresight of the management team enabled the company to acquire the rights to several highly prospective properties during the period of low commodity prices that existed at the turn of the century, when other mining companies were divesting assets and curtailing exploration activity.  This has positioned shareholders of International PBX to participate in the commodity bull market with exceptional prospects for success, at a time when a new significant discovery will translate into dramatic share price appreciation.  Despite this attractive set-up, the company is currently valued at a market capitalization more befitting of a grass-roots explorer.  I believe this company is undervalued relative to its potential for success, and provides an opportunity for investors to achieve returns that will outperform the market.  I own shares of International PBX Ventures. – Mike Kachanovsky  

Overview  

The mining sector accounts for a large percentage of the economic activity in Chile, and the mountainous country, confined to a narrow belt down the western coast of South America, has been the center for the discovery of many of the worlds largest and richest mineral deposits.  The combination of this mineral wealth, a stable domestic government, and mining laws that support and encourage exploration and development, make Chile one of the highest rated countries in the world for investment in the mining sector.  International PBX Ventures was established in 1995 to explore some of the most prospective regions of the country in search of new discoveries.  Over 34% of the world copper production comes from Chilean mines.   

Office address:  209 – 475 Howe Street, Vancouver, BC, V6C 2B3

Telephone:  604-681-7748

Investor Relations:  1-877-626-2121  

Exchange listing symbol (TSX-V):  PBX  

Website address:    http://www.internationalpbx.com  

Share structure:             Issued:                          32,475,606 

                                    Fully diluted:                  35,525,606  

Market capitalization:     Basic -  $27 Million  

International PBX Ventures is run by a strong management team, led by seasoned geologists.  Terry Walker, Director and President, has been a resident of Chile for ten years, and is considered by many to be one of the most respected geologists in the country.  Mr. Walker has been involved in mineral exploration in Chile since the 1970s.  By his own estimation, he reviews ten or more potential properties for every one that he selects as an exploration candidate.  Terry is responsible for assembling the high quality property interests controlled by the company.  Dr. Gary Medford serves as Chairman of the Board of Directors, and worked with Cominco Ltd. (now TeckCominco) for many years before joining PBX in 1996.  The knowledge and local contacts that have been acquired from the years of working in the country have directly contributed to the assembly of the property interests held by PBX.  Despite forming the company at the beginning of a severe bear market for junior resource companies, during a prolonged slump in the commodity markets for many metals, the management of PBX were able to conserve financial resources to allow the company to survive while many other junior exploration companies became insolvent and were delisted.  The bear market conditions caused some of the best properties to be abandoned as exploration activity nearly ceased, and this created the opportunity for the acquisition of many of company’s top property holdings to be completed cheaply and under favourable terms.  It is the vision of management to be acquiring properties while others were scaling back their efforts that has created the opportunity for investors to benefit now that the resource market has once again jolted back into high gear.  

Projects  

PBX has secured the rights to a suite of ten properties (8 by staking and 2 by option agreements), all located in Chile, with the ability to earn a 100% interest in each of them.  Characterized by easy access to transportation infrastructure, power, and water, the economic potential of the properties is further enhanced by the near surface mineralization identified through surface sampling, and the ability to secure permitting in a pro-mining jurisdiction.  While many of the properties offer the potential to host a large mineral deposit, four can be expected to rapidly advance to the development stage, and several of the others would be considered ‘flagship projects’ in the arsenal of most other junior explorers.  

The Copaquire Property is arguably the most important land package affecting the near-term performance for the company.  It is believed the Copaquire Property could host at least two large deposits containing molybdenum and copper.  A drilling program commenced in February 2005, with the objective to confirm previous drill core data completed in the 1977 by another company, and bring the data into compliance with NI 43-101 reporting standards.  They will also test new targets on the property, and drill to greater depths than previous efforts.  The project offers the potential to vault PBX into elite company in the junior resource sector.  Contained within the limits of a zone known to extend 750 meters wide, 1000 meters in length, and up to 700 meters in depth, a potential resource block could be defined of up to 1.55 billion tons.  Past drilling efforts have yielded assay results averaging 0.1 – 0.2% molybdenum sulphide, and 0.3 – 0.6% copper.   If the company were able to successfully prove up a resource of similar grades on their property, the asset value of this one discovery would amount to several hundred times the current market capitalization for PBX.  A second discovery zone occurs further north from the original discovery, along the axis of a major fault line that bisects the property.  The similar geological structure observed at this second occurrence has fueled speculation that it is a continuation of the same ore body that has been offset to the north through intense tectonic activity.  If so, then the potential resource that the property may ultimately yield is even more impressive.  It should be noted that the property lies in an area of moderate topography, at the edge of the access road to the Quebrada Blanco Copper Mine, which affords year-round access.  Mineralization on the property extends from the surface, suggesting a zero strip ratio for development, a very appealing consideration that will impact favourably in an economic study.  Copaquire is located just 10 km south of two major producing copper mines:  the Collahuasi Copper Mine to the north, and the Quebrada Blanco Mine to the east.  Once the exploration work has defined a deposit at Copaquire, PBX plans to vend that project to a larger mining company and use the proceeds towards development of other property holdings.  With so many large operations active in proximity, there should be no shortage of suitors interested in acquiring Copaquire.  

