Times have been tough for the mining sector these past three years. Liquidity remains a critical problem, with speculative investors nibbling selectively at drill hole stories but, for the most part, staying away.
Flow-through funds, which now provide investors with an enhanced tax benefit, have boosted the number of financings being announced by juniors prepared to shift their focus closer to home. Canada is still one of the best places in the world to explore, based on geologic prospectivity and political climate, and the nation is seeing an increased level of exploration activity for diamonds and platinum group metals (PGMs).
Art Ettlinger and Douglas Leishman, retail mining analysts with Yorkton Securities (Leishman has since joined Endeavour Financial), say all that is needed is a small catalyst to re-ignite interest in the resource sector. “Hints of a discovery in a sector that has been out of favour for as long as ours might be that spark,” they remark in their year-end report Avoiding Volatility with Junior Mining Companies. The pair go on to highlight 10 companies trading in the range of 33-72, whose shares they expect will perform well in 2001.
Backed by solid management and prospective properties, the analysts believe these companies have the right ingredients to deliver a discovery of high-value.
Their top 10 list for 2001 includes
Recent mini-bulk sample results from the K-252 body, one of three kimberlites discovered in 2000, indicate it is one of the best Alberta kimberlites yet. A 1.28-tonne drill sample returned a 0.85-carat parcel of diamonds larger than 0.8 mm for a preliminary grade of 0.662 carat per tonne.
K-252 is covered by up to 77 metres of overburden and is represented by a complex geophysical anomaly estimated to be 150 metres in diameter. The kimberlite has two distinct phases: a fine-to-medium-grained volcaniclastic kimberlite and a kimberlite breccia. “Depending on the diamond quality, K-252 has yielded the first diamond grade (albeit at a relatively small sample size) with a realistic chance of being economic,” analysts say.
Ashton identified K-252 as a drill target using an airborne electromagnetic (EM) geophysics survey, followed by ground EM and gravity. Unlike the other 34 kimberlites, which display a sharp contrast against the surrounding mudstone county rock, K-252 is the first kimberlite discovered by the Ashton joint venture to have a weak magnetic signature.
“The recognition of weakly or non-magnetic kimberlite detectable by EM and gravity techniques is a major development that will allow for the discovery of new pipes,” they write.
Further sampling of K-252 and field investigations of additional geophysical targets are planned. The Buffalo Hills project is a joint venture, with Ashton and
Ashton is also exploring for diamonds in Canada’s Far North and in Quebec’s portion of the Superior Province.
Ashton is recommended as a speculative buy. It currently trades at 69 in a 52-week range of $1.50-0.55 and has 35.9 million shares outstanding, or 38.2 million fully diluted.
The buy recommendation is based on the arrival of David Watkins as president early last year. Watkins is a former vice-president of exploration for Cyprus Amax, and Leishman and Ettlinger are betting his experience will pay dividends for Atna.
Atna, however, has not forgotten its exploration roots. The company recently acquired rights to the Monterde gold-silver open-pit/ heap-leach prospect in northern Mexico and the Lone Pine polymetallic project in Arizona.
Atna began a 12-to-15-hole drilling program at Monterde before Christmas, and initial results are expected in the first quarter of 2001. The Lone Pine project centres on a small, past-producing, high-grade copper-zinc mine that has never been drill-tested, something Atna intends to do this year.
“While we view Lone Pine and Monterde with interest, we believe the greatest growth prospect for Atna lies with its ability to grow through acquisition,” write the analysts.
News that
Operator Navigator can earn a half-interest from Canabrava by spending $1.75 million over two years. The junior has already spent $1 million, and a winter program, now in progress, is budgeted at a further $1 million.
Based on a review of regional airborne magnetic data, the pair staked 150 sq. km of ground, referred to as the Kat claims, near the Attawapiskat cluster of 18 known kimberlites. In addition, the 12-sq.-km Ogoki claim block was staked to cover five magnetic anomalies, whereas the 50-sq.-km Caribou block was staked in a region that returned positive indicator minerals. The Caribou claims also cover strong magnetic responses identified from regional airborne data.
