The Northern Miner asked several followers of the junior mining sector for their recommendations and predictions for 2003. Last week we heard from John Kaiser and Donald Poirier. This week, James Mustard of Haywood Securities and Robert Bishop, publisher of the Gold Mining Stock Report, offer their recommendations.
James Mustard
The Haywood Securities analyst points out that the resource sector is once again receiving a lot of attention, thanks to several interrelated factors: rising metals prices; concerns over the U.S. economy and dollar; the possibility of armed conflict in Iraq and other areas; and higher oil prices.
“We’ve seen a lot of companies raise financings, which six months ago they would not have been able to do,” he says. “A clear example is
Although Mustard leans toward gold, he also recommends two diamond stocks —
“Diamonds North is young and well-managed, with a quite attractive capital structure,” he says.
The company was spun off from Major General Resources (now Commander) and is managed by Mark Kolebaba, formerly of BHP.
Chief among Diamonds North’s assets is the Victoria Island project in the Northwest Territories, which has a significant number of geochemical and geophysical targets.
Ashton Mining of Canada is also pursuing some promising targets. Since 2001, the company, together with Quebec Crown corporation
Bulk samples were taken from each of the Renard 2, 3 and 4 bodies. In total, 11.34 carats of diamonds measuring greater than 0.85 mm in two dimensions were recovered from 12.13 tonnes of material, and more recently, a 2.5-tonne sample from the Renard 2 body returned 1.62 carats measuring greater than 0.85 mm in two dimensions.
During the winter, the partners intend to spend $6 million and collect 40 tonnes of additional material from Renard 2, 3, 4, 5, and 6, their objective being to amass a cumulative sample of 10 tonnes or greater from each of these bodies. Delineation drilling will also be performed on the Renard 2, 3, 4, 5, 6 and 8 bodies.
Meanwhile, at the Slave joint venture property in the Coronation Gulf region of Nunavut, Ashton and partner
Ashton has discovered five diamondiferous kimberlites in the region, three of which are on the joint venture’s holdings.
Plans call for heavy mineral sampling and, if warranted, follow-up drilling. The work will begin in late March or early April, after ground geophysics have refined airborne anomalies.
The joint venture holds about 2,380 sq. km of ground in the Northwest Territories and Nunavut, mostly in the Coronation Gulf region.
Ashton holds an 89.4% interest in the joint venture; Pure Gold, the remainder.
At the Buffalo Hills property in north-central Alberta, Ashton will drill four geophysical anomalies, the strongest of which measures 400 by 400 metres. These targets are strong electromagnetic resistors associated with a weak magnetic response — a geophysical pattern similar to the K252 kimberlite, which returned about 55 carats per hundred tonnes. The other 35 kimberlites on the property were identified by their high magnetic signatures.
Ashton has a 45% stake in Buffalo Hills, while Pure Gold has 10%; the remaining 45% is held by Alberta Energy Co., a subsidiary of
The low-sulphidation epithermal gold prospect was previously held by Kennecott, a division of
Kennecott has outlined a 270,000-oz. resource at the Discovery zone. The property was drilled previously, and Midway Gold saw some high-grade holes in the database, which it followed up with selective diamond drilling. “In the process, the company established a degree of continuity that perhaps didn’t exist before,” says Mustard.
Last year, the junior carried out drilling designed to define a resource at the Discovery and 121 zones. Highlights include 37.2 metres averaging 3.97 grams gold per tonne, starting at 39 metres down-hole, in hole 269 on the 121 zone. This included a 3.8-metre section that averaged 26.13 grams gold. On the Discovery zone, hole MW-260 cut 7.3 metres averaging 18.12 grams gold starting at 92.3 metres down-hole, while hole MW-253 cut 1.5 metres of 131.4 grams gold starting at 87.5 metres down-hole.
With Newmont as a partner, the joint venture has increased its land position to 125 sq. km. The claims now cover the projection of the Discovery zone trend, a distance of 23 km.
“Newmont has conducted an extensive regional survey, including airborne geophysics, and identified up to nine outlying targets. Several of those are being tested by reconnaissance-style drilling.”
Roughly 1,500 metres of core drilling and 7,600 metres of reverse-circulation (RC) work are planned for the first quarter.
Another of Mustard’s recommended buys is
By the end of the first quarter, the company expects to have seven drill programs under way, with funding coming from various joint-venture partners, including
In the Red Lake area of Ontario, the Newman-Heyson and Nova-Co gold properties are being explored under a joint venture with Kinross, which can earn a 51% interest by spending $5 million on exploration and making cash payments to Wolfden.
Last year, a first-phase drill program intersected a gold zone while testing a gold-in-soil geochemical anomaly. Hole RLK-02-05 cut a quartz-carbonate sulphide shear zone and returned 9.24 grams gold per tonne over 3.55 metres, including a 2-metre interval of 14.9 grams gold.
A 2,500-metre follow-up program is testing the strike continuity of this zone, as well as several other geochemical and geophysical anomalies.
