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Taseko Mines (TSX: TKO; AMEX: TGB)
Strong Third Quarter Production Results from Gibraltar Copper Mine - October 4, 2010
During the third quarter, Gibraltarproduced 25.7 million pounds of copper, a roughly 25% improvement overQ2 helped in part by improving copper recoveries. The mine is now wellon its way to reaching its goal of producing 115 million pounds peryear. Meanwhile molybdenum production came in at a healthy 265,000pounds. Gibraltar boasts a mine life of at least 25 years. Just one morereason why we’re happy having implemented our speculative options strategy. [Zurbo]
Tanzanian Royalty Exploration (TSX: TNX; AMEX: TRE)
Closes Private Placements - October 4, 2010
As Silverax wrote in a recent comment to subscribers regarding exploration companies in Africa:
I don’t think anything explains theenigma of TRE. Their only press releases seem to be about privateplacements. Their Tanzania properties are not in the newly-discoveredgold belt where Canaco is exploring but rather in the original LakeVictoria belt. I am not in favor of companies that provide virtuallyzero information in terms of hard numbers but rather ask shareholdersto trust the superior wisdom and intelligence of management.
And that’s not an exaggeration.A full 7 of the last 10 press releases have had to do with privateplacements, and minor ones at that for a company trading for well over$600 million. [Zurbo]
To be completely fair about it, thoseprivate placements were taken down by the CEO — Jim Sinclair, the goldbug who predicted $1,650 gold by January 2011 — and they have beenfavorable to the company with no warrants attached. But the point isstill valid in that a “royalty” company with this group of assets andlengthy operations should be self-sufficient by now especially if itcarries such a hefty market cap. [Silverax]
Southern Arc Minerals (TSX-V: SA; Pink Sheets: SOACF)
Vale S. A. (NYSE: VALE)
Southern Arc and Vale Enter Into Option/Joint Venture Agreement - October 4, 2010
Vale’s interest in Southern Arc’searly-stage Indonesian projects is certainly positive, but theflexibility of spending commitments and long time lines involved in theagreement keep us from getting too excited. Vale has only committed tospend $1.2 million in a phase 1 exploration program within 12 months ofexploration permits being received. From there, Vale has the option toproceed with a multi-stage Phase 2 program. According to the agreement,if Vale chooses to go ahead with the Phase 2 program, it has 7 yearsfrom when Phase 2 commences until it needs to produce a bankablefeasibility study. So basically we will need to see indications of Valemoving much more aggressively before these agreements become ofany significant interest to Southern Arc, although they do demonstrateonce again that the majors are not afraid of getting involved inIndonesia despite all the recent hooplah concerning environmental andforestry issues. [Zurbo]
Kaminak Gold (TSX-V: KAM; Pink Sheets: KMKGF)
Kaminak Continues to Intersect Wide Intervals of Gold Mineralization at Latte - October 4, 2010
Kaminak’s Latte zone at the Coffeeproject in the Yukon is now recognized as containing two domains, anupper disseminated zone of oxidized gold grading up to 2 grams per tonne(gpt) across a structural width of up to 80 meters along a strike of400+ meters and a lower zone of gold associated with sulfides (pyrite)grading 2-10 gpt across widths of up to 10 meters. The total strikelength of the system remains unknown with both ends of the zone showingstrong gold intercepts. Since the surface gold anomaly starts to getweaker at these end points, it is possible that the system continuesunder cover to the east and west. There is some apparent weakening atdepth but the bottom of the mineralization is considered open as it hasnot yet been reached by the shallow drilling conducted so far. All inall, Latte is resolving as a ~1 million ounce gold deposit grading inthe 1.5 gpt range combining the oxide and sulfide horizons. My guess foran initial inferred resource, on the high side, is 13 million tonnescontaining 580,000 ounces of gold. As noted above, a portion of thisresource appears to be unoxidized; if suspected to be at least partiallyrefractory, it should ideally be presented separately in the resourceestimate. With drilling at Latte completed for the current season, itwill be a few months before we find out just how much larger the Lattedeposit will get. In the meantime, assay results are pending at severalother zones. Apparently some of the holes are visually well-mineralizedso there is still hope for some excitement before the winter doldrumsset in. Notably, the Double Double and Supremo zones to the north ofLatte appear to generally have narrower widths but significantly-highergrade mineralization with the drill core textures and mineralassemblages suggesting the presence of both oxidized and sulfide domainsbeing present here as well. It is encouraging that some of the highgrade intercepts appear to be thoroughly oxidized; should these zonesdemonstrate continuity (there is some evidence for limited depth), thesezones may quickly overtake Latte in economic importance. With two orthree zones of mineralization on the scale of Latte, Kaminak arguablydeserves its current market capitalization with plenty of upsideremaining from future exploration success. [Silverax]
Endeavour Silver (AMEX: EXK; TSX: EDR)
Cream Minerals (TSX-V: CMA; Pink Sheets: CRMXF)
Endeavour Silver Commences All Cash Offer to Acquire Cream Minerals - October 4, 2010
The background to the offer provided byEndeavour Silver for Cream Minerals (TSX-V: CMA; Pink Sheets: CRMXF) isgreatly appreciated as is the main risk facing the company:
Risk of Cream Resource Disclosure:Cream’s mineral resources as disclosed in their National Instrument 43101 (”NI 43 101?) reports on the Nuevo Milenio Property were prepared byCream’s second largest shareholder and a Director, not by independentconsultants as required under NI 43 101. In Endeavour’s opinion, theresources are not compliant with NI 43 101 and a substantial amount ofwork will be required to confirm resources in compliance with NI 43 101.
