Acorns to Mighty Oaks: An undervalued miner?

Colossus (TSX: T.CSI, Stock Forum) listed on the TSX in February 2008 at $1.25 and currently trades at about $2.60, down from a peak of $3.90, three months ago.

The prospect

Although the company has three projects on the go in Brazil, the flagship project is Serra Pelada, the site of a modern day gold rush from 1980–1986, where 70,000 garimperos (itinerant miners) toiled daily recovering gold, platinum, and palladium from the site. Over two million ounces of gold were removed, and unknown amounts of platinum and palladium, before the open pit mine site succumbed to flooding. The company is earning a 75% interest, with the remaining 25% interest held by a miner’s cooperative called Coomigasp. The project offers high-grade gold, platinum, and palladium with high recovery rates, simple processing, and low mining costs.Recent drill results include 46.72 meters at 24.11g/t gold, 9.04g/t platinum, and 11.57g/t palladium. Drilling is ongoing and the company expects to have a 43-101 compliant resource within a year and a scoping study by the end of 2009 with production starting in 2010. Given the low capex needed to start production, the company may forego pre-feasibility and feasibility studies to expedite production. As this mine develops, so will two of their other properties in Brazil, which should give the company long-term precious metals production.

Undervalued?

With a burn rate of $1 million a month and $15 million on hand, as well as options and warrants that should provide another $25 million, the company should have no need to go to market for financing anytime soon. Insider ownership is 22%, so they are motivated for success as quickly as possible. Expectations are that the 43-101 would provide a resource of at least two million ounces of gold and significant amounts of platinum and palladium – enough to make the gold free. Based on the expected gold alone, at $800 an ounce, the opportunity exists for over $1.6 billion in gold revenues, aside from the platinum and palladium. With 66 million shares on a fully diluted basis, this revenue prospect suggests that the stock has tremendous upside over the next few years. Buy, hold, and prosper.

Acorns to Mighty Oaks – You be the judge.

ABOUT THE AUTHOR

Charles Hodgkinson

Charles Hodgkinson is President of Hodgkinson Ventures Inc., a private Venture Capital Investing company with over 30 years investing and media experience, and can be reached at www.acornstomightyoaks.com.

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