The Northern Miner asked five analysts of the junior mining sector for their recommendations and predictions for 2003. The list includes John Kaiser, publisher of the Kaiser Bottom Fishing Report, Donald Poirier of First Associates, Robert Bishop, publisher of the Gold Mining Stock Report, James Mustard of Haywood Securities, and Lawrence Roulston, publisher of Resource Opportunities.
For this, the first of several instalments, we asked Kaiser and Poirier for their views.
John Kaiser
The newsletter publisher believes the resource sector is on the verge taking off, provided the price of gold exceeds US$375 per oz.
“I think we are going to see a gold spike that is going to ignite a broad-based junior exploration bull market,” he says. “I wouldn’t care to predict what gold will end up being in the long run, but if it goes above US$375, you will see all of these semi-dead companies come to life. There will be a lot of money pouring into the market.”
He considers US$375 per oz. the “magic number” above which a lot of mineralized zones become economic.
“I believe the diamond market will be slow during the first quarter and come to life around the time of the annual convention of the Prospectors & Developers Association of Canada [in March]. Diamonds are, of course, inversely related to gold. When gold is up, it’s because things are going wrong in the world, and luxury items such as diamonds fall on the priority scale. But in terms of exploration, I think diamonds will do better in the latter half of the year than in the first half. The first half will be dominated by gold plays.”
Among Kaiser’s recommended buys is
“In the diamond sector, I think this will be an important year for Mountain Province. De Beers will become more aggressive about turning this into a mine. In the next month or so, we should see revised model numbers for that project, and if these are good, I’m looking at a $3-5 range at least for Mountain Province.”
The company has an interest in the AK diamond property, south of the Lac de Gras area in the Northwest Territories, 300 km northeast of Yellowknife, near Kennady Lake.
The project is owned 51% by De Beers, 44.1% by Mountain Province and 4.9% by
Exploration has uncovered eight diamondiferous kimberlites and several sills and dykes on the property. In last year’s winter program, seven large-diameter holes were drilled into the Hearne and 5034 kimberlites, yielding 1,665 carats greater than 1.5 mm in size. The sample included a 9.9-carat stone, recovered from the 5034 body.
An assessment of the diamonds collected from all drilling programs (439 carats in 1998; 2,508 carats in 1999 and 1,665 carats in 2001) prompted De Beers to undertake additional bulk sampling early in 2002. Five large-diameter holes were drilled into the northern lobe of the Hearne kimberlite, resulting in the recovery of 1,174 carats. The three largest diamonds weighed 8.7, 6.4 and 4.9 carats. In the 1999 and 2001 bulk samples, the largest diamond, in each case, weighed 3.4 carats.
The diamonds were sent to the Diamond Trading Company in London, England, for valuation. Those values will be used to model the values per carat in Johannesburg. Then revenue-per-tonne modeling will be performed, taking into account both the updated grade information and the diamond values. The modeled values per carat and modeled-revenues-per-tonne values for the 5034 and Hearne pipes are expected in early 2003.
More recently, Mountain Province received microdiamond results from the Kelvin kimberlite body and from the MZ Lake Sill 73. The counts for the Kelvin body are similar to those observed at the 5034 and Hearne pipes. Only a small amount of kimberlite from MZ Lake Sill 73 was tested, resulting in six microdiamonds. Kelvin and MZ Lake are 9 km northeast and 20 km northwest, respectively, of the Kennady Lake area, which hosts the Hearne, Tuzo and 5034 kimberlite pipes. This winter, De Beers will carry out ground magnetometer and gravity surveys over the Kelvin and Faraday kimberlite bodies and their associated dyke systems. Faraday is 3 km northeast of Kelvin.
Kaiser also has his eye on
The junior is a spinoff of Major General Resources, shares of which were consolidated on a 1-for-3 basis; that company was then renamed
Diamonds North holds more than 4,050 sq. km on Victoria Island, Nunavut. These properties include Blue Ice, Hadley Bay, Washburn, Yankee, Wellington and Holman.
In mid-December 2002, Diamonds North tabled encouraging sampling results from its wholly owned Blue Ice property. Samples were collected from the Sculptor, Pegasus and Zeta kimberlites, along the central portion of the Galaxy Structure. Results from all three kimberlites show that the central part of the 20-km-long Galaxy structure is diamondiferous, and this area will be explored in 2003. The coarse-grained kimberlite material at Pegasus remains a priority for the company.
At the Hadley Bay property,
The Washburn property is a joint venture between Diamonds North, with 52%, and
At the Wellington property,
At the Holman property, Diamonds North is involved in a joint-venture agreement with
Meanwhile, Diamonds North holds a 67% interest in the Yankee property, a joint venture with
“These guys have been acquiring deposits that were the focus of promotions in the past and that actually have ounces or base metals in the ground. This is the kind of stock that will come alive in a big way, if you get a really bubbling resource junior market.”
