For whatever reason spaces disappear when pasting over our Mining News Review from its original source, which makes for slightly more difficult reading below. The only way I know how to solve this is to manually go through the post and create new spaces between words, but given the length of these blog entries this is a time consuming process. If you would like to read the Mining News Review for the Week of September 13that its original source without any spacing problems, please visit: http://www.metalaugmentor.com/eforum/?p=4407.


Orvana Minerals
(TSX: ORV; Pink Sheets: ORVMF)

Copperwood Project Preliminary Economic Assessment - September 13, 2010

This is another case of required capital being large in comparison to the net present value of the project.Without Copperwood, Orvana already enjoys a robust base case valuation of almost C$6.00 per share. With Copperwood, our base case valuation rises to C$7.65 per share. So yes, the project does undoubtedly add considerable incremental value to the company if all goes well, but for the time being the main value driver for Orvana will be the successful development of its El Valle gold-copper project in Spain. [Zurbo]

Bayfield Ventures (TSX-V: BYV; Pink Sheets: BYVVF)
Arranges $5 Million Flow-Through Financing at C$1.40 Per Share - September 13, 2010

Initially my thinking was that I don’t like the timing of the financing but this flow-through might place anear-term floor under the shares, and then once they step out the 1 oz.+results to the East or to depth we should see a continuing rise in the share price. [Silverax]

More for subscribers…

Salazar Resources (TSX-V: SRL; Pink Sheets: SRLZF)
Cease Trade Order and Requirement for New Technical Report - September 13, 2010

The company estimates that it will beable to issue an updated resource estimate and technical report on theCuripamba project within “approximately the next 10 days” in an effortto remove the cease trade order. With any luck this will lead to asignificant sell-off once shares resume trading, perhaps giving us theopportunity to establish a position at an attractive price level if weso choose. [Zurbo]

From a comment last Friday:

Today Zurbo and I reviewed a few companies reportingresults earlier this week and the only one that really jumped out fromthe batch as the real deal was Salazar Resources…Bad: They are inEcuador. Good: Just broke out from a well-worn 0.80-1.20 range plus theyappear to have a new highly prospective VMS find on their hands withexpansion potential. Of course VMS tend to be clustered so where thereis one there is typically more. Haven’t checked their land position butwould be nice to see if it is big on all sides around the discovery.Also not in the Ecuador jungle so better odds it can be developed andmoreover its $500+ per tonne polymetallic rock can handle whateverroyalty the bureaucrats throw at it. [Silverax]

Continental Precious Minerals (TSX: CZQ)
Preliminary Economic Assessment on the Viken Project - September 13, 2010

The Viken project provides us with anextreme example of capital expenditures being large in comparison to aproject’s net present value, making Orvana’s Copperwood project andSilver Standard’s Snowfield-Brucejack project look like sure things incomparison. With greater than $4 billion in required capitalexpenditures, Viken seems to have a very minute chance of ever beingdeveloped without significantlyhigher uranium and vanadium prices. Even then we’re not sure theproject makes sense considering that by our calculations it would add30-40% to the world’s annual vanadium supply, likely depressing pricesfor the product that the project is so dependent upon. [Zurbo]

Endeavour Financial (TSX: EDV; Pink Sheets: EDVMF)
Sells 43% Interest in Crew Gold for $215 Million in Cash - September 13, 2010

Does not change our recent opinionabout Endeavour Financial but this is still good news for junior goldproducers with quality assets and willing to sell. Following thistransaction Endeavour will have approximately $180 million in cash andaccess to a $100 million credit facility for which to continue pursuingits “gold strategy”. We think Endeavour Financial will be looking forundervalued gold producers with production under 100,000 oz. per year oradvanced gold developers needing $25 million to $100 million withprojects in high-risk jurisdictions. [Zurbo]

More for subscribers…

Tara Gold (OTCBB: TARM) and Tara Minerals (Pink Sheets: TRGD)
Tara Minerals to Acquire Tara Gold in All-Share Offer Valued at $83 Million - September 13, 2010

This transaction makes sense consideringthat Tara Gold owns most of Tara Minerals, is listed on the Pink Sheets,and hasn’t updated its financials since 2007, while Tara Minerals isfully reporting, listed on the slightly more desirable OTCBB, but tradeson dismal volume and huge bid-ask spreads. The transaction, ifsuccessful, should lead to greater liquidity in Tara Minerals whilenegating the need to ever update Tara Gold’s financials. But the deal islooking like a big IF considering that two law firms have already comeout publicly questioning the validity of the transaction: see here and here.Not only does it appear that some major shareholders are unhappy withthe proposed arrangement, but it also hints at a potential informationleak considering how quickly these law firms issued statements. Neitherof these developments speak highly of how the company is currently beingmanaged. The new Tara Minerals might look interesting to us if it had a$10-$20 million market cap, but we’re talking about a company that willbe valued at approximately $100 million operating a project that hasbeen promising imminent robust cash flow for years without anysignificant results to date. Buyer beware. [Zurbo]

International Tower Hill Mines (AMEX: THM; TSX: ITH)
Enhancement Options for Preliminary Economic Assessment - September 13, 2010

With the contemplated “Large Mill”option, our base case valuation has increased from about $17 to over $21 per share. Under this new scenario, average annual gold productionincreases from about 500,000 ounces to 833,000 ounces, which would makeLivengood larger than either Detour Lake or Canadian Malartic — theseare the flagship assets of multi-billion dollar market darlings DetourGold (TSX: DGC; Pink Sheets: OSKFF) and Osisko Mining (TSX: OSK; PinkSheets: DRGDF).

