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Sprott Physical Silver Trust (NYSE: PSLV)
Sprott Physical Silver Trust Completes IPO – November 3rd
Just like the Sprott Physical Gold Trust(NYSE: PHYS), the Sprott Silver Trust (which actually began trading onOctober 29th) is currently trading at premium to its net asset value(NAV). As of the close on November 3rd, this premium was calculated tobe 7.42 percent. The obvious idea here would be to short PSLV and golong SLV hoping that the premium shrinks back towards zero. But thecurrent premium of 7.42% is by no means a guaranteed top, which meanssuch a trade would carry a fair amount of risk. To provide someadditional context as to how high this premium could potentially go, thefollowing chart illustrates the NAV premium distribution for Sprott’sPhysical Gold Trust since its inception on February 25, 2010:
The good news is that the PHYS premiumhas proven to be quite volatile, meaning that investors couldpotentially execute the above trade successfully multiple times everyyear. And if a similar pattern emerges with PSLV, then the opportunitydoubles. [Zurbo]
Romarco Minerals (TSX-V: R; Pink Sheets: RTRAF)
Romarco Announces in-Shell Resource Estimate – November 2, 2010
One would think with all the long, highgrade intercepts being reported at Romarco’s Haile Gold Mine that theresource would have turned into something larger and higher grade thanroughly 4 million ounces at about 1.7 grams per tonne. Although 4million ounces is quite formidable even if the deposit weren’t stillgrowing, we’re simply left asking ourselves how much upside couldpossibly remain for a company already trading for about $1.3 billion on afully diluted basis.
With the open pit feasibility study notexpected to be completed until sometime in Q1 2011 we still have a fewmore months of waiting before arriving at a more quantitative answer.For now our guess is not too much, but boy oh boy what a beautifulchart. [Zurbo]
Cream Minerals (TSX-V: CMA; OTCBB: CRMXE)
Endeavour Silver (AMEX: EXK; TSX: EDR)
Cream Minerals Makes No Recommendation to Shareholders as to Whether to Accept or Reject the Endeavour Offer – November 1, 2010
In our opinion Endeavour’s offer issuperior to the offer being made by Minco Silver (TSX: MSV; Pink Sheets:MISVF). Since Endeavour’s offer expires on November 9th, we’ll knowsoon enough what shareholders decide. All we know for now is that if weowned shares we’d be tendering them to the silver producer in Mexico,not the silver developer in China. [Zurbo]
Seabridge Gold (AMEX: SA; TSX: SEA)
Iron Cap Emerges as 4th Major Deposit at Seabridge Gold’s KSM Project – November 3, 2010
It certainly isn’t bad news that the newIron Cap zone potentially adds enough material to increase thethroughput rate from 120,000 to 180,000 tonnes per day, but that is onlygoing to further increase the already enormous capital cost of theproject. We’ll have to wait until the new preliminary feasibility studyis released in April 2011 to determine how significant the incrementalcapital cost is compared with production gains in terms of valuation.But the question remains of whether or not there are buyers out therecapable of financing this $3+ billion project, and more than likelycombining it with Silver Standard’s (NASDAQ: SSRI; TSX: SSO) equallycapital intensive Snowfield-Brucejack project. [Zurbo]
Rusoro Mining (TSX-V: RML; Pink Sheets: RMLFF)
Rusoro Receives Final Permits to Commence Offshore Gold Sales and Begin Mining Activities at the 100% Owned Increible 6 Project – November 1, 2010
This isn’t really new news. In fact, we originally discussed the implications for subscribers back in Augustwhen Rusoro was trading about 50% lower. Let’s be frank, Rusoro is anextremely risky investment but it is also extremely undervalued. Afterall you’re looking at a gold producer that has the potential to produceover 500,000 ounces of gold per year within the next 2-3 years and iscurrently trading for about $150 million. There are other outliers inour model besides Rusoro, but on average gold producers typically tradefor at least $200 million per 100,000 ounces of annual goldproduction. Rusoro currently trades at about $25 million per 100,000ounces of its expected gold production 2-3 years from now. That’s ascheap as it gets. [Zurbo]
TNR Gold (TSX-V: TNR; Pink Sheets: TRRXF)
Minera Andes (TSX: MAI; OTCBB: MNEAF)
TNR Gold Corp.: Los Azules Copper Project Court Date Set for Summer 2011 – November 4, 2010
There is probably very little that willhappen with the Los Azules project while TNR Gold’s claim to a 25%back-in right to a portion of the Los Azules project is litigated overthe next year or so. That isn’t necessarily a big deal since neither thepresent valuation of TNR Gold nor Minera Andes relies much if at all onLos Azules. On the other hand, Los Azules could start looking more andmore attractive to mining companies as other large South American copperprojects are developed in the next few years, leaving fewer majorproperties in the pipeline. As mentioned previously, we do consider LosAzules as a likely development prospect, despite its remote, highaltitude location, because the “layout” of the mineralization isfavorable in comparis0n to many other large porphyry copper deposits.Thus, we do expect that Los Azules will command a substantial valuationat some point in the future, making the outcome of the TNR Gold dispute arelevant matter for investors with patience.