Eagle Plains holds 14 properties in British Columbia, 10 in the Yukon and one in the Northwest Territories. Among its gold properties are Abo, Copper Canyon, Kokanee Creek McQuesten and Sprogge.
The Abo project, 130 km west of Vancouver, spans 18.6 sq. km and includes several gold occurrences associated with intrusions.
The 17.4-sq.-km Copper Canyon project, about 65 km southwest of Telegraph Creek, B.C., features a porphyry gold-copper occurrence. The ground is contiguous with the Galore Creek mineral resource, which is pegged at 2
34 million tonnes averaging 0.55% copper and 0.35 gram gold per tonne.
Near Nelson, B.C., is the Kokanee Creek project, where, in 1997, five holes intersected near-surface gold mineralization. Hole KC97-02 cut 26.11 grams gold over a 0.7-metre interval and 13.52 grams gold over 1.4 metres. Field work suggests the mineralized zone may be open to the north, south and west.
In the Yukon, Eagle Plains optioned the McQuesten property to
The Sprogge project is in the Yukon, 11 km east of the road to the Cantung mine. The property hosts three main bulk-tonnage targets. The Kangas zone consists of skarn and replacement-style mineralization in calcareous siltstone. The Discovery zone hosts gold-bearing pyritic mineralization within a quartz monzonite dyke and adjacent calcareous siltstone. The Confluence zone hosts coarse clastic rocks that exhibit fracture-controlled chalcedonic veining.
In the East Kootenay region of British Columbia, Eagle Plains holds several properties with Sullivan-type base metal potential. Though economic mineralization has yet to be discovered, exploration crews have outlined promising targets. The company also holds title to gold properties in the Cranbrook area, which it intends to explore this year.
Also, the junior has been looking for volcanogenic massive sulphide (VMS)-type polymetallic mineralization in the Pelly Mountain area of south-central Yukon.
Writes Kaiser: “They are trying to build up a high-grade vein gold deposit in Quebec but have also been accumulating prospects in Atlantic Canada, as well as Ontario and Quebec.”
The company holds a half-interest in the Clearwater project in Quebec. Provincially owned Soquem owns the other half, though Eastmain is spending $2.5 million on drilling to earn half of Soquem’s interest. Once Eastmain has earned that additional 25%, Soquem will have the option of earning back the interest by spending $3 million on exploration over five years. A 3% net smelter return royalty (NSR) held by
In late 2001 Soquem estimated Clearwater had an indicated resource at 973,000 tonnes grading 8.3 grams gold per tonne, plus 510,000 tonnes at 3.7 grams in the inferred category. Grades higher than 34.28 grams per tonne (1 oz. per ton) were cut; the uncut grade of the indicated resource is 9.6 grams, while that of the inferred is 3.8 grams. The estimate will be revised after last year’s drill results are compiled.
In the course of diamond drilling, Eastmain has expanded the Eau Claire zone 300 metres laterally and 200 metres vertically. Of the 18 holes drilled, 15 intersected 107 gold-bearing veins, and 25 of these vary in thickness from 1.5 to 9 metres and range in grade from 5.03 to 22.8 grams gold per tonne. The partners intend to complete a second, 10,000-metre program this year in hopes of boosting the gold resource at Eau Claire to at least a million ounces.
In Ontario, Eastmain can earn a 100% interest in the Plummer Additional property from
Eastmain’s Railroad project, near Bathurst, N.B., is a new base metal VMS discovery, next to Noranda’s 20-million-tonne Heath Steele mine. Railroad consists of 60 sq. km covering the mine horizon of the Brunswick zinc deposits. The junior acquired the project from BHP Minerals in 1997, in exchange for a royalty.
Also promising is the Abitibi Extension project in Ontario, which comprises three properties with untested geophysical anomalies: Nett River, North French and Chabbie.
At 41, Kaiser recommends
“Orezone has a lot of stock out, about 80 million shares, but it also has a couple of projects that are million-ounce-plus deposits,” he says.
The flagship property is Essakan, the largest gold deposit in Burkina Faso, and one in which
Orezone has an option to earn a 100% interest in the Sega property from
The junior also stands to earn a 100% interest in the Bombore property, which has one of the most advanced oxide gold deposits in Burkina Faso. Total oxide resources are pegged at just over 1 million oz. gold averaging 1.5 grams gold. Orezone will explore higher-grade areas in an attempt to advance the project toward open-pit production within the next two years.
About 6,000 metres of drilling are planned on the company’s other projects, beginning with Bondi, which has a gold-in-soil anomaly. Bondi is adjacent the Golden Hill property, where Orezone intersected 22 metres averaging 11.4 grams gold per tonne in the Peksou zone.
Kaiser’s picks last year included the following:
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Donald Poirier
The First Associates analyst is cautiously optimistic about the coming year.