Indeed, that particular shortcoming wasone of the first things that caught our eye a while back although wedidn’t recall the details until Endeavour kindly reminded us and otherinvestors. That said, the 12 cent cash offer appears to be firm and wesee little risk buying Cream at that price based on the hope thatanother suitor might come along during the next month or so. [Silverax]
Amarillo Gold (TSX-V: AGC; Pink Sheets: AGCBF)
Amarillo Commences 5,000 Metre Drilling Program at Mara Rosa Project Brazil - October 4, 2010
The company continues to advance itsfeasibility work on the Mara Rosa project in Brazil yet the share pricereveals neither the developmental progress nor the record high goldprice. One possible reason the shares remainsmoribund is the somewhatcomplex metallurgy that continues to undergo further study andoptimization of plant configuration: as reported on August 11, 2010,about half the resource at Mara Rosa is mildly refractory due to beingtied up in tellurides. We expect a workable solution to be eventuallyidentified and successfully tested but it could negatively impactproject NPV via higher capital costs (though this might be offset by ahigher gold recovery than the 80% currently modeled for agitated pulpleaching). Our suspicion is that things aren’t lined up yet for the bigride, but with that said, the shares are pretty cheap and won’t requiremuch buying pressure to break out above a dollar, at which point C$1.50seems inevitable. [Silverax]
Gammon Gold (TSX: GAM; AMEX: GRS)
El Cubo Labour Strike Declared Illegal - October 4, 2010
It doesn’t matter much whether or not thestrike at Gammon Gold’s El Cubo mine is legal, what matters is how soonthe mine can be placed back into production. Firing almost 400 unionworkers and filing criminal charges against 7 union executives mighthave been an appropriate action by the company but we don’t see how itwas “in the best interests of the union employees” as claimed by CEORene Marion. If Gammon Gold can lose its “antiMidas touch”, it might beworth a punt considering what could be another turnaround in the makingat the troubled Ocampo mine, one that might be more-or-less permanentthis time around. What would probably help the company a bit is someadditional perspective about how mining is done in Mexico — we suspectDr. Luis Chavez is often a lone voice of reason at board meetings.[Silverax]
Searchlight Minerals (OTCBB: SRCH)
Searchlight Minerals Corp. to Pursue Autoclaving to Extract Precious Metals From Clarkdale Slag Project - October 4, 2010
After years of messing around withshortcuts leading to dead ends, it has finally come to this: highpressure grinding rolls (HPGR) followed by autoclaving of theiron-silica slag. Unfortunately, there are some hurdles to stillovercome. First, HPGR can process the abrasive slag material but itprobably needs to be integrated into a closed circuit milling flow sheetin order to ensure a consistent, optimum particle size. The companyspent literally years experimenting with a vibratory grinding mill butit uses a wet slurry whereas HPGR is a dry grinding mill. As a result,the slag material will probably need to be dried out prior tointroduction into the HPGR. While this isn’t likely to be a fatal flaw,it does add complexity and cost.
Second, the autoclaving of the slag hasnothing to do with oxidizing or neutralizing sulfides/arsenides, whichis the primary purpose of all conventional pressure leachingapplications. Rather, the autoclaving at Clarkdale apparently helps theleach solution penetrate into the slag particles (which have beenfractured along grain boundaries during the HPGR stage) in order to comeinto direct contact with the metals to be leached. Furthermore, thepressure and temperature are supposed to prevent dissolution of iron andsilica into, and the interference of carbon with, the gold-bearingsolution. Even if technically possible, this would be a novelapplication providing little justification to conclude the following:
Once the batch test resultshave been reduced and analyzed into a pre-feasibility document, acontinuous pilot bulk test will be scheduled in a largermulti-compartment autoclave (30-50 liters) as part of the feasibilitystudy. It is anticipated that this bulk test will be conducted in thefourth quarter of 2010, subject to completion of the pre-feasibilitystudy and availability of the testing facility. This type of scale-up iscommon in the mining industry, and the majority of recent majorautoclave installations have proven their feasibility utilizing bulktests conducted with 30-50 liter autoclaves.
Those 30-50 liter autoclaves used in thebulk tests are for standard pressure leaching applications involvingrefractory gold or sulfide ores. These are primarily conventionalchemical processes (oxidation or hydrometallurgical isolation ofsulfides) whereas the slag application would be a combination mechanical(penetration of slag particles) and novel chemical process(hydrometallurgical isolation of silica, iron and carbon). Pilot planttesting of such a process might not guarantee scalability and thereforethe custom construction of a large processing facility may ultimately berequired for bankable feasibility purposes. Such a “pilot plant” couldultimately cost tens — if not hundreds — of millions of dollars, therebyobviating the need for the “bankable” feasibility study and therebycreating a Catch-22 scenario.
If the above issues are not astechnically complex as we imagine them to be, then Searchlight could be afew months away from salvation and the shares might represent a goodspeculative punt. [Silverax]
Peregrine Metals (TSX: PGM; Pink Sheets: PTTDF)
PeregrineMetals: Measured and Indicated Resource at Altar Increases 74 % to 802Million Tonnes Grading 0.44% Cu Equivalent Containing 7.41 BillionPounds of Copper and 1.53 Million Oz. of Gold - October 4, 2010
The deposit growth has not addedsubstantially to near-surface oxides and consequent the leached coppercap still does not represent a resource base that is compelling as astandalone operation despite management’s goal of evaluating Altar as aninitial oxide copper heal leach mine. For this reason: “PeregrineMetals is proceeding with a Preliminary Economic Assessment (”PEA”) on acombination leach and concentrator mining operation to examine the bestscenarios for mining and processing this large copper-gold deposit.”Alas, neither the overall grade nor the geometry and layout of theporphyry system at Altar suggest to us that a robust mining scenario canbe outlined based on the discoveries made to date. The attraction ofAltar for us was the oxide copper potential and, to a lesser extent, theperipheral gold potential but the company doesn’t seem particularlyinterested in pursuing them at the current juncture. [Silverax]
Heatherdale Resources (TSX-V: HTR; Pink Sheets: HTRRF)
Niblack Mineral Development (TSX-V: NIB; Pink Sheets; NIBMF)
High Grade Results Continue To Expand And Upgrade Lookout Zone At Niblack & High Grade Results Continue To Expand And Upgrade Lookout Zone At Niblack - October 4, 2010
It seems all the VMS (volcanogenicmassive sulfide) exploration companies appear to have market caps in theC$50 million range and here are two more that get us there on acombined basis. The valuations are relatively even with Heatherdaleabout twice the enterprise value of Niblack, matching the eventual 70/30joint venture split of their Niblack property in southeastern Alaska.The existing resource inventory is still on the smallish side althoughrecent exploration success suggests that a meaningful increase will bemade after the completion of the current drilling program. Statedanother way, it’s not unreasonable in our opinion to hold the viewpointthat a VMS deposit or deposits located far away from analready-operating concentrator will probably need an in situ metal valueof over US$1 billion before being taken seriously. By that measure, theNiblack project is at least half way there. [Silverax]
Donner Metals (TSX-V: DON; Pink Sheets; DONFF)
Donner Metals Ltd.: Xstrata Zinc To Conduct Definition Drilling at PD1 Deposit - October 4, 2010
The potential upside and downside of the arrangement with Xstrata Zinc is demonstrated by the recent “positive” feasibility report published on the Bracemac-MacLeod deposit:highly sensitive to rising metal prices but potentially disastrous atlower metal prices due to the funding requirement. Simply put, if metalprices drop to or below those used in the feasibility study (U
.80/lbzinc, US$2.50/lb copper), it would be nearly impossible for DonnerMetals to raise the funds for its pro rata share of the US$163.7 millionin estimated capital costs. Meanwhile, Xstrata Zinc might still goahead with the project for its own reasons and it would likely be ableto obtain the funds for construction. The result would be Donnerdefaulting on the joint venture agreement, the consequences of which wehaven’t looked into but suspect cannot be very good.