There is no questioning that Livengood is a complex deposit with a relatively large capital cost, but thesepreliminary economic studies indicate that “only” $635 million is required initially, while further expansion of the deposit has thepotential to substantially increase the mine life and project value.Although the market may be shrugging off an aggressive exploration program designed to expand the deposit, if the company is able totranslate an increased resource base into an expanded mine life at the833,000/oz per year rate, a substantial upward revaluation seemsinevitable. Patience (of the 12-18 month variety) should be rewarded onthis one. [Zurbo]

Diamond Fields International ((TSX: DFI; Pink Sheets: DFIFF)
Red Sea Project Update - September 13, 2010

This company is interesting to us giventhe recent “pump and dump” concerning Nautilus Minerals (TSX: NUS) by acertain newsletter publisher. Diamond Fields is engaged primarily intest mining of marine diamond deposits off the west coast of Africa butrecently it also become involved in the Atlantis II poly-metallicproject in the Red Sea off the coast of Saudi Arabia. Nautilus Mineralsrecently doubled in share price as a result of the newsletter promotionyet the company presently has only what amounts to a small resource (2-3years of mining at the contemplated rate) and zero experience withundersea mining. Compared to the several-hundred million dollar marketcap of Nautilus (much of which is admittedly accounted for by its hugecash treasury of US$185 million), Diamond Fields has a market cap aroundC$10 million and is one of a small handful of juniors, if not the onlyone, with actual undersea mining experience. Moreover, the Atlantis IIproject targets a SEDEX environment, which tends to host larger tonnagesthan the VMS targets being pursued by Nautilus. The SEDEX environmentalso generally lends itself to easier mining and processing because itconsists of loose sediments and brines that can be pumped to surface forprocessing whereas the mineralization in VMS environments is often locked up in welded ash structures (”chimneys”) that need to beprocessed on the sea floor before being pumped to the surface orotherwise raised in chunks. In any case, Diamond Fields appears to be aninteresting and cheap speculation on the emerging undersea miningindustry and we will watch developments closely. [Silverax]

Clifton Star Resources (TSX-V: CFO; Pink Sheets: CFMSF) and Osisko Mining (TSX: OSK; Pink Sheets; OSKFF)
Osisko and Clifton Star Intersect 42 Metres Averaging 3.78 g/t Au at Duparquet - September 13, 2010

Another strong set of holes from theDuparquet JV between Clifton Star and Osisko in the Abitibi but we needto keep things in perspective. First, the majority of the holes in the 2010 program are coming back with only modest mineralization. A rule ofthumb I like to use is that the core or main zone of an attractivepotential open pit situation should have a tenor of at least 100gram-meters of gold. “Gram-meters” means you multiply the grams by theintercept length. For example, a 100 meter intercept of 1 gram per tonnegold is 100 gram-meters.  This isn’t a hard and fast rule because otherfactors such as depth also matter (the deeper the intercept, generallythe higher gram-meters needed for open pit and vice versa). Then we mustalso account for true width given that drill holes cannot always beoriented to intersect a structure perpendicularly. Using the above ruleof thumb, our assessment of the 2010 program at Duparquet is that it hasonly been marginally successful and much more work will be required tofollow up on some of the encouraging historical results. It should alsobe noted that Duparquet is likely to require a higher grade and tonnagethreshold in comparison to deposits with more favorable metallurgy.Specifically, the better mineralized zones at Duparquet appear to bemoderately to very refractory with some areas quite high inarsenopyrite, which may require expensive processing and/or tailingsmanagement. Nonetheless, we believe Osisko remains interested in theproject and we expect them to follow up with another major explorationprogram next year. [Silverax]

Caerus Resource Corporation (TSX-V: CA; Pink Sheets: CAEUF)
Exploration Update at El Cafatel Gold Mine, Colombia - September 13, 2010

By themselves these short channel samplesin the adits and tunnels of the El Cafatel Gold Mine are not remarkablealthough the high hit rate of at least 1 gram per tonne (gpt) gold aswell as the almost ubiquitous +0.10 gpt gold do point to bulk tonnagepotential at the project. Unfortunately there are no property mapsshowing sample locations or even much in the way of geologicalobservations to provide any clues about deposit potential. It is thatway as well for the other 3-4 projects the company has recently acquiredor is in the process of acquiring in Colombia. Of particular interestis the Antioquia property due to its close proximity to ContinentalGold’s (TSX: CNL) Buritica project where recent drill results (which weanticipated months ago)were smoking hot. Again, there is very little published informationabout this Antioquia property so we don’t know exactly how close it isto the eye-popping Buritica drill holes but rumor has it that thedistance is about 1 kilometer and on strike. That said, we also can’ttell if Caerus will even be able to complete the acquisition of thisproperty. What we can tell is that the company has a very small marketcap south of C$15 million despite an aggressive acquisition strategyalong with some big hitters and promotional fire power being lined up(Thom “Mr. Colombia” Calandra is touring two of the properties this week).We note Continental Gold IPO’d with a market cap close to C$300 millionand has more than doubled since then. We would view Caerus at thispoint as a “blind” play on Colombia that is arguably cheap enough torepresent a decent bet to leverage the early-stage explorationexcitement that is likely to come. [Silverax]