With respect to that dispute, MineraAndes appears to have an obvious legal edge based on a literal readingof the option agreement and this will be difficult for TNR Gold toovercome. By no means, however, does Minera Andes have a cakewalk on itshands given that it is unusual (even suspicious) for an optionee‘s back-in right to be for a minority non-operating interest conditioned on performance by the optioner.Since the 36 month condition was a modification of the original letterof understanding, which had an open-ended back-in right, the legal meritof the case could very well come down to determining what if any newvalue was received by TNR Gold in exchange for allowing the 36 monthcondition (which clearly works against TNR Gold’s benefit). As thehearing nears and assuming we think there is some speculative money tobe made, we’ll try to find and read through the agreements to see if TNRGold did indeed appear to receive something in exchange for the loss ofbenefit due to the 36 month restriction. [Silverax]
Here is some additional information from“Sufiy” who closely follows TNR Gold. I think it still comes down tovalue exchanged when the letter of understanding was formalized in anoption agreement, but this supplemental information does appear to beuseful:
TNR Gold vs Minera Andes:
We are checking the new presentations and Los Azules Maps on MineraAndes website – it looks like, according to Rob Mcewen on page 22,stepping out hole with 1.12% Cu over 62.5m and four best holes:
#46 1.08% Cu over 145 m;
#48 1.01% Cu over 216 m;
#49 1.05% Cu over 236 m and
#61 1.04% Cu over 168 m
are all based on the Northern Part of the property, which is under this litigation.
Itis important to remember, that now, according to this NR, alllitigation around Los Azules between TNR Gold, Minera Andes and Xstratais joined in one trial and TNR Gold will seek, according to theStatement of Defence above, not only rectification of the optionagreement to reflect its true intentions – without 36 months condition,but that “production of a feasibility study, whether produced within 36months or some other time, was a condition solely for the benefit ofSolitario (TNR Gold sub – S.), and as such, could be waived”.
Also at stake is Escorpio IV property:
“We did not understand why Minera Andes did not accepted the back inright by TNR Gold and lost opportunity to consolidate the project andsecure a very important Escorpio IV property, where according to MineraAndes mining plan part of mining facilities supposed to be located, butRob McEwen must has his own strategy. With this kind of presentation itwill be not cheap any more to settle out of the court, but it is alwaysbetter then drag such a project in litigation for years to come.”
Bottom line, this situation bearswatching in the months ahead. Of course TNR Gold also has otherprojects, one of which (the Shotgun gold project in Alaska) is thesubject of a recent bit of friendly promotion that could have the shares trading higher for a while. [Silverax]
Vena Resources (TSX: VEM; Pink Sheets: VNARF)
Vena Significantly Increases Uranium Resource Estimate at Macusani – November 2, 2010
This 22 million pound uranium resource combined with the resources already defined by a neighboring company that we recently featured for our subscribers strongly suggests that the Macusani Plateau will eventually be a uranium-producing region. [Zurbo]
Golden Minerals (AMEX: AUMN; TSX: AUM)
Golden Minerals Report Q3 Results – November 3, 2010
Spend and they will come seems to be Golden Minerals’ business philosophy:
For the remainder of 2010 andthrough the end of 2011, pursuant to the Company’s long term businessstrategy, Golden Minerals expects to spend up to approximately $16.5 millionto fund the completion of the initial feasibility work at the El Quevarproject. The Company expects to spend approximately an additional $54 millionbeginning in 2011 to fund the continuation of exploration drilling,underground drifting, metallurgical studies and related technical,engineering and project assessments to further define the resource. TheCompany expects to spend approximately $12.5 million tofund exploration on its portfolio of exploration properties through theend of 2011. Depending on the success of the targeted explorationprogram and generative exploration activities, the Company could spendadditional amounts for early and advanced stage drilling programs on itscurrent or new properties. An estimated $9.0 millionwill be spent through the end of 2011 on general and administrativecosts, working capital and other corporate purposes. [emphasis ours]
That’s over $90 million in plannedexpenditures over the next 15 months. There are few if any juniorexploration companies that can boast a budget that large (only one comes to mind,though the situation is a bit different). While this could lead to afair amount of exploration excitement to support the share price atthese levels, Golden Minerals’ track record of loose spending doesn’texactly give us overwhelming confidence. For additional information seeour previous comment on the company in our Mining News Review: Week of October 4th. [Zurbo]
CIC Resources Inc. (private company)
Paraguay Could Have the World’s Largest Titanium Reserve – November 5, 2010
Until there is more information, oneshould consider this news to be a significant risk to any marginaltitanium development project.
Disclaimer: We own shares in several of the companies mentioned in this analysis (Metal Augmentor subscribers know which ones), but no compensation has been received fromany of the companies mentioned. This is not investment advice; shouldyou seek investment advice we recommend you discuss the company with alicensed investment advisor or broker.