On the plus side, Donner is not requiredto contribute any capital until May 31, 2011 so it still has plenty oftime to arrange its share of project financing which is initiallyestimated at about US$40 million.This seems feasible, but only if metal prices–particularly zinc andcopper–don’t take a significant hit between now and then.
Soho Resources (TSX-V: SOH; Pink Sheets: SHRJF)
SohoResources Corp. Announces Positive Preliminary Economic Assessment forCurrent Resource Identified on Its Tahuehueto Project - October 4, 2010
The project is coming together but thereis much work left to be done and the company is scraping the bottom ofthe barrel trying to come up with the funds. There isn’t enough gold orsilver in the resource category to get investors very excited at thispoint even if a decent and reasonably-profitable small mining operatingcan be established. On top of that, the combination of underground andopen pit mining as well as the production of two concentrates makes thisproject as proposed quite complex for its size. [Silverax]
Dundee Precious Metals (TSX: DPM; Pink Sheets: DPMLF)
Sabina Gold & Silver (TSX: SBB; Pink Sheets: SGSVF)
Sabina Gold & Silver Announces More Significant Results at Umwelt Discovery, Back River Project, Nunavut - October 4, 2010
These are some phenomenal results, and remembering Dundee to be the company that sold the Back River project to Sabina in June 2009,we couldn’t help but thinking they must be kicking themselves as theywatch the Sabina share price power higher and higher. But then werecalled that Dundee was given 17 million shares and 10 million specialwarrants in that transaction, and that these share and warrants are nowworth over C$150 million. That’s not too shabby! Meanwhile Dundee’scurrent cash position comes in at around C$100 million, leaving itsufficiently funded to complete a major expansion at the flagshipChelopech mining operation. We’ll have more to say about Dundee in thenext update to our mid-tier Gold Producers Report. Preliminary it looks undervalued within our model, which gives it a base case valuation target of C$11.00 per share. [Zurbo]
Sabina is not in our analysis becausethere are no recent economic studies but clearly the Back River resourceadds very significant value to the project and makes its remotelocation no longer the one critical issue that blocks development of theproject beyond the resource definition stage. There is upside here butwinter doldrums are likely to set in and we may see a decent pullback.Hopefully by then we will have more information about the economicparameters of a proposed mining operation. This is one of the companiesthat we identified early on but never got on board because we did notformally document our thinking — that has now changed with this MiningNews Review approach.[Silverax]
Golden Minerals (TSX: AUM: AMEX: AUMN)
Golden Minerals Announces Equity Financing - October 6, 2010
Golden Minerals is now up 10x from wherewe originally featured the company (and up about 3 times from the levelwhere we eventually sold the last of our position). There are fewopportunities that are as certain as Golden Minerals trading at $2 withmore than $8 per share in cash (as it did in June 2009), but this is acompany that doesn’t like holes being burnt in its pockets — so it wasquick to spend what it had on holes in the ground and is now on itssecond major financing during the past year. The current value of thecompany is primarily due to the bonanza silver located in the centraland western Yaxtche zone at its El Quivar project in Argentine but theopportunity is no longer as certain. As noted previously, the company isdoing the right thing by re-evaluating its initial proposal to build alow tonnage, low grade mine at El Quivar and we look forward toreviewing the results of the preliminary economics. Until then, wecongratulate the patient shareholders who have held since those earlydays of certainty and wish them continuing success. [Silverax]
North Country Gold (TSX-V: NCG)
North Country Gold Corp. Announces $5 Million Private Placement Unit Financing & North Country Gold Corp. Announces Increase to the Private Placement Unit Financing - October 6, 2010
Do we detect a pattern here? Apparentlythe funds want into the gold and silver juniors bad. Be that as it may,the timing is pretty good for North Country Gold even though they won’tbe putting the money to use until next spring. Unfortunately the halfwarrants at 60 cents are a giveaway and we are likely to get significantselling once the placement shares become free trading sometime inFebruary. My guess, and it’s admittedly tinged with cynicism, is thatthe updated NI43-101 resource will be conveniently released sometimearound then. With the mammoth issuance of stock optionsalso out of the way, we hope to have no further distractions of thedilution frenzy-type going forward. In any case, the Three Bluffsproject is one we can believe in and the primary question at this pointis, when should we buy? [Silverax]
Megastar Development (TSX-V: MDV; Pink Sheets: MSTJF)
Eloro Resources (TSX: ELO; Pink Sheets: ELRRF)
Megastar and Eloro Announce Megastar Annual and Special Meeting - October 6, 2010
Let’s see, Megastar shareholders get 70million shares of Eloro on a pro rata basis in exchange for Megastarselling its 50% share of the Simkar property in the Val d’Or gold campof Quebec to Eloro. Megastar has about 45 million shares fully dilutedso that is 1.5 Eloro shares for each Megastar share. Eloro currentlytrades at 10 cents while Megastar is at 13 cents. In other words, if youbuy a Megastar share today for 13 cents you will in the future get 1.5Eloro shares currently worth 15 cents assuming the deal is approved.That looks like a free lunch, or at least getting something for nothing,and we generally like that scenario even if there is a chance thingscan go wrong. That is called speculation. As for the Simkar property, itis what it is — a valid exploration project with fair odds ofdiscovering a lode-style ore shoot below the historic mine workings. Weprobably wouldn’t pay more than $20 million for something like that atsuch an early stage but that is where Eloro will be when the deal isdone assuming the share price remains the same. [Silverax]
Eastmain Resources (TSX: ER; Pink Sheets: EANRF)
New High-grade veins & Bulk tonnage targets at Clearwater - October 6, 2010
The Eau Claire resource was previouslymodeled as a lode vein deposit. In fact, that is how the resource updatedue this past summer (and before that, in late 2009) was supposed tomodel it. But somewhere along the way Eastmain recognized the open pitpotential of the project. Alas, the hand wasn’t speaking to the footuntil somebody at SRK Consulting, tasked to audit the internal modelingas part of the NI43-101 process, pointed out the obvious: if you plan topotentially mine a portion of the deposit as an open pit, then youshould resource model that portion as an open pit. The implications aretwo fold: one, the updated resource will take a while longer tocomplete, which is a negative; and (2) the resource number, when finallyreported, could surprise some people, which is a positive. Even at amillion ounces of open pittable resource this would be a valuableproperty given the nature of the gold (mostly free milling and containedin visually recognizable host rocks), not to mention the explorationupside. [Silverax]