Kodiak Exploration (TSX: KXL; Pink Sheets: KXLAF)
Kodiak Drilling Intercepts Increased Gold Grades and Widths at Milestone - September 13, 2010

A major round of follow-up definitiondrilling will be required to established the vertical continuity andoverall tenor of the mineralization at Milestone. The best resultsappear to be concentrated at depths about 100-150 meters below surfacealthough some holes have decent intercepts below and above there.Unfortunately, even with a strike length of several kilometers, a“shear” system like this will often not accumulate major tonnage due tothe extent of grade variability. Shear-hosted gold deposits arenotorious for containing “hidden” secondary ore controls and — withoutunderstanding what those might be — the system can be easily mistakenfor something that it is usually not, such as an open-pittable deposit.At this stage the results at Milestone justify a target of 1 millionounces of gold (though not much more) but that will likely require amajor drilling program, perhaps another 50,000 meters. Those prospectsdo not interest us. [Silverax]

VG Gold (TSX: VG; Pink Sheets: VGGCF)
VGGold Expands Mineralization by 150 Meters, Drills 18.8 GPT Gold over8.0 Meters (0.55 oz over 26.2 Feet), Including 89.3 GPT over 1.60 M - September 13, 2010

The company is drilling for an open pitdeposit but the porphyry at Paymaster appears to concentrate gold inirregular slivers and pods of very high grade surrounded by modest-widthenvelopes of lower grade that can apparently extend over largedistances. At this stage of exploration, the lower grade envelopesthemselves do not appear to support either open pit or undergroundpotential. At the adjacent Dome open pit and underground gold mine, goldoccurs primarily in the volcanic and conglomerate rocks that abut theporphyry and the mineralization has good continuity and consistent widthin those host rocks. By contrast, the results being reported by VG Goldat Paymaster appear to indicate the mineralization is comprised ofcomplex shapes — perhaps with secondary structural controls — mostlywithin the porphyry itself or directly adjacent to it. Defining a  largegold resource in this type of structural setting will be quitedifficult and expensive (explaining in part why Goldcorp joint venturedthe project to VG Gold in the first place). The best approach may be toramp into the high grade zones in order to conduct close-up drilling anddrifting for structure. In any case, this doesn’t look like an open pitdeposit to us — most of the potential appears to be in the high gradestructures especially if they prove to have better continuity at depth.[Silverax]

Argentex Mining (TSX-V: ATX; OTCBB: AGXM)
Argentex drills bonanza silver intersection at Pinguino: 6.0 meters of 2,428 g/t silver on Tranquilo Trend - September 13, 2010

Pinguino . . . is it a world-class indiumdeposit? A classic epithermal gold-silver vein district? Or Patagonia’slargest base metal system? Whatever it is, Pinquino has more veins thancan be found on the legs of the average 70 year old waitress, but alasArgentex has had little success demonstrating that any of them carry anappreciable quantity of metals — of any kind. When things get a bitboring and discouraging, it is time to poke a shallow drill hole intothe oxidized, possibly hypogene, top layer of this vein or that. Theresult is almost invariable something ridiculously promising like 6.0meters of 2,428 g/t silver that nonetheless the company never seems tobother following up for some reason. [Silverax]

Kaminak Gold (TSX-V: KAM; Pink Sheets: KMKGF)
Kaminak Drills New Gold Discoveries at Supremo: At Least Five Gold-Bearing Structures are Open Along Trend and at Depth - September 13, 2010

People a lot smarter than us can’t getenough of Kaminak’s Coffee Project so we must be missing something. Allwe can see so far is that the Latte zone is a modest-sized golddiscovery with decent continuity along strike at an average grade (~1.5gram per tonne gold) that might be too low to support a bulk miningoperation at such a remote location. At Supremo the company has found azone of better grades along a small section of the original “T3 trend”but drill cross sections reveal potential problems with verticalcontinuity. It is possible that secondary ore controls exist that crosscut the main trend or intersect it at shallow angles. In any case, wedon’t yet see the makings of the kind of potentially robust gold depositthat got Underworld Resources bought out — at a price, we note, that isless than Kaminak’s current market cap. Readers may also wish tocompare the early results at Coffee to what we believe is a project ofsimilar scale and tenor — Jayden Resources’ (TSX-V: JDN) Silver Coinproject near Stewart, B.C. [Silverax]

Aquila Resources (TSX: AQA; Pink Sheets: AQARF)
New Drilling Program Commences at Back Forty Project and Final Results of 2009/2010 Program Reported - September 15, 2010

We give the Back Fortyproject long odds of ever becoming a mine due to what is likely to bestrong environmental opposition. Best to bear that in mind as drillresults are reported and noise is made about a project developmenttimeline. Frankly we’re surprised Hudbay continues to be involved withthe project, but the required investment for Hudbay to earn a 51%interest was relatively small compared with their nearly $1 billion cashposition, and therefore perhaps probabilistically it could still beconsidered a smart use of funds despite its small chance of success.[Zurbo]