In the process of completing more than 47,000 line km of airborne magnetic surveys, Navigator has identified numerous targets. Priority targets on the Kat claims will be followed up with ground geophysics in preparation for drilling in early February. Drilling is planned for 10 targets, at least half of which are near De Beers’ Victor pipe.
Ettlinger and Leishman note that investors in either company will gain exposure to more than the Severn project. Canabrava has a large portfolio of diamond exploration projects elsewhere in Ontario and Brazil.
Navigator’s other projects include the Thye Lake nickel-copper property in the Northwest Territories, which was recently optioned to
Navigator has 17.7 million shares outstanding (25.3 million fully diluted) and trades in a 52-week range of $1.20-37, whereas Canabrava, with 36.5 million shares outstanding (39.9 million fully diluted) is trading in a 1-year range of $2.60-30.
On the basis of an upcoming drill program on the Blacktop high-grade polymetallic massive sulphide showing at the Fox property in southern British Columbia, Jerry Blackwell’s
For several years, Gitennes had focused on the Virgen gold property in Peru. This project was subsequently sold to
“Gitennes is well-managed, spends cautiously and seems always to come up with a project of merit,” state Ettlinger and Leishman. “The location of Fox is such that any drill success will attract considerable investor interest.”
Teck’s involvement has been in the form of option agreements on specific projects, jointly funded prospecting initiatives, and private placements tied to later option rights.
Mansfield conducts regional exploration on its own behalf using a team led by Thomas Richards, whose approach is old-fashioned prospecting.
Mansfield’s three key properties lie in a relatively isolated part of Argentina, some 435 road kilometres west of Salta. Teck is drill-testing the El Camino prospect on the Cerro Samenta property. Mineralization in the El Camino zone is separate and distinct from the previously tested porphyry copper-molybdenum prospects and may represent the upper levels of an Olympic-Dam-type system. Teck holds an option to earn a half-interest in Cerro Samenta.
Recently, Teck carried out mechanized trenching at the Rio Grande property, where the initial target area is defined by intense potassic-altered volcanic rocks, with zones of albite-diopside and magnetite in an area greater than 1 sq. km. Initial hand-trenching returned 96 metres of 0.58% copper and 0.98 gram gold per tonne.
The mechanized trenching has exposed wide areas of oxide copper. Leishman says large areas of intensive brecciation may imply a vertical component. Under Mansfield and Teck’s previous model, mineralization was thought to be hosted in a relatively flat-lying package of volcanics, thus putting limits on the thickness of any large zones. Observations from the trenches contradict this theory, says Leishman.
Teck is preparing to drill Rio Grande. The major can earn a 55% interest by spending $4 million and paying $1.1 million over four years.
At the nearby, wholly owned Arizaro property, Mansfield is carrying out mechanized trenching on a similar-style prospect.
“If Mansfield’s exploration model is correct, there is a strong probability of drill success, which could lead to a significantly higher share price,” says the pair of analysts. Mansfield is trading at 77-72 in a 52-week window of $2.25-30. The company has 21.8 million shares outstanding, or 26.8 million fully diluted, and $3.2 million in cash.
At 72,
Impala can earn a 60% interest in River Valley by spending $6 million over five years and paying $215,000 over four years. The property covers 40 km of strike length along the southeastern, southern and western contacts of the River Valley intrusion. The PGM potential of this complex intrusive body has been demonstrated by
An area selected for the first 12,000 metres of drilling is an olivine-gabbronorite horizon, parallel to and within 500 metres of the intrusive contact. This target is similar to the one being drilled on Pacific North’s property. Holes will be spaced every 200 metres along the 4.5-km extent of the mapped contact. Twelve holes totalling 2,700 metres were recently completed.