Kodiak Exploration (TSX-V: KXL; Pink Sheets: KXLAF)
Kodiak Drills 35m Grading 2.21 gpt Gold including 4m Grading 16.6 gpt Gold at Milestone - October 6, 2010
Two holes about 200 meters apart had goodresults, the rest not so much. One hole (MS10-48) may be a fluke giventhe low grades of two other holes drilled from the same setup. HoleMS10-49, the other good hole from this set of assays is in the samesmallish zone as holes MS10-38 to MS10-40 reported earlier. Much moreneeds to be done along the lines of finding similar high grade zones(shoots?) at Milestone before we start getting excited. [Silverax]
Eagle Plains Resources (TSX-V: EPL; Pink Sheets: EGPLF)
Eagle Plains Samples New High-Grade Gold Discovery at Yellowjacket Gold Project, Atlin, B.C. - October 6, 2010
What we are focusing on for a bit of perspective:
The 1903 Report of the Minister of Mines describes the Rock of Ages workings as: “…ashaft has been sunk 60 feet. From the bottom of this a cross-cut wasrun 7 feet and struck the hanging wall of the ledge. A drift was rundown-stream 60 feet at this level, and one upstream on the 30 footlevel. The ledge wherever tapped is about 14 feet in width, mostly lowgrade ore, although many extremely rich patches are encountered.”Eagle Plains geologists have mapped and sampled the local area and havenow received partial results, including an interval which returned 51.36g/t over 5.2m.
In light of the possible “extremely richpatches”, what we’d like to know is what are some of the other intervalsin those partial results besides the 51.36 g/t over 5.2m. [Silverax]
Fire River Gold (TSX-V: FAU; Pink Sheets: FVGCF)
Fire River Gold Announces Mineral Resource Estimate For the Nixon Fork Gold Mine, Alaska - October 6, 2010
The resource estimate was from workperformed prior to Fire River Gold taking over, consisting of 1,233drill holes and 17,693 samples. You know that size is a concern when acompany reports a gold resource in grams. We did some math and came upwith 3,267 grams of resource per drill hole and 357 grams per sample.That probably includes some double-counting but it also should temperexcessive hopes about the ongoing 28,000 meter drilling program. Namely,if we assume each drill hole will average 50 meters (it will probablybe more than that from surface but less from underground), we get 560total drill holes for the program. At the historic rate of 3,267 gramsper drill hole, that is a level-set expectation of 1,829,520 grams ofresource expansion. For the number-challenged among you, the convertedfigure is 58,821 ounces. All kidding aside, the Nixon Fork Gold Minesits on top of a small, high-grade gold deposit. After the currentdrilling program or any other future drilling programs, the mine willstill sit on top of a small, high-grade gold deposit. Not to say itcan’t make some money — just a small amount of it. [Silverax]
Trevali Resources (TSX: TV; Pink Sheets: TREVF)
Trevali Commences Trading on Toronto Stock Exchange; Appoints Dr. Anthony Holler as Chairman - October 6, 2010
We are intrigued by the unique dealstructure with Glencore at the Santander project in Peru that has themetals trading giant responsible for plant construction and mineoperation while Trevali gets 100% of the upside in the form of potentialmine operating profits. Unfortunately, there are no external economicstudies and so we are left with back-of-napkin calculations that suggestthe upside for Trevali may be limited in the near term assuming themarket will value the company on the basis of its existingzinc-silver-lead resource at a 2000 tonne per day mining rate. We alsoassume that Glencore’s services don’t come cheap; Trevali will have topay for them eventually out of future mining cash flows. In any case,trading on the Toronto exchange will hopefully create some liquidity inthe months ahead so that we can take advantage of any attractiveopportunities that may present themselves. [Silverax]
Atna Resources (TSX: ATN; OTCBB: ATNAF)
Atna Reports Strong Production at Briggs Mine - October 6, 2010
Higher gold prices might do wonders forcompanies like this with a small current gold production profile thatalso have one or more development-stage projects that together couldmake them a 100,000+ ounce per annum mid-tier gold producer.Unfortunately, Atna is partially hedged as a result of what appears tobe a “mini-Barrick” delusion of grandeur (hopefully now cured given thateven Barrick has stopped being insane) as well as a US$14.5 million“gold bond” issued in 2009 to provide funds for the purchase ofequipment and for startup capital at the Briggs Mine in California(!).Terms of these gold bonds will make it somewhat difficult for Atna togenerate significant cash flow in the near term from the Briggsoperation even at $1,350 gold. Future drivers for the share price wouldinclude meaningful development progress on the company’s other projects,several of which appear to have solid prospects, and of courseabstaining from hedging policies that eliminate upside leverage tohigher gold prices (there are other ways to lock in minimum gold pricesthat don’t come at such a steep cost). [Silverax]
Amarok Resources (OTCBB: AMOK)
Phase I Drill Program Confirms Gold Potential of Rodeo Creek Project - October 6, 2010
How shall we describe this one, gentle reader? How about one word? Fraud.Of course if we need to tell you that, you need to immediately sell allof your gold stocks and buy a nice safe mutual fund (okay, it can be agold mutual fund). And if you listen to anybody who has said anythingpositive about this company — Grass Roots Research, Liberty Analytics,Skymark Research, Emerging Stock Report, et cetera — even gold mutualfunds are probably too much for you to handle. [Silverax]
Titan Uranium (TSX: TUE; Pink Sheets: TUEFF)
Titan Uranium Continues Baseline Environmental Studies And Engineering Design At Sheep Mountain Project, Wyoming - October 6, 2010
Is it considered progress when there islittle chance you are going to get a mining permit? Titan Uranium wasC$3 during the uranium boom of 2006-2007 but there is little chance ofit ever trading that high again. It could go back up to its 2009 high of60 cents for one irrelevant reason or another but unless you havestrong faith in state and federal regulatory agencies approving open pitheap leach uranium mines ever again in the United States, it would bebetter to wait for the actual permits before jumping on board — even ifthe share price is 60 cents when that happens. [Silverax]
Yukon-Nevada Gold (TSX: YNG; Pink Sheets: YNGFF)
Ketza IP Target Proves to Bear Significant Gold Intercepts - October 6, 2010