Allied Nevada Gold (AMEX: ANV; TSX: ANV)
Improved Metallurgical Test Results - September 15, 2010

This improved metallurgy combined with the recently updated scoping studyfor a significant expansion at Hycroft continue to improve theproject’s overall economics. The expansion contemplates total productionof over 7 million ounces gold and 300 million ounces silver over 13years at an incremental cost of about $1.1 billion. Updating ourvaluation model for these improved figures we arrive at a base casevaluation target of about $27, not far from the current share price.Considering the current production profile for 2010–about 100,000 ouncesgold and 500,000 ounces silver–there is still a great deal of executionrisk at Hycroft. After all, very few companies aim to increaseproduction by a factor of 10 over the next 3 or so years. [Zurbo]

Rio Alto Mining (TSX-V: RIO; Pink Sheets: RIOAF)
La Arena Reserves Increase to 2.57 Million Oz Au and 1.57 Billion Lbs Cu - September 15, 2010

The expanded resource base along withsome improved economics at La Arena seems to be telling us that wemissed a great opportunity when we had the chance to buy below C
.50earlier this year.

Rio continues to intrigue us, but timeand again we’ve shied away from it since its valuation is so reliantupon the successful development of the copper dominated sulfide portionof the La Arena project which among other things requires much greatercapital expenditure. Assuming the sulfide expansion is funded and movesforward in the 2013-2014 timeframe, we calculate a robust base casevaluation of C$5.35 per share. Without it, our valuation target falls tojust C$2.16. Others whom we respecthave recently jumped aboard, but for now at least we’ll remain put.Perhaps if the sub-$1 prices ever return we’ll be enticed enough to takethe plunge. Until then, best of luck to all the longs. You couldcertainly do a lot worse. [Zurbo]

Getty Copper (TSX-V: GTC; Pink Sheets: GTCDF)
Getty Signs Letter of Intent with Zhejiang Guoguang Group - September 15, 2010

There has been a fair amount of chatter this week among our subscribers concerning resultsfrom Happy Creek Minerals’ (TSX-V: HPY; Pink Sheets: HPYCF) recentlycompleted drill program at the Highland Valley property. This propertyis bounded to the north by Teck’s (NYSE: TCK) Highland Valley Copperopen pit mining operation, and in response to speculation about Teckpotentially being an eager buyer, Silverax wrote the following:

I’m not particularlyimpressed by what Happy Creek has to offer but perhaps someone caneducate me. Of course I am often wrong but the grades appear too low.Without the discovery of a higher grade zone with substantial tonnage atbest I would consider this a play on much higher copper prices. I amnot one to think we are going to have much higher copper prices in thenext few years. The best thing the company has going for it is the under$10 million market cap but that hardly makes it unique…Continues for subscribers

Interestingly, no one mentioned GettyCopper which also happens to own a copper project adjacent to Teck’sHighland Valley Copper mining operation. And unlike Happy Creek, Gettyhas already defined a resource, completed a prefeasibility study, andhave now lined up a joint venture partner to help advance the projecttowards an eventual production decision. We can’t get too excited atthis point considering the weak economics put forth in theprefeasibility study and the long timelines involved, but if the depositcan be significantly expanded it may begin to look more interesting.The joint venture agreement contemplates spending a minimum of $3million over the next 24 months to test the expansion potential of theknown deposit, so one the keep an eye on over the next few years.[Zurbo]

Let’s add that Happy Creek has some otherprospective projects in the Cariboo region of British Columbia but noneof them jump out at me as ripe for discovery. [Silverax]

Golden Minerals (TSX: AUM; AMEX: AUMN)
Golden Minerals Reports Additional High Grade Intercepts and Resource Expansion Drilling Program at El Quevar - September 14, 2010

El Quevar in the Salta Province ofArgentina is without a doubt one of the better silver discoveries ofthis cycle, highlighted by drill intercepts in the central and westernportion of the Yaxtche deposit such as QVD-116 at 22 meters of 931.6grams per tonne (gpt) silver — that’s almost 30 ounces per ton — andQVD-167 with 12 meters of 2915.8 gpt silver (over 80 ounces per ton).Recent results demonstrate the apparent resource expansion potential inthe western portion of Yaxtche with hole QVD-211 returning a 146 meterintercept of 317 gpt silver. Meanwhile other zones at the 60,000 hectareEl Quevar project such as Quevar Norte are demonstrating the potentialto host sizeable silver deposits of their own. On the negative side, theYaxtche deposit is extensively segmented by faulting and displays quitea variability in dip, width and grade. This makes precise resourcemeasurements difficult, complicates the mining plan and requiressubstantial underground mining expertise that current management atGolden Minerals does not possess.

Speaking of management, these are theguys who lost the San Cristobal Mine in bankruptcy to joint venturepartner Mitsubishi. We personally don’t think they should be knocked toohard for that disaster (after all, management wasn’t the one insistingon the ill-conceived hedging strategy), but we also don’t believe theydeserve salaries averaging $500,000 for the top 5 executives (includingbonuses but excluding stock compensation) out of an annualadministrative budget of around $8 million. Most juniors of equal orsuperior merit make do with $1-2 million to cover head office expensesincluding executive compensation and even with such tight budgets theyare still able to come up with something less lame than a genericcorporate strategy of “focus on exploration, development and growththrough strategic business transactions”. They also don’t put “golden”in their company name if their most advanced projects are silver (to befair, the “golden” probably comes from the fact that head honchoClevenger and crew hang out in Golden, Colorado — but that doesn’t makethe name any less lame).