Another promising project is in the planning stages at the Tabaco Property, located in the central part of the country.  The property hosts several highly oxidized zones extending from the surface to depths of 75 meters, bearing soluble copper grades from 1.0 – 1.6%, along with significant gold and silver values.  A sulphide zone extends to an unknown depth below.  Testing results completed in 1990 suggest that the ore yields very good recovery rates using standard low-cost dilute sulphuric acid leaching methods.  The property is estimated to contain a net resource of about 15-20 million tons in several high-grade zones grading an average of 1% soluble copper.  The economics for such a large resource, located near surface with rich grades and high recovery rates, suggest that PBX could put this property into production as an open pit mine, to generate strong cash flows with a low initial capital expenditure requirement.  The company plans to complete further drilling in 2005, to further define and expand the resource potential of the various zones they have encountered to date.  

Tierro De Oro Property is a large package of continuous claims located near the Pan American Highway, in the north-central region of the country.  This is another of the holdings that was acquired by Terry Walker through direct staking.  It is located in an area of historic mining activity that is estimated to have produced several hundred thousand ounces of gold from small-scale projects, and is proximal to the large copper and gold producing La Candelaria Mine, operated by Phelps Dodge.  Extensive surface mapping, sampling, and trenching efforts completed on the property have identified to date twenty at-surface oxidized gold zones with assays ranging from 1- 2 grams per ton over 50 – 150 metre widths.  The widespread nature of the mineralized zones suggests the development potential for a series of bulk tonnage open pit deposits amenable to low cost cyanide heap leaching.  

A fourth project on the front burner for advancement is the Sierra Pintada Project, another large package of continuous exploration claims in the Chilean Coastal Belt.  The property encompasses 15 kilometers of the Atacama fault zone, a structural trend extending for hundreds of kilometers, and hosting several large copper-gold mines. Numerous historic mine workings have been identified on the property, dating back to the 1850’s, where the vein structures outcropped at surface.  Past mining activity targeted only the highest grading zones of the veins, and ranged from shallow trenching and open pits, to shafts and adits excavated to depths of 50 meters.  The vein systems have been mapped to extend for intervals of several kilometers, ranging up to 150 meters wide.   Based on a program of chip sampling from the exposed workings, and extensive soil sampling, several high-grade copper-gold zones have been defined.  Estimates based on historic mining from the area suggest that the grades could run as high as 5% copper and 10-15 grams per ton gold.  A drill program is planned to follow up on these targets, and to test for the potential of new high-grade zones that may lie below a layer of shallow overburden.  It is believed that the property could host high-grade deposits with open pit tonnage potential.

Outlook  

Exploration prospects characterized by the term “blue sky potential” are fairly common among the junior resource sector.  Only infrequently does one come across a company described as such that has so many of the critical ingredients for success already in place, and with a low market capitalization more befitting of a grass-roots exploration outfit.  To have control of several properties with high potential for success increases the odds that at least one project will be advanced to become a producing mine. It is the full package of attributes that makes PBX a unique opportunity for investors.  

Consider that Chile was recently the highest ranked country in the world for overall investment attractiveness.  The country is the home of 6 of the top 10 largest copper mines in the world, and mining development thrives in the environment of easy permitting, low rates of taxation, stable government, and access to inexpensive hydroelectric power and labour.  Consider that PBX maintains a 100% interest in all of their properties.  Consider the favourable economic parameters for development of the significant near surface resources already defined on many of the properties, and the potential for additional discoveries with further exploration.  Consider the strong share structure of less than 36 million shares fully diluted, providing shareholders with leverage to the increase in asset value that accrues with the development of a major deposit.  And lastly, consider the management team in place, with the strategy to unlock the value of the various properties through diligent exploration and a disciplined financial approach.  

There are no guarantees in the mining business.  Even the most promising projects can fail to advance through the various levels and surpass all of the obstacles in the way of successful development.  However, the largest and most successful mines in the world each began as a risky exploration effort on a property that had yielded encouraging early results.  For investors that seek the rewards that can be achieved ‘elephant hunting’ for large new resource discoveries, International PBX Ventures provides a lower risk opportunity to participate in the sector and the current share value is bargain priced when one considers all the parameters that make the company so attractive.

Disclaimer:  I have made my research and opinions available to the public as a resource to provide investors and the public with basic information.  My comments and opinions should not be interpreted as a recommendation or investment advice, which I am not qualified to provide.   While I have made every effort to maintain accuracy in the information I provide, it is possible that there are some errors or omissions in my coverage and the accuracy cannot be guaranteed.  It remains the responsibility of each individual investor to confirm if the subject of my analysis is appropriate for their investment objectives, and to conduct their own research and due diligence, and retain the services of a qualified advisor on to provide this service on their behalf.  I accept no responsibility for the performance of the companies that I feature in my coverage.  Junior mining and exploration companies are a risky market sector and investment in these companies can result in loss of capital.  Past performance is no guarantee of future success.  From time to time I may purchase stocks in the companies I feature in my reports, and I may sell some or all of my holdings.  I will disclose personal ownership in those companies that I refer to at the time of my first coverage, or after follow up reports.  I do not accept compensation from companies as payment to provide positive coverage or opinions.