The headline is wrong on two counts.First, it is not “intercepts” as in plural but rather “intercept” as insingular. Second, it isn’t “significant” unless you consider 2.3 gramsper tonne gold over 2.99 meters to be significant. It might seemnitpicky to focus on a press release about a minor exploration projectbut this stuff speaks strongly to a company’s credibility especiallywhen you’re a gold mining turnaround play with a C$750 million fullydiluted market cap — such a valuation suggests the market has come along way in trusting the company’s contention that a turnaround is infact in progress at Jerritt Canyon. So let’s look at the press release abit closer. Note this statement by the company:
The top of the IP anomalystarts at approximately 700 meters below the surface. The first twodrill holes (KR-10-1477 and KR-10-1478) encountered significantintervals of fault zones and failed to reach their target depths (IPanomaly zones) before being lost due to very poor rock conditions.
In other words, the IP target is locatedbelow 700 meters so none of the gold intercepts, significant or not,from the first two drill holes prove anything with respect to the IPtarget. Now let’s look at this statement:
Drill hole number KR-10-1479,was completed to 862 meters (2,827 feet) and encountered several zonesof Au mineralization prior to reaching the depth of the IP target. Therock in the bottom half of this drill hole averages about 3 percenttotal sulfides and is sufficiently high enough to explain the IPanomaly. No intrusive rock was intersected.
The initial impression is that the thirdhole also failed to intercept any gold at or below the target level ofthe IP anomaly but the assay table does reveal the aforementioned 2.3grams per tonne gold over 2.99 meters starting at a downhole depth of743.9 meters. Then again, if this drill hole was inclined more than afew percent from vertical, that downhole depth would actually be lessthan 700 meters below surface and therefore it would actually be abovethe depth of the IP target as well. Indeed, that interpretation seems tobe more consistent with the company’s own statement referenced above,rendering the entire headline a lie. [Silverax]
Oro Silver (TSX-V: OSR: Pink Sheets: OROSF)
Drilling Commenced at Oro Silver’s El Compas Project, Zacatecas, Mexico - October 6, 2010
It would have been nice to know inadvance that the company has started a new drill program butnevertheless the initial results from the first three holes provide abit of excitement. It should be noted that both the El Orito vein andthe El Compas vein likely contain relatively small ore shoots that mighteach eventually host on the order of 100,000 - 200,000 ounces of gold(including equivalent silver). Thus they don’t represent majorexploration targets or blue sky potential. There is some indication thatvein extensions or new veins could host additional ore shoots but thereal potential exists at depth. Alas, the company does not appear tohave plans to drill deep targets in the near future. [Silverax]
Crocodile Gold (TSX: CRK; Pink Sheets: CROCF)
Crocodile Gold Pours 10,000 Ounces of Gold in September 2010 Setting New Monthly Record - October 6, 2010
Crocodile Gold is now officially amid-tier gold producer according to our definition of 100,000 -1,000,000 ounces of annual gold production and we will be adding thecompany to our Mid-Tier Gold Producer model that we are currentlyupdating and will have ready in a few weeks (probably just in time for agold correction knowing our sometimes-rotten timing). On initial lookthe company looks a bit expensive at C$1.50 but it does have some verydecent assets, competent management and grand plans to grow productionand resource base. Production growth so far seems to have beenaccomplished without many hitches, which is quite impressive given thatseveral smaller, diverse (open pit and underground) operations areinvolved. [Silverax]
Corex Gold (TSX-V: CGE; Pink Sheets: CGEKF)
Corex steps out on two holes and Intersects 29.0 m of 0.71 g/t Au, and 56.4 m of 0.47 g/t Au including 6.1 m of 2.1 g/t Au - October 6, 2010
More potential open pit oxide gold inMexico — this one has lots of “boring” drilling still ahead so no hugehurry to accumulate other than the fact that the shares are hitting a 52week low just as gold is hitting yet another record high. Gammon Gold(TSX: GAM; AMEX: GRS) became involved with the company over the summerby way of an equity investment as well as a seat on the Corex TechnicalAdvisory Board, but as noted elsewhere Gammon suffers from the“antiMidas touch” so it’s not clear if the association is negative orpositive. In all seriousness, it is unclear what the potential tonnageof an initial 43-101 resource might be from the moderate-sized goldzones discovered to date and the timing of a resource estimate —assuming one is being planned — is also uncertain. [Silverax]
Medusa Mining (TSX: MLL; ASX/AIM: MML; Pink Sheets; MDSMF)
Medusa Mining Limited: Confirmation of Dividend Payment - October 6, 2010
It’s hard to blame new mid-tier goldproducer Medusa Mining for not knowing what to do with all the cash thecompany’s Co-O Mine is throwing off other than to pay it out as adividend. The market cap looks rich for the current production profileand resource base but the distribution, size and extent of the classicepithermal gold veins at Co-O suggest that the deposit could be worldclass. The mine is already producing gold at an extremely low costthanks to the consistently-high gold grades and cheap cost of Phillipinelabor. We wouldn’t buy here but then again Medusa doesn’t look all thatdifferent to us than Andean Resources (TSX: AND; Pink Sheets: ANDPF)and Goldcorp did cough up US$3.4 billion for that one. [Silverax]
Mines Management (AMEX: MGN; TSX: MGT)
Montanore Project Reaches Another Critical Permitting Milestone - October 6, 2010
If you need to understand why the MinesManagement share price continues to struggle, you need look no furtherthan this latest press release announcing a critical permittingmilestone that heretofore was totally unknown to the majority ofinvestors. Considering that permitting is the main risk at this point,one would assume the company is keeping shareholders updated on what hasbeen accomplished to date and what still needs to be accomplished. Butno such luck out of a management team who dared claim in 2004 thatpermitting would be a cakewalk because Noranda had already done most ofthe required work back in the 1990’s– only to be still severalyears away from completion in 2010. There is simply no urgency to ownthis stock, it will still be there in a year or two, probably at more orless the same price (unless the markets enter another all-boats-risephase in the meantime). [Silverax]
First Majestic Silver (TSX: FR; Pink Sheets: FRMSF)
First Majestic Silver Corp.: Another New Record for Silver Production; 1,823,370 oz Silver Produced in Q3 - October 6, 2010
First Majestic is well on its way toproducing over 10 million ounces of silver per year at which point itcan arguably be considered a “senior” silver producer. We suspect FirstMajestic’s claim to fame as the “purest” silver producer was initiallyrecognized as a result of the Silver Producers Reportwe introduced over the summer. In any case, the company has doneextremely well the past few weeks and is now arguably fully valued andtherefore likely to trade more-or-less in lockstep with silver prices(not a bad thing in, and of, itself). We look forward to adding thelatest operating results to our model when they become available as wellas modeling the proposed Del Toro Silver Mine, which may representfurther upside once the economic parameters are better known. [Silverax]
Great Basin Gold (TSX/JSE/AMEX: GBG)
Great Basin Provides update on the Burnstone Mine Project - October 6, 2010
Full commissioning at Burnstone is nearlyat hand and commercial production should be declared within weeks(possibly months, depending on the company’s interpretation ofaccounting or operational definitions). There is still a credibility gapthat will probably only be cured by demonstration of competent,profitable gold production, at which point the shares should move towardfull valuation in the $3.00 to $3.50 range (based on current goldprices). We just advised subscribers on the matter of the soon-to-expire warrants we recommended a while back, which are up a tidy 100%+. [Silverax]
Alexco (TSX: AXR; AMEX: AXU)
Alexco Intersects 10.4 Meters of 44.3 Ounces Per Ton Silver, Expands Onek Zinc-Silver Deposit at Keno Hill - October 6, 2010
The market reaction is arguably justifiedby silver prices over $23/ounce but not by these drill results, whichlook spectacular until we read the fine print that they define a compactarea adjacent to the historic Onek mine area where past drillingidentified about 1 million ounces of silver plus about 35 million poundscombined lead and zinc. The 2010 Alexco drilling program probablyexpanded on that, but not by much. In the meantime, Alexco continues toramp up for production but frankly at a market cap above C$300 millionthe share price is getting a bit ahead of itself, silver pricesnotwithstanding. Resumption of underground mining in historic workingsis always a difficult task as Alexco and its shareholders are about tofind out. [Silverax]
American Manganese (TSX-V: AMY; Pink Sheets: AMYZF)
Expanding Manganese Resource at Artillery Peak Grows by 45% - October 6, 2010
This is purely for the manganese bug —all three of them worldwide. There probably will never be a manganesemania, which means Jim Dines probably won’t claim to be the “originalmanganese bug” either. But seriously, this idea is way out there andcould actually work out. What’s needed are offtake agreements orindustrial partners who will guarantee a market for the product andmight even fund the mine construction. A separate issue is thepatent-pending hydrometallurgical process developed for the ArtilleryPeak deposit. Anytime you have something brand new in mining, you areadding operational and execution risk to a business that is alreadyinherently high risk. Ultimately, it comes down to whether or not thecompany can bring a credible partner to the table and we see no reasonfor the average investor to buy in until that happens. Unless of courseyou are a manganese bug, in which case please have at it. [Silverax]
AngloGold Ashanti (NYSE: AU)
AngloGold Ashanti eliminates hedge book, gains full exposure to gold - October 7, 2010
That was fast, over 2 million ouncesbought back in under a month at an average price of US$1,300, whichmeans most of that was in the past few days. That much gold buying couldvery well help explain the steep rise in gold prices so far in October.This will probably go down as one of the stupidest moves in gold mininghistory along with last fall’s mea culpa from Barrick, whose similarmove a year ago was only a bit less stupid on account of it beingearlier and at a slightly lower gold price. If you should ever againlisten to either the “gold price experts” at AngloGold Ashanti orBarrick, then you deserve what the market is going to hand you. So nowthat the gold miners have finally bought back all the gold at recordhigh prices (after having sold it forward at record low gold prices),let’s hope they all start putting out predictions for lowergold prices going forward. In a similar vein, if you should ever findyourself agreeing with any central banker about gold prices, considerbanishing yourself from gold investing for the sake of your net worth.[Silverax]
Pelangio Exploration (TSX-V: PX; Pink Sheets: PGXPF)
Pelangio Exploration Announces Third Gold Discovery at the Manfo Property-24.7 g/t Over 5 Metres - October 7, 2010
These holes at Pokukrom East are decentbut not spectacular. The soil anomaly suggested wider structures thanwhat have been drilled although it is possible there are several stackedzones to account for the width. Note that the mineralization appears todip west or northwest toward the drill hole collars and therefore theholes may have overshot the center of the system. Another possibility isthat the mineralization does not extend very deep. In any case, it’sfairly obvious that there is potential for good continuity of a 25-50meter wide gold zone along a strike of at least 500 meters and to adepth of 100 meters right from surface, open in all directions. Withmodest stepouts from these initial 5 holes, this could be a 250,000 oz.gold target grading ~1 gram per tonne of gold. That is not veryinteresting by itself because a multitude of similar targets will needto be drilled on the property before we can start talking about a mine,but ideally these separate gold systems will expand to depth and alongstrike beyond the surface contour of the anomalies. With five holesremaining in the inaugural program, we can’t yet consider ourspeculation (about prioritizing the highest potential targets last) tobe finished but it’s a close call. [Silverax]
Cameco Corp. (NYSE: CCJ; TSX: CCO)
Steelworkers Vote to Strike at Cameco Mines - October 5, 2010
Although the union members at Cameco’sKey Lake and MacArthur Lake mines won’t be in a legal strike positionuntil October 22 and hope to reach an agreement before then, if none canbe reached this could have a significant impact on the uranium spotprice. A situation worth monitoring as it could lead to an overreactionand provide the fuel for a rally in the smaller uranium explorers anddevelopers. [Zurbo]
Belo Sun Mining (TSX-V: BSX; Pink Sheets: VNNHF)
Belo Sun Mining Intersects 31.90 Meters Grading 3.05 g/t Gold Including14.05 Meters Grading 5.13 g/t Gold at Volta Grande Project, Brazil - October 7, 2010
In many ways Belo’s Volta Grande projectis similar to Tocantinzinho, the flagship project of Brazauro Resourcesbefore it was acquired by Eldorado Gold (AMEX: EGO; TSX: ELD) for about$115 million or what would currently be equivalent to about $1.35 pershare. Both projects are located in Brazil, are 100% gold, grade about 1g/t, have total estimated capital costs of slightly over $300 million,and have life-of-mine estimated production of 1.6-1.7 million ounces at acash cost of around $500 per ounce.