In any case, a deposit like Yaxtche would ideally be developed either as (1) a larger bulk operation at a low cutoff grade (see Manantial Espejo)or (2) as a smaller high grade operation initially targeting only thebonanza grade zones. Alas, management appears to be trying to navigate amiddle road by proposing an 800 tonne per day mill along with a mineplan relying on a low cutoff grade. Having said that, they do appear tohave recently realized (or were informed by their technical consultants)the problem with this approach and as a result they are delayingcompletion of the feasibility study pending another major round ofexploratory drilling intended to presumably expand and better define thehigher grade portion of the deposit. We note that the earn-in agreementwith Hochschild had called for completion of a feasibility study by theend of 2010 in order for Golden Minerals to provisionally earn 80% inthe portion of El Quevar containing Yaxtche but the Hochschild interestwas acquired in early 2010 so the earn-in requirement no longer applies.Hochschild accepted a 10% equity stake (almost half of which consistsof $15.00 warrants) in Golden Minerals in exchange for its 35%(conditionally 20%) interest in Yaxtche. We wouldn’t exactly call that aringing endorsement. We would call Golden Minerals a decent value evenafter the recent run up although we are inclined to pass up the dealbased on the points made above. [Silverax]

ECU Silver (TSX: ECU; Pink Sheets: ECUXF)
ECU Silver Begins Receiving Payments on its Gold/Pyrite Concentrates - September 14, 2010

Can someone please tell management thatpyrite is not a valuable metal for purposes of smelter payments andtherefore a “gold/pyrite concentrate” is not any better than a plain old“gold concentrate” — especially when the gold content is under 20 gramsper tonne? Scratch that, at such a grade the pyrite might seemingly beworth more. While that’s not actually true, we recommend managementchange their terminology to the more apt “gold/fool’s gold concentrate”.[Silverax]

Primero Mining (TSX: P; TSX; Warrants: P-WT; Pink Sheets: MNOCF)
Primero Provides 2010 Guidance - September 14, 2010

Primero is a new gold producer thatrecent acquired the San Dimas mine in Mexico from Goldcorp. Initialback-of-napkin calculations indicate the company is currently tradingaround fair value given that silver production is subject to a streamwith Silver Wheaton, but we will shortly add the company to our mid-tiergold model that evaluates production factors in detail. We will reportback on the results including how Primero stacks up against its peers.[Silverax]

Intrepid Mines (ASX: IAU; TSX: IAU; Pink Sheets: IAUFF)
Tujuh Bukit Hole GTD-163 Intercepts 589.5 Metres at 0.57 G/T Gold, 0.65% Copper & 122 PPM Molybdenum - September 14, 2010

There is no doubt that Tujuh Bukit isbig. What’s uncertain is the depth and orientation of the porphyrymineralization and specifically what kind of mine plan can be developedto dig all that gold, copper and moly out of the bowels of the earth.Parts of the deposit are close to the shoreline — so close that the bottom of one hole projected to surface is literally on the beach.There are also the inevitable comparisons to Newmont’s Batu Hijau mineon the island of Sumbawa especially as it relates to “mine-able” grades.Okay, here is the deal for you Indonesian copper-gold (or gold-copper)porphyry fans: Batu Hijau works as a mine with pre-production grades ofaround 0.50% copper and 0.40 g/t gold because the deposit has a high grade central core with vertical consistency that comes right to surface (older tonalite is the high grade stuff). This porphyry core grades approximately 0.8% copper and 0.7 grams per tonne goldand will support a wide halo of much lower grade in-pit mineralizationthroughout the mine life. The porphory at Tujuh Bukit arguably is abetter comparison to Exeter Resources’ (TSX: XRC: AMEX: XRA) Caspicheproject in Chile in that both appear to have the best grades at 500+meters depth. It will be interesting to see how this porphyry systemresolves with further drilling. Finally, Intrepid Mines has suffered nota hiccup during this past summer that saw the forest issue in Indonesiatemporarily derail fellow gold explorer East Asia Minerals (TSX-V: EAS;Pink Sheets: EAIAF) at its Miwah project on Sumatra. [Silverax]

Fire River Gold (TSX-V: FAU; Pink Sheets: FVGCF)
Fire River Gold Announces 26 g/t (0.76 opt) Gold Over 2.9 m (9.5 ft) At the Nixon Fork Gold Mine, Alaska - September 14, 2010

Heads up, these results are not from newdrill holes but rather assays from 2007 and 2008 holes that wereapparently never sampled by the previous operator. Look, what we havehere is a small mine in great condition with several skinny pipes ofgold skarn in place. Gold skarn typically doesn’t amount to largetonnages but it can partly make up for that with high grade. Of coursethere is also the possibility of discovering additional gold skarns inthe vicinity or even other types of deposits related to the sameintrusive. In any case, the goal at the Nixon Fork Gold Mine is to dosome diligent exploration and prep work in advance of ramping up to a20,000 - 40,000 oz. per year gold mining operation somewhere down theroad. Such an operation could generate a surprising amount of profit ifrun right, just beware of promises about imminent profitable productionand cash flows (which to its credit management has not claimed). Alsodon’t get too carried away given the likelihood that any new discoverieswill also contain limited tonnages. [Silverax]