The My-Ritt and St. Paul’s Bay properties, also near Red Lake, are being explored by Teck Cominco. The major can earn a 55% in My-Ritt by spending $4 million and a 51% interest in St. Paul’s Bay by spending $1.5 million plus cash payments to Wolfden. To earn additional 10% at St. Paul, Teck Cominco must complete a feasibility study, and to earn 5% more at My-Ritt, it must provide production financing.
Last year, Wolfden identified several gold-in-soil anomalies at My-Ritt, as well as folded and faulted ultramafic rocks of the St. Paul’s Bay deformation zone. First-phase exploration at the latter is under way.
The East Bay gold property, in the same district, is under option from Placer Dome. Wolfden can earn a half-stake by spending $2 million on exploration over three years.
The East Bay property is 10 km from two gold mines: Placer Dome’s Campbell and
ll program is planned.
The Skinner gold property, on the west side of the Birch-Confederation greenstone belt, is under option to Teck Cominco. The company can earn up to a 75% interest in two stages. The initial 65% can be earned by spending $700,000 on exploration by the end of 2006 and making annual cash payments to the vendor, and an additional 10% can be earned by spending an extra $400,000. Crews have identified basaltic and ultramafic komatiite rocks similar to those that host the Red Lake and Campbell mines. Also, a significant gold-in-basal-till anomaly occurs down-ice from the Skinner property. A first phase of drilling is planned for the second quarter.
The Argosy Gold Mine property is under option to
Before being shut down in the early 1950s, Argosy produced 101,875 oz. gold at an average recovered grade of 0.37 oz. per ton. Production was sourced from three veins mined to a maximum depth of 900 ft. Drilling recently intersected a 1.7-metre interval averaging 14.67 grams gold per tonne in the unmined No. 3 vein zone. A second phase of drilling is planned for the second quarter.
The Monument Bay gold property, in northeastern Manitoba, is optioned to Bema Gold. Bema can earn up to a 70% interest in the property by making cash payments to Wolfden and spending $6 million on exploration. Last winter, the company calculated a resource of about 300,000 oz. gold grading 18.5 grams gold per tonne on the Twin Lakes B-Zone. Over the past summer, further exploration identified a parallel high-grade gold zone. Encouraged by this discovery, Bema has kicked off a 10,000-metre drill program on the Twin Lakes, Twin Lakes West and Seeber River zones, covering a strike length of 2,200 metres. An updated resource calculation is expected to follow.
Another prospective Red Lake area project is Bonanza. It’s under option to
The property hosts the Sanshaw gold prospect, which has some limited underground development and, according to the National Mineral Inventory, hosts 159,000 tonnes averaging 6.9 grams gold per tonne, above the 115-metre level. Previous drilling revealed intersections as high as 47.3 grams gold per tonne over 5.2 metres. About 3,000 metres of drilling are planned this winter.
Wolfden’s wholly owned High Lake property provides leverage to a high-grade volcanogenic massive sulphide deposit. High Lake is being explored under an agreement with Teck Cominco, which will provide technical support for at least a year. In return, Teck Cominco has a first right of refusal on a joint venture or outright property sale.
Over two years, drilling has expanded both mineralized zones. Prior to the Wolfden drill programs, the resource at High Lake, was pegged at 5.3 million tonnes grading 4.05% copper and 2.36% zinc, plus 1.76 grams gold and 31.73 grams silver per tonne. An airborne geophysical survey identified a series of conductors close to base metal showings on the northern extension of the High Lake stratigraphy. Several conductors will be tested in 2003.
Another of Mustard’s gold buys is Rubicon Minerals, at 98.
“Rubicon provides a lot of exposure to the Red Lake camp, being well-managed and technically strong,” says Mustard.
The company has a joint venture with AngloGold, which will undertake a massive drilling program in the area this year. As well, Rubicon provides a lot of exposure to the emerging gold exploration play in central Newfoundland.
Recently the junior announced a private placement of up to 9.5 million units priced at $1.05 each for gross proceeds of $10 million. A unit consists of one share and half a share purchase warrant. Each whole warrant allows the holder to buy another share at $1.25 from two years of the closing date.
Proceeds will be used to explore the junior’s Red Lake assets, including the McFinley project.
In addition to controlling 268 sq. km in the Red Lake camp, Rubicon has several large property positions in Newfoundland, including the Golden Promise project, the Botwood-Glenwood trend, the StarTrack trend, the New World trend, and the Avalon trend.
In Red Lake, Rubicon has three major assets: McFinley, the McCuaig joint venture, and the Rubicon-AngloGold option.
At McFinley, 14 holes were recently drilled. Highlights include the following:
q a 0.35 metre interval that cut 729 grams gold per tonne;
q 0.6 metre averaging 63 grams gold;
q 0.65 metre averaging 46.6 grams gold and 0.35 metre averaging 16.8 grams gold.