“The environment feels a lot better than it has in previous years,” he says. “The interest continues to be in advanced projects and in intermediate-sized and gold-producing companies, as well as select junior exploration companies, [though] the market confidence just isn’t what it was in 1995 or 1996.”
Poirier believes overall investor confidence has been eroded by the crash in high-tech stocks and corporate accounting scandals, and he predicts the market will stay that way until it becomes obvious again that mining stocks are profitable.
At $3.89, Poirier believes
The company, formed a year ago by the merger of Oliver Gold and Hastings Resource, is developing the Ona-Puma nickel laterite project i
n north-central Brazil.
Under an agreement with
Canico has updated the resource calculations for the laterite deposit. Based on a nickel cutoff grade of 1.5%, Puma West’s inferred resource is estimated to be 33.7 million tonnes grading 2.21% nickel, while, at a 1% cutoff, the figure rises to 54.2 million tonnes averaging 1.84% nickel. The new calculations are based on the results of 220 diamond drill holes completed on Puma West as part of Canico’s 2002 evaluation program.
The drilling program has now moved to the nearby Ona nickel laterite deposit, which is much more extensive than Puma. Watts Griffis & McOuat estimate Ona has an inferred resource of 22.6 million tonnes grading 2.1% nickel at a 1.5% nickel cutoff, and Canico believes these resources can be significantly increased.
The laterites appear to be suitable for conventional pyrometallurgical processing, and a full feasibility study is planned for 2004.
In November, Glencairn agreed to buy the low-grade Bellavista gold deposit in Costa Rica from
In June, Glencairn backed out of an earlier deal to buy Bellavista after a presidential decree banned open-pit mining in the tropical country. After assurances that the government would support the mine’s development, Glencairn recommitted to acquiring the asset.
An epithermal gold-silver deposit, Bellavista hosts 11.2 million tonnes grading 1.54 grams gold. The resource can support annual production of 60,000 oz. for more than seven years.
A feasibility study pegged total operating costs at US$179 per oz. and capital costs at US$28 million. At a gold price of US$325 per oz., the project has a pretax internal rate of return of 19%, and a net present value of US$20.2 million at a discount rate of 5%. The project received all necessary environmental approvals in February 2001.
Glencairn has engaged Standard Bank London to provide up to US$19 million in limited-recourse project financing and is considering ways to raise the remaining US$9 million, including equity financing or a seeking out a minority partner. Another option would be to engage a mining contractor, which would reduce necessary capital by US$5 million.
In December 2002, the company bought privately owned La Plata Minerals, which owns a porphyry copper and precious metals deposit 20 km northwest of Durango, Colo. Gold-Ore issued 2.5 million shares and assumed a US$35,000 debt, which it has repaid.
As well, the junior can earn a 100% stake in the San Marcial silver property in Mexico’s Sinaloa state by spending US$600,000 on exploration and paying US$633,000 over five years. The deal is subject to a 3% NSR.
The company boasts a strong management team headed by President Robert Wasylyshyn, who previously managed the projects of
Glen Dickson, chairman, formerly presided over
At $1.28, Poirier recommends
The company holds numerous projects and joint ventures in Quebec and is one of the best-funded juniors in the province. The total exploration budget for 2002 at these projects was $8 million, most of which was spent by Virginia’s partners.
The properties include Poste-Lemoyne, held equally with Toronto-based
Another key gold venture in the province is La Grande Sud, near the massive hydro facilities east of James Bay.
At its wholly owned Noella property, in the Caniapiscau area of the James Bay region, mechanical trenching outlined a prospective gold corridor in the Bear Iron formation. Cambior retains a 1% NSR royalty on the property, half of which can be bought back for $500,000.
Meanwhile, results from field work on the Gayot project, north of the Caniapiscau Reservoir in Quebec, have uncovered two new zones of nickel-copper-palladium-platinum mineralization. A work program with a budget of $1 million is scheduled for winter 2003, and will consist of airborne and ground geophysical surveys followed by diamond drilling.
Poirier’s last ‘pick’ is
The most recent resource estimate, released in November 1999 and based on 181 diamond drill holes, was 96.2 million tonnes grading 1.6 grams gold and 5.8 grams silver, or 4.9 million oz. gold and 18 million oz. silver. The figure is based on a cutoff grade of 0.5 gram gold per tonne.
Angostura, which sits near the Venezuelan border, attracted attention in mid-1998, when an employee of the project’s drilling contractor was kidnapped by the infamous Revolutionary Armed Forces of Colombia (FARC). The driller and his subsequent replacement were eventually freed unharmed, and exploration resumed, albeit at a much slower pace.
The newly elected government has taken a hardened stance against armed rebels, and when Greystar feels the area is secure it will begin a 20,000-metre drilling program, plus 1,200 metres of drifting and bulk sampling.
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