Decade Resources (TSX-V: DEC; Pink Sheets: DECXF)
Drilling Intersects 12.19 G/T Gold Over 7.60 Metres In DDH-Mon-2010-1 At Montrose - September 14, 2010

The good news is that the Montrose zonecontinues to evolve as a decent if small tonnage gold deposit. The badnews is that without gold being discovered elsewhere there might not beenough of the shiny stuff at Montrose to justify further development ofthe project as a whole. The Red Cliff area pumped early on as anextension south of the Montrose zone has now been confirmed as a lowgrade bust. Other prospective zones are coming up snake eyes as well.[Silverax]

Canaco Resources (TSX-V: CAN; Pink Sheets; CANWF)
Canacodrills 27 metres at 4.29 and 15.6 metres at 6.6 grams gold per tonne -continues to expand Magambazi Gold Discovery with new results atMagambazi Central - September 17, 2010

One of these days we’ll actually getanother of the “too obvious” discoveries right and buy a large positionbefore the market goes crazy over the possibilities. Yes, this is amajor grassroots discovery with huge blue sky. The Magambazi lodes —they are apparently orogenic Archean gold deposits — could just be thetip of the iceberg if the southeasterly part of Tanzania turns out to bea major gold-bearing greenstone belt like the northwestern corner.That’s a big “if” but the market is increasingly considering it aforegone conclusion. We aren’t so sure but our ambivalence could be duesimply to us not being aboard for this rocket ride. In any case, theMagambazi lodes drilled to date do point to a gold deposit of 1-3million ounces in the 5 grams per tonne range with a sizeable portion ofthat potentially open-pittable. So a significant portion of Canaco’spresent C$700+ million market cap is clearly justified. [Silverax]

Rubicon Minerals (TSX: RMX; AMEX: RBY)
Rubicon Announces Secondary Offering of its Common Shares - September 16, 2010
Rubicon Announces Terms of C$190 Million Secondary Offering of its Common Shares
- September 17, 2010

Our thoughts here aren’t that Rob McEwenwanted to sell his Rubicon position in order to raise funds to buysomething else (although that angle sounds reasonable to us as well) butrather that Rubicon has received buyout interest recently and McEwensomehow stands in the way. The most obvious scenario involves thepossibility that Goldcorp is conducting advanced due diligence (there isno love lost between Goldcorp’s current management and McEwen).Rubicon’s Phoenix deposit makes a lot of sense for Goldcorp, and if theaggressive major is going to make a run for the uppity junior that isgrabbing all the attention at Red Lake, it better be soon — lest it finditself having to engage in another bidding war, this time in its ownbackyard. Rubicon hasn’t made much headway over the course of the pastyear but we suspect that is about to change. [Silverax]

Andina Minerals (TSX-V: ADM; Warrants: ADM; Pink Sheets: ADMNF)
AndinaReports Improved Grades in the 2010 Resource Update and ProvidesProgress Update for Volcan Initial Phase I Development Plan - September 16, 2010

We full-heartedly endorse the careful andthorough development plan that Andina is pursuing, although mostinvestors are likely to be confused by the extensive company disclosuresdetailing the challenges a potential open pit mine with little oxidizedgold and poor deposit orientation has to face in the high altitudeMaricunga gold belt of Chile. Volcan’s neighbors include two of thebiggest undeveloped porphyry gold-copper deposits in the world — CerroCasale (75% Barrick/25% Kinross) and Caspiche (100% Exeter Resources —TSX: XRC; AMEX: XRA). Volcan itself is no weakling as demonstrated bythe latest resource estimate of 11.5 million ounces of gold in allresources categories at a cutoff grade of 0.4 grams per tonne. Andinamanagement does, however, recognize that bigger isn’t always better andtherefore the company is considering several development paths includingthose that a junior of its size (fully diluted market cap under $200million) can potentially finance and manage on its own. The challenge,as we see it, is to design an initial mining plan costing under $1billion in capital and carrying an internal rate of return above 20%while maximizing future opportunities to exploit the entire goldresource should market conditions permit. Andina’s share valuationprovides upside opportunities along two pathways based on that premise:(1) resource leverage due to a rising gold price and (2) success inoptimizing the mine development path. By contrast, Exeter’s Caspiche atthis stage faces greater challenges (as does Cerro Casale. For example,Exeter hopes that a somewhat novel (though not unique) approach in thecontext of mining gold-copper porphyries — block caving of higher grademineralization located deep underground — could add compelling value toCaspiche but frankly this is desperation (whereas block caving mightactually make some sense as part of a multi-phase mine plan at Volcan).[Silverax]

North Country Gold (TSX-V: NCG)
North Country Gold Corp Extends Three Bluffs Zone to West - September 16, 2010

They probably need about 1.5 millionounces of decent-grade gold (current total resource is about 750,000 oz.at nearly 6 grams per tonne) at Three Bluffs in Nunavut before startingto talk up the potential of a new mine there. These latest drillresults in the western extension of the existing central resource areaprovide an encouraging sign that the company will eventually get to the1.5 million ounce number, although possibly not at the same excellentwidth and tenor that marks the high grade hinge zone. To be morespecific, the present thinking by management appears to be that ThreeBluffs will be a shallow open pit mine — if so, our guess is that theywill need something on the order of at least 5 grams per tonne goldacross 5 meters (i.e., more than 25 gram-meters at a grade of at least 5grams per tonne) within 100 meters of surface to make it work. On thatbasis, 5 of the 8 holes successfully defined potentially-economicmineralization while the other 3 holes may be just slightlysub-economic. All in all, this is actually quite good and makes us lookseriously at this company. [Silverax]

Pelangio Exploration (TSX-V: PX; Pink Sheets; PGXPF)
Pelangio Exploration Confirms Gold Discovery at the Manfo Property — 8.6 G/T over 12 Metres - September 16, 2010

This second discovery on the Manfoproperty in Ghana at the Pokukrom West anomaly appears to be a steepzone with undefined strike length although the limited footprint of thesurface anomaly suggests a small overall size. A previous result from Nfante West earlier this monthconfirms the wide distribution of gold across the property although theassay results points to a limited deposit size here as well. That said,Pelangio has not reported assays from two other targets being drilledin this first pass program: Pokukrom East and Nfante East. This isinteresting and potentially significant because the respective easternanomalies at both Pokukrom and Nfante dwarf the western anomalies forwhich preliminary results have been reported so far. Moreover, theeastern anomalies  both contain large areas of soil geochemistryexceeding 100 ppb gold (ppb = parts per billion so 100 ppb = 0.1 gramsper tonne). Indeed, the 100 ppb gold-in-soil anomaly at Pokukrom Eastexceeds in size the total gold anamoly footprint (40+ ppb) at PokukromWest and Nfante West combined. This leads us to the inevitableconclusion that the company purposefully scheduled its drill program inorder to report the potentially-most-significant results last. As such,there is likely to be more upside price action out of Pelangio evenafter the strong run up since July and despite the relatively richvaluation approaching C$100 million. We expect a pullback to the 53-54cent level and may consider doing a short-term trade from there.[Silverax]

Esperanza Resources (TSX-V: EPZ; Pink Sheets: ESPZF)
Esperanza Increases Measured and Indicated Resources by 46% for the Cerro Jumil Gold-Silver Project - September 16, 2010

Cerro Jumil is now confirmed as amore-or-less one million ounce gold deposit. Alas, we’re not fond ofthis project due to its modest size (both in terms of an open pit golddeposit as well as the planned production rate) and location in a partof Mexico where mining is definitively not the lifeblood of thecommunity. Torex Gold (TSX-V: TXG; Pink Sheets: TORXF) has just obtaineda one-year agreement from the local ejido (these are communityorganizations with ancestral claims to the surface rights) to simplyaccess the nearby Morelos project — and we’re not holding our breath forthe agreement allowing them to mine it. Torex (formerly Gleichen) paidTeck Resources (NYSE: TCK; TSX: TCK-B) a princely sum of US$150 million cash plus a few shares and warrantslast year to acquire the 3+ million ounce gold deposit. It would bestupid to claim that the one million ounce Cerro Jumil deposit istherefore probably worth in the neighborhood of US$50 million especiallysince Torex Gold now sports a market cap of over C$500 million. So wewill instead say that Cerro Jumil is probably worth US$50 millionbecause that is roughly the value currently being assigned to it by themarket (with another US$50 million or so for the San Luis project inPeru). And yes, we believe the market is being generous. [Silverax]

Northgate Minerals (TSX: NGX; AMEX: NXG)
NorthgateMinerals Intersects Highest Grade-Thickness Interval of 3.37 Grams perTonne Gold and 0.95% Copper Over 60 Metres at its Kemess UndergroundProject - September 15, 2010

In our mid-tier gold producer model,Northgate looks relatively undervalued compared to its peers and that iswithout accounting for the potential of an underground block cavingoperation at Kemess North. There, the drills appear to be defining adecent zone of higher grade gold and copper (more so gold, not so muchcopper) at depths never envisioned for the original open pit mine planand therefore historical exploration wasn’t very precise. It is positivethat resource definition is revealing the presence of better gradesthan previously thought although Kemess North is still quite a ways fromadding significant value to the company. For now the main price driveris the Young-Davidson development project where we expect valuerecognition to evolve as the mine approaches production in 2012(assuming no delays). [Silverax]

Continental Minerals (TSX-V: KMK; OTCBB: KMKCF)
Continental Signs Agreement to be Acquired by Jinchuan Group for $432 Million - September 17, 2010

We don’t believe this was the bestpossible outcome for shareholders but considering the project is in“semi-autonomous” Tibet (in other words China) and two of the biggestshareholders are large Chinese mining conglomerates capable of pullingbureaucratic strings to get things done (or not, as the relevant casehere might be), the result was . . . ummmmmmm . . . a “realistic” one.Lesson learned: if you are a Western company with a property in China,don’t get too carried away with the possibility of operating a mine ormaximizing value for shareholders. [Silverax]

Mirasol Resources (TSX-V: MRX; Pink Sheets: MRZLF)
Mirasol Discovers Multiple New Silver Veins at the Virginia Vein Zone, Argentina - September 15, 2010