The program tested depths between 15 and 120 metres below surface. McFinley remains untested at depth and along strike outside the underground development. Follow-up work is planned.
The McCuaig joint venture is held 60% by Rubicon and 40% by
The company intends to conduct a second phase of drilling from the ice of Red Lake, the objectives being to follow the gold mineralization at the 1900 zone, explore the silicified ultramafic zone, and test for deeper gold mineralization.
At the Rubicon’s RLJV properties,
Once these expenditures are completed, AngloGold will have a vested 60% interest. The exploration program is expected to consist of 10,000-15,000 metres of diamond drilling on at least five targets.
Last year, Mustard’s picks included the following:
q Ashton Mining of Canada (ACA-T) at around $3.60 — the stock hit a year high of $4.65 and a low of 81, and at presstime was trading at $1.28.
q
q
q Fort Knox Gold Resources, now
q
q
q
q
q Rubicon Minerals at 27 — the stock hit a year high of $1.94 and a low of 60, and at presstime was trading at 98.
q
Robert Bishop
Bishop, publisher of the Gold Mining Stock Report, believes the gold market is in the early stage of a cycle that will reach historic highs over the next few years.
“It will be U.S.-dollar-driven and strongly supported by the market imbalance created by an orgy of hedging and central bank lending,” he says. “Offsetting the trade will be as positive for gold as it was negative during the hedging and lending frenzy of the late 1990s. With the U.S. dollar increasingly out of favour and with few good alternatives competing for safe-haven status, gold’s role as an alternative currency — the ‘anti-dollar’ — has only begun to be apprecia
ted.”
Bishop says 2002 represented an “insider’s bull market” and that gold’s break above $340 per oz. in December signals the beginning of a second phase.
“This second phase will attract a much larger, but still skeptical, audience. A core audience has been fully invested for some time, and it seems clear that prices over four hundred dollars [U.S.] an ounce will be required to attract what might be termed a ‘public’ audience.”
Bishop is hot on
“Results suggest there’s plenty more to come from the Tabakoto and Segala gold projects, and with the recent news of a new volcanogenic massive sulphide discovery in Eritrea, the Nevsun now has two active projects in place.”
The junior operates several projects in West Africa, the key ones being Tabakoto in Mali and Kubi project in Ghana. It also holds Segala, north of Tabakoto, and Bisha, which is in Eritrea.
At the 90%-owned Bisha property, Nevsun is engaged in a 6,500-metre second phase of drilling. A 6-hole (804-metre) phase in 2002 uncovered high-grade gold and base metal mineralization. Among the highlights were hole 4, which returned 1.18 grams gold and 42.1 grams silver per tonne plus 6.27% copper over 24.5 metres, and hole 5, which returned 32.49 grams gold and 1,382 grams silver over 7.62 metres and 0.81 gram gold, 33.9 grams silver and 4.92% copper over 8.23 metres.
The Tabakoto project is in the Kenieba region of western Mali. There, a final feasibility study is being managed by Metallurgical Design & Management (MDM), a South African engineering company. The prefeasibility study envisions a 650,000-tonne-per-year open-pit operation capable of producing 105,400 oz. gold annually over a mine life of five years. The average grade of the proposed pit is 5.45 grams gold, while the recovery rate is estimated at 96%. Average production costs are expected to be US$185 per oz., with preproduction costs coming in at US$24 million. MDM projects an internal rate of return of 35%.
The prefeasibility was based on a total gold resource of 1.9 million oz., consisting of an indicated resource of 5.6 million tonnes grading 7.5 grams of primary material and 535,000 tonnes grading 1.8 grams of gold oxide. The inferred resource totals 2.1 million tonnes grading 7.64 grams of sulphide material.
The Segala project, in which Nevsun acquired an 80% interest last July, comprises 23 sq. km north of Tabakoto and has resource of 1.4 million oz. gold. A new resource estimate is expected in the first quarter, to be followed by a final feasibility study.
Farther south, in Ghana, Nevsun has a 90% stake in the Kubi project, which it acquired in 1992 from BHP, now
In April 1999, Ashanti made an initial payment of US$1.8 million for the first 60,000 oz. of gold recovered at Kubi. According to an agreement, 20% of the initial payment is held in escrow, pending either the receipt of a permit to mine inside the forest reserve or the recovery of the first 60,000 oz. from areas outside it. In addition, Ashanti will make royalty payments of US$15 per oz. for every additional ounce recovered beyond 60,000 oz. Should the gold price exceed US$325 per oz., Ashanti will pay Nevsun an additional 20% of the amount by which the gold price exceeds that level, and this stipulation applies to all ounces that exceed 60,000.
Says Bishop: “While I expect continued revaluation of the company’s gold projects, it is the new discovery in Eritrea that I expect will add the greatest value in the months ahead. Beyond that, Nevsun is one of the most obvious takeover plays developing in the current market.”
Another of Bishop’s picks is
“Miramar is an aging gold producer with production of 125,000 oz. per year, but the exploration being conducted currently is the main reