Junior companies are facing the struggle of their lives during this prolonged industry downturn, and the general view is that only the brightest and the best will survive. But even juniors with competent management and good properties are facing potential equity dilution as investors abandon the resource sector to take part in the technology boom.
Mining analyst Graeme Currie of Canaccord Capital makes no bones about these harsh facts of life in his recent research report on
Despite this market caveat, Currie has taken a shine to Rubicon and its Canadian mineral properties, three of which are to be drilled shortly. “We view this property portfolio as having excellent exploration potential, but it is clearly the exceptional quality of the company’s management team that stands out. By and large, it is ahead of most of the competition’s management in the junior mining sector.”
Currie rates Rubicon a “speculative buy” for risk accounts. The junior has 15.6 million shares outstanding (19.2 million fully diluted) and working capital of $350,000. It has been trading in a 52-week range of 75 and 37. About 30% of the company’s shares are held by management. Its officers include three well-known names in exploration: Garfield MacVeigh, David Adamson and Michael Gray. On the board level, it boasts experienced geologists Douglas Forster and Craig Nelsen.
Although Rubicon holds ground considered prospective for nickel in Canada’s Arctic, it is best-known for its sizable land package in Ontario’s Red Lake gold camp, its Point Leamington polymetallic project on the north-central coast of Newfoundland, and the Palmer volcanogenic massive-sulphide prospect on the northern end of the Alaskan Panhandle.
Rubicon is the largest land-holder in the Red Lake camp, with a package of ground covering 50,000 acres. It has focused its efforts on the Dorion-McCuaig corridor, which structurally appears to be a western extension of the Campbell-Red Lake system.
“In order to expedite exploration,” Currie writes, “Rubicon just completed a letter-of-intent to enter into an option agreement that brings a new participant into this camp, one that is recognized worldwide as a premier gold company: AngloGold.”
The South African major has an option to earn a 60% interest by spending US$3 million over five years. “As of yet, the first year’s budget has not been finalized, but, at the least, we expect a 15,000-ft. drill budget before the end of the first quarter of 2001,” Currie notes.
Meanwhile, in Newfoundland, Billiton has signed an agreement allowing it to earn up to a 70% stake in the Point Leamington deposit. To earn this interest, the company must fund the project to feasibility and provide Rubicon’s share of capital. This option deal also covers Rubicon’s nearby Lewis Lake project.
Previous owners have already outlined a large deposit at Point Leamington, which includes a higher-grade zone of 1.6 million tonnes grading 7.34% zinc, plus copper, gold and silver credits. Recent drilling has returned encouraging results, including 21.7 metres of 5.59% zinc (plus copper, gold and silver) and 16.7 metres of 4% zinc, including 7.1 metres of 6.85% zinc and 0.39% copper plus 3.1 grams gold and 56.3 grams silver per tonne.
“We believe that the opportunity to expand the zinc resource and to define a copper horizon in this geological environment is very good,” Currie notes.
Last year’s drilling program at the Palmer project returned mixed results, though it did confirm an exploration model similar to the Myra Falls polymetallic deposits on Vancouver Island. More drilling is planned for later this year.
Currie views Rubicon as having good prospects, despite the lackluster market for juniors. “At a current market cap of $8.5 million, we view this junior as providing speculative leverage not only to a number of good prospects, all of which are to see drilling programs in the coming two quarters, but to a management team that should command a high degree of respect.”
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