After exploring the East Lake Bull property, in the late 1990s, Mustang granted Falconbridge an option to earn a half-interest by spending $6 million on exploration over four years. The major currently mines, mills and smelts PGMs, including custom feed, at its nickel operations in Sudbury, 90 km east of East Bull Lake.
The property covers 90% of the 22-km-long East Bull Lake intrusive. Mustang has identified several target areas along its margins. To date, 31 holes have been drilled. Eleven tested the Bull Frog zone along the intrusion’s southern margin, pulling 20 metres grading 1.6 grams combined PGMs and 12 metres grading 2.53 grams PGMs.
Mustang is recommended as a speculative buy “based on [its] current drill program at River Valley and on the renewed exploration at East Bull Lake.”
The analysts go on to say that “the current strength in the PGM markets should focus attention on the company with exploration success at either project.”
Mustang recently topped up its treasury with a $1.1-million special-warrant financing at 70, so that it now holds $2.8 million in cash and roughly 17 million shares outstanding, or 20.1 million fully diluted. The issue trades in a 1-year range of $1.60-38.
In September 2000,
“This is arguably one of the most significant drill intercepts of the past year and has led to our recommendation of a speculative buy for Philex Gold,” say Ettlinger and Leishman. The analysts note that they would not normally recommend a company whose management they have never met, nor whose property they have never visited, but they take some measure of comfort in the fact that
Anglo can earn an initial 40% interest in the 51.9-sq.-km property by spending $2.2 million over five years. The major can then increase its stake to 70% by completing a bankable feasibility study.
Subsequent to the announcement of results from hole 6, Philex traded as high as $2.11 before plunging on the release of further results in November that failed to meet market expectations. Hole 7 was collared from the same pad as hole 6 but was swung 180 to the south, cutting 280 metres of 0.46% copper and 0.4 gram gold. Hole 9 was swung 90 to the west and cut 421 metres of 0.56% copper and 0.9 gram gold.
Yorkton’s analysts are encouraged by these results and state that “the length of potentially ore-grade mineralization being drilled suggests a very large and strong hydrothermal system.”
News from the project is only being released on a quarterly basis. “Consequently, periodic indifference by the market during the absence of news could result in excellent buying opportunities,” say the analysts. Philex has 40.2 million shares outstanding, or 41.6 million fully diluted.
At the time that Ettlinger and Leishman made their picks, Philex was trading at 40. It has since climbed to 70.
At 23,
The company has 7.9 million shares outstanding (10.2 million fully diluted) and about $400,000 in cash. It trades in a 52-week range of 51-20.
Rimfire is targeting specific geological terrains in British Columbia, the Yukon and Alaska that have the potential to host big, high-grade deposits. The company’s two key properties in British Columbia are the RDN and Thorne.
The RDN property is 40 km northwest of Eskay Creek and hosted by the Jurassic Hazleton Group volcanics, which are considered to be correlative to the rock units at Eskay Creek. The property is under option to
During last year’s field season, Newmont completed prospecting, mapping and geophysical surveys over most of the property. This work identified several EM conductors.
In the Pogo district of Alaska, Rimfire has five properties under option to
In the fall, a 4-hole program was completed on the Boundary target, 16 miles east of the Pogo deposit. The best result was 24.3 grams gold over half a metre.
Virginia is recommended “for the risk-tolerant investor wanting to speculate on the discovery of new mineral deposits in northern Quebec.”
Virginia has interests in 24 separate projects in Quebec covering 2,784 sq. km. Sixteen are under option or joint-venture agreements. Two that caught Ettlinger and Leishman’s eye are the Payne Bay and Gayot projects. Payne Bay project is a 50-50 joint venture with
A six-hole drilling program completed in the fall targeted geophysical conductors associated with two of the discordant lobes. The first two holes tested the Central lobe and returned a number of uneconomic intervals of nickel mineralization. The remaining four holes tested the Muskox lobe. Hole 3 intersected 321 metres grading 0.48% nickel and 0.18% copper over its entire length.
Virginia trades at 70 in a 52-week range of $1.58-53.
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