Enough with the surface and channel sampling on these veins, drill ‘em already! [Silverax]

First Gold Exploration (TSX: EFG; Pink Sheets: FGEXF)
First Gold Exploration Inc.: Best Drill Results to Date, New Listing and Project Updates - September 15, 2010

Will there be such a lithium supplydeficit in the future that an open pit spodumene mine in Canada makessense? Probably not, but this isn’t the most egregious lithium play by along shot. [Silverax]

Sandspring Resources (TSX-V: SSP; Pink Sheets: SSPXF)
Sandspringannounces new Indicated NI 43-101 Mineral Resource of 2.64 millionounces gold, 261 million pounds copper and 3.42 million ounces gold, 216million pounds copper Inferred - September 15, 2010
SandspringPresents Drill Results from Holes 81-93 on Stepout; Hole 93 intersects110m of 0.90g/t Gold and 0.06% Copper and 56.5m of 1.08g/t Gold and0.09% copper - September 15, 2010

The new results add considerably to the scope of aninternal preliminary economic assessment being prepared by the Companyat this time and will delay the completion and public disclosure of apreliminary cash flow economic model and mine plan.

Is that a good or bad thing? In eithercase, the company doesn’t appear overly expensive after the recent runup in share price even if timing of the next step is indeterminate.Still, we prefer to observe from the sidelines while the slogging getsdone to figure out how to extract substantial value from Toroparu. Mostof the notable gold deposits in the Guiana shield have something extragoing for them — favorable metallurgy (oxidized, free gold) or excellentgrades or close to surface. We anxiously await the thing that makesToroparu special. It’s not the copper grades and certaintly not the mostrecent drill results. [Silverax]

Commerce Resources (TSX-V: CCE; Pink Sheets: CMRZF)
CommerceResources Corp. Drills 1.95% TREO over 243.84 metres, including 2.41%TREO over 28.32 metres in Second Hole at the Eldor Property in Quebec - September 15, 2010

Evaluating the economic potential of arare earth deposit is exceedingly complex. Minerology and metallurgy aremuch more important than grade so the only deposits that deserve meritare those where detailed analysis down to the final refining process hasalready been conducted in order to confirm the ability to extractspecific rare earth metals in potentially economic concentrations. Sincemuch of the future anticipated growth in demand will be for “heavy”rare earth metals but all deposits are more-or-less “light” rare earthmetal dominant, there might never be a major new “light” rareearth mine developed outside of China other than the Lynas (ASX: LYC;Pink Sheets: LYSCF) effort at Mt. Weld and Molycorp (NYSE: MCP) atMountain Pass (which is actually an old mine). For the above reasons andsome others as well, this is the first and last time that drillingresults from a “light” rare earth project will ever be mentioned in theMining News Review. [Silverax]

East Asia Minerals (TSX-V: EAS; Pink Sheets: EAIAF)
EastAsia Intercepts 0.5 g/t Gold, 0.22% Copper Over 128 Metres, Within499.7 Metres Grading 0.26 g/t Gold, 0.11% Copper in Second Hole at LowerTengkereng Project - September 15, 2010

Comparisons to Batu Hijau are notappropriate as noted elsewhere in reference to Intrepid Mines. Theporphyry intrusive stock in the vicinity of Lower Tengkereng does notappear to be well-mineralized although the system itself appears to bevery large. Future drilling of the prospect will likely requireadditional geochemical and/or geophysical work to hone in on specifictargets. Meanwhile, there are other targets in the project area thatEast Asia can systematically drill test. Frankly, we're not suremanagement achieved what it set out to do this year at the Barisan 2Porphyries project. In light of the negative focus on forestry issues,these inconsequential results are a distraction from the otherwiseexcellent progress that continues to be made at Miwah. [Silverax]

Explor Resources (TSX-V: EXS; Pink Sheets: EXSFF)
Explor Intersects 11.15 Meters of 5.38 g/Tonne Au on Timmins Porcupine West - September 15, 2010

This looks like a relief rally to us, asin “what a relief that there is actually gold on this property gradingmore than a couple of grams per tonne!” That said, it is still just 5.38grams per tonne and that isn’t exactly a barn burner. We view theTimmins Porcupine West property as prospective based on its location andfavorable geology but that and a dollar will make you exactly a buckricher. There is no shortage of juniors drilling for gold in thenumerous greenstone belts of the Canadian Shield and a few of them willprobable discover major gold deposits in the future as they haveperiodically done in the past. Usually these discoveries are made nextto or underneath old mines. Explor has that base covered as well andtherefore seems as good a punt as any of the other gold juniors whosecorporate strategy can be summarized as “high hopes”. Good luck and Godbless ‘em all! [Silverax]

Barkerville Gold (TSX-V: BGM; Pink Sheets: BGMZF)
Barkerville Pours First Gold Bar-Full Scale Gold Production Achieved - September 15, 2010

Frankly it's impressive when a companycan just pick up an old mine, dust it off and get it into productionjust in time for record gold prices. They aren't going to blow anybodyaway with wild profits at this stage but if they putz around long enoughthey just might build a sustainable gold mining operation. Worthwatching, and perhaps a dabble. [Silverax]

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.