According to our model, fair value forBrazauro based on its Tocantinzinho project was about C$2.70 per share,which means it was acquired at a roughly 50% discount to fair value.Belo Sun currently has a calculated fair value of about C$1.70 pershare, so a similar offer would put Belo at roughly C
.85 per share.[Zurbo]
General Moly (AMEX:/TSX GMO)|
General Moly Announces Hanlong’s Receipt of Key Chinese Governmental Approval - October 8, 2010
General Moly’s Mt. Hope deposit in Nevadais to our knowlege one of the only mining projects in the United Statesthat is being financed by Chinese equity investments and loans. TheChinese have of course already moved into Canadian mining in recentyears after getting comfortable in Africa and South America. Thesituation is interesting because China hasn’t had much luck with themining sector in the United States. For example, the proposed purchaseof a majority stake in Firstgold (Pink Sheets: FGOCQ) by a Chinese firmlast year was scuttled due to politicsand Firstgold subsequently filed bankruptcy. Now in the case of Mt.Hope the Chinese are not taking majority control and the Fallon navalair station is about 200 miles from Mt. Hope, so we probably won’t see asimilar national security argument being made. Yet there still might besome debate given that Firstgold owns some minor gold projects whereasMt. Hope is a major US$1 billion mining project. Mt. Hope still hassignificant hurdles to clear including securing water rights, completingthe environmental review and obtaining permits, so hopefully thepoliticians will be enlightened enough by the time financing is at handto give the Chinese investors and lenders a fair shake. In any case, theChinese are probably watching this deal with great interest in order toget a better feel for exactly what, where and how they can invest inthe U.S. natural resource sector (which would be a great way to cash intheir dollars). [Silverax]
Gold Canyon (TSX-V: GCU; Pink Sheets: GDCRF)
Gold Canyon Intersects 305 Meters at 1.03 Grams Per Tonne Gold at Its Springpole Gold Project - October 8, 2010
To make sure that I wasn’t missinganything, I’ve re-read the 2006 technical report on the Springpole GoldProject, noting that historical estimates of the contained gold were inthe 1 million ounce range. Drilling during the 1990s apparently defined asystem up to 800 meters long and 300 meters deep despite a poorunderstanding of ore controls. The current drilling program has so faridentified what appears to be the same 2 main areas of mineralization(in holes SP10-007 and SP10-008) along the Portage Zone that had beendrilled historically. There is no indication so far that these areas,about 500-600 meters apart, are continously mineralized. Indeed, thetechnical report suggests that these are pipe-like or tabular bodiesalong trend without much continuity in between. Hole SP10-016 doesadmittedly demonstrate that the system is open to the southeast but the50 meter distance from Hole SP10-008 does not represent a major stepout.
There are several other red flags here aswell. One is that half of the holes in the current program are beingdrilled in other zones on the property that historically did not proveup significant gold despite drill hole density approaching swiss cheese.Some of these holes may have decent assay results — suggesting perhapsthat numerous areas of the property are highly prospective for gold —but in the scheme of things this drilling is meaningless because theredoes not appear to be new geological or other information that isrelevant for generating new targets. I would go so far as to suggestthat drilling these other holes was a waste of money unless they resultin the discovery of new high grade structures. Something else to noticeis the following technical slip found in the paragraph describing HoleSP10-016: “the structure hosting economic gold mineralizationin the Portage Zone”. This might not seem like a big deal, but the factis that there has been no work done to determine what, if anything,constitutes “economic gold mineralization” in the Portage Zoneespecially considering it lies underneath a lake and the metallurgy/rockcomposition is complex. It’s little things like this that can sometimesillustrate management’s frame of mind and in this instance we suspectthe operative word is “chauffeur” — as in shareholders are possiblybeing taken for a ride. [Silverax]
Rubicon Minerals (TSX: RMX; AMEX: RBY)
Rubicon Minerals Announces Closing of the Secondary Offering of Its Common Shares - October 5, 2010
I don’t know about the various tipping points for Rubicon to break out above $4after the McEwen divestiture but but I doubt they will release aNI43-101 resource anytime soon and certainly not before the bulksampling and underground drilling programs (if not several of them) andrelated evaluation work are completed. The F2 zone appears to be at anintersection between fold structures creating a central (core) area ofdilation with stacked ore lenses and shoots havingpotentially-significant vertical extent but limited lateral continuity.Modeling something like this is very difficult and not within thecapability of analysts.
