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Resource Report: Undervalued and Barely on the Radar: Keep an Eye on These Juniors

0 Comments|February 12, 2007

Promising gold and zinc properties suggest value in two juniors.

Promising gold and zinc properties suggest value in two juniors.

I like to reseed my prospect pool regularly, and spend probably well over a dozen hours each week reading press releases, talking to IR people and presidents of companies in order to make sure I have plenty of upside potential in the pipeline. Extracting wealth as an investor is a lot like mining itself: You make the many of the most vital decisions during the exploration stage.

One afternoon, I made a minor Google detour and stumbled upon the website of a Vancouver-based IR company called Contact Financial. Funny how a little Googling around can lead you astray for hours. Contact hasn't been around a long while but as far as IR firms go they've populated their client list with some exciting companies. As ever, I like my junior resource companies undervalued, thoroughly mineralized and just barely on the radar. That way, when people start catching on, there is but one direction to go.

Cassidy Gold Corp. (TSX: V.CDY, BullBoards) is in one heck of an interesting position now, and could well be one of the hottest investment opportunities out there in the junior exploration sector. The "but" in the preceding sentence lies in a small legal tangle Cassidy has stumbled into, which has caused the company's stock to languish since May last year when it was trading at highs around $1.20. The disgruntled previous operator at Cassidy's Kouroussa North property in Guinea brought on the court action - which is of dubious merit, to be sure. More on that later.

It's no wonder that the claimant, Guinea Golden Mines S.A.R.L. is anxious to nab the property back. Kouroussa North has ample gold in the ground, with assays returning high grade over notable distances. The grades here are so far above the average that one can't help but take note.

The last technical report on the property was filed in October 2006, with an initial resource estimate of 4.4 million tonnes ore grading an average 2.4 g/t, for a total 337,000 ounces indicated. The independent Qualified Person (QP) who wrote the report recommended further expansion of the resource base, and the company has since continued an aggressive drill program, with excellent results.

Without pulling out a calculator and averaging distances and grades, it is clear that the new assays are reasonably close to, if not better than the old are. Grades like16.65 g/t Au over 13 meters, 4.18 g/t Au over 29 meters and 7.46 g/t Au over 32 meters mark consistently appearing highs, while other assays maintain a healthy average.

Furthermore, the technical report uses language that is, from a "43-101 compliant" standpoint, highly encouraging. For example, "Cassidy has continued an aggressive exploration campaign over the last three years which has resulted in significant expansion of the global resource," and, "The knowledge acquired to date and excellent exploration success over the last three years confirms the considerable potential of Kouroussa and surrounding areas." Those surrounding areas are all 100% owned by Cassidy.

There is, however, the nagging matter of the outstanding legal action. Although not qualified to pass judgment on the matter, the QP also had something to say about that: "During the year ended October 31, 2004, the permit for the Property was not renewed by the Ministry of Mines, Geology, and the Environment of the Republic of Guinea pursuant to its mining code. A new permit was granted in respect of the Property in favour of Cassidy which now owns a 100% undivided interest."

Cassidy is presently trading at about 66 cents. A cursory scan of the 30- and 90-day averages suggest that most of the skittish investors are now out; recently, increased volumes seem to be leveling out the stock price, or even pushing some upward mobility into CDY. At any rate, the assays suggest a company that deserves more attention from investors than other firms with a fraction of the good fortune and hard work.

Then there's Firestone Ventures (TSX: V.FV, BullBoards). Here's one of those little companies that keeps on keeping on for months and months and then bingo bango, they finally get it right. After acquiring the option to purchase a 100% interest in the Torlon Hill zinc and lead property near the city of Huehuetenango, Guatemala, the company quickly initiated a drill program aimed at delineating a 43-101 resource estimate.

The results were so impressive the company's shares surged to 73 cents from 41 cents in two days and experienced trading volumes unheard of in the company's history. The first set of assays included 33 meters grading 22% Zn, 28 meters grading 11.2% Zn and 53 meters grading 8% Zn. A further 21 holes were drilled before Christmas and in January returned similar results.

Although the Torlon Hill property has produced lead on a small scale since the 16th century, its potential for zinc had not been investigated prior to a field program carried out by Redhawk Resources Inc. in 2001. Redhawk made some progress, but never made it to the drilling stage.

Since the results of the 2006 exploration season were made public, it has become clear that Torlon Hill has outstanding potential. Or, as the independent geologist John Cleary stated in his 43-101 compliant technical report on the property (dated January 11, 2007), "The high-grade nature of the zinc mineralization, the surface exposures, and the potential for expansion suggested that there could be significant potential for an open-pit, economically mineable mineralized zone."

Firestone recently took a bounce up again after releasing assay results from a separate project in the Yukon called the Sonora gold-silver-copper project, for which it has an option to earn an 80% interest. The company halted trading on January 15th this year and announced intercepts of 6.21 g/t Au over 15.3 meters. Although this was the exception rather than the rule, this first phase of the drill program is rather like reconnaissance work. 2007 will bring more attention to those areas that assayed well, as well as other targets of interest that have seen encouraging sampling.

Both of these companies are exploring in exciting times. It seems only weeks ago that the ranks of the gold bears had grown precariously dense, and were threatening to interrupt what should otherwise be a phenomenal bull year. Now gold is at its highest point in six-months. It looks increasingly likely that prominent gold bulls like Bill Cara (who in early January predicted $750 gold this quarter) are going to prove the bears wrong.

Doug Hadfield is the Chief Editor of the Resourcex Investor, an internationally distributed newsletter specializing in identifying as-yet-undiscovered resource companies representing the best in their class. For more information, visit the website

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