If we look at the F2 zone closely, we’llnote that it has been defined so far on at least 1000 meters of strikeand 1000 meters to depth in terms of a minimum “10 gram-meter” envelopewith a 3 gram per tonne cutoff. You calculate gram-meters by multiplyingthe grade of a drill intercept by its width. The dimensions of thissystem suggest something really big but when you do the math we get300,000 ounces of gold at the minimum threshold. Now clearly there arenumerous high grade structures within this envelope that can grade above1000 gram/meters but the job of someone trying to take a guess at theoverall resource potential is to determine what portion of the totalarea consists of such high grade structures. The exercise is complicatedby the stacked nature of the mineralization such that it doesn’trepresent a discrete vein.
Obviously, there isn’t 30 million ouncesof gold (which would require the entire F2 zone to grade above 1000gram-meters) so we are left with the possibility that the number issomewhere between 300,000 ounces and 30 million ounces.
You can get a feel for the range ofgram-meter values by looking at the table of F2 drill results and whilethe numbers are all over the place, a common range of intercepts seemsto be around the 50-100 gram-meter value, which would imply a possibleoverall resource in the 1.5 million to 3.0 million ounce range. But thisis irrelevant for resource modeling purposes as drilling to date hasnot been able to establish grade distribution or continuity with anydegree of accuracy.
Ideally, Rubicon would be able to definehigh grade zones that are several hundred meters long and tens of meterswide and thick. Such individual zones can contain hundreds of thousandsof ounces of gold and represent obvious targets for initial miningoperations. There are likely to be structures like this at F2 given thedrilling results to date (e.g., the “core zone”) but that doesn’t meanthey are easy to delineate. Moreover, the extent to which bulk samplingand close-up underground drilling can do so is also uncertain.
For the above reasons, I don’t think aresource estimate is the tipping point for Rubicon but rather it is thediscovery or delineation of a high grade zone or zones demonstratinggrade continuity and predictable distribution. The presence or absenceof such zone(s) at F2 is the main uncertainty that keeps the market capfrom being larger and is also possibly why Goldcorp or others have notmade a move (but if someone did so, Goldcorp would probably engage in abidding war to keep Red Lake entirely in its own hands). By contrast, itwas the recent discovery of structures with good continuity at CerroNegro that resulted in Andean (TSX/ASX: AND; Pink Sheets: ANDPF) beingacquired by Goldcorp over the summer.
Sorry for the long comment but in summarythe tipping point for Rubicon is likely to be exploration success andas such the company very much remains a discovery play that will live ordie by the drill bit. It is very possible that the “discovery” will bein an area that has already seen high grade results and certainly the“core zone” that is the target of the bulk sampling would be the topcontender — so results from this program should be watched and evaluatedclosely. [Silverax]
Andean Resources (TSX/ASX: AND; Pink Sheets: ANDPF)
Andean Provides Corporate Update - October 7, 2010
Included in this update are the resultsof recent drilling including the Mariana Central zone that confirms thesize of this ore shoot likely exceeds 1 million ounces at a grade thatcould approach 1 ounce per ton. This is world class and unlikely to bethe last such ore body to be discovered at Cerro Negro. The key to thevalue of this deposit is the continuity of mineralization that allowsthe geologists to contour a grade envelope at various gram-meterintervals. Mining this ore shoot should be as easy as modeling it.Contrast this with Rubicon (TSX: RMX; AMEX: RBY) where ore controls anddistribution are in the early stages of being understood. [Silverax]
Riva Gold (not listed yet)
Riva Closes $3.25 Million Private Placement and Grants Stock Options - October 7, 2010
This is a spinout from Wildcat Silver(TSX-V: WS; Pink Sheets: WLDVF) that is due to start trading on theTSX-V in a couple of weeks. The projects in Guyana are interesting forthe possible extension of high grade veins and bulk tonnage potential.With ~50 million shares outstanding and an implied value of 50 cents pershare based on the private placement, this company already has asignificant market cap for an early stage exploration play but theprojects appear capable of generating at least initial excitement sowe’ll keep an eye on this one as it starts trading. Of particularinterest is the Higgins zone at the Noseno project where the presence ofseveral high-grade veins has been confirmed; drilling commenced inSeptember. The thing to watch for are indications that there areadditional gold-bearing veins or styles of gold mineralization thatcould together combine to form a bulk tonnage gold deposit that can bemined by open pit. [Silverax]
South American Silver (TSX: SAC; Pink Sheets: SOHAF)
South American Silver Announces New Drill Results Extending Higher Grade Mineralization at the Malku Khota Silver Indium Project - October 7, 2010
Cross sections reveal most of the silvervalue continues to be located near surface in association with thesandwiched Malku Khota sandstone. There is a large envelope of lowergrade silver and indium that accounts for the sizeable resource of 300million+ ounces at the minimum cutoff grade but it would be aquestionable decision to include these lower grade, deeper resources inany mine plan. There also appears to be a higher grade zone toward thebottom of the system as defined by recent drilling in the footwallsandstone but it has little meaning at this point because there does notappear to be continuity with the higher grade zone near surface. Assuch, talk of resource expansion based on deeper drilling is promotionalfluff at best and an unnecessary distraction from rapid projectdevelopment at worst. On a separate note, there are open questions aboutthe relationship between the indium and silver given the occurrence ofseveral zones of indium absence associated with higher grades of silverand vice versa. Metallurgy is an open question as well givenmanagement’s apparent preference for a run-of-mine heap leach plan to befollowed by various hydrometallurgical processes to extract the metalsfrom the leach solution. Things could get costly and complicated in ahurry whereas the situation is actually screaming for a simple startupmine plan that could potentially be put in place at a relatively lowcost by focusing on the higher grade zone that outcrops at surface.Remembering that the project is in Colombia should compel managementtoward simplicity and low cost instead of ambition and grandiosity, butthe company’s statements and presentations tend to suggest an attitudeinfused with the latter. In conclusion, the Malku Khota project lookslike a valuable opportunity that can be easily screwed up by badstrategy. The updated preliminary economic assessment due at the end ofthe year (we’d be suprised if it can be completed by then) should revealmore of the strategy, good or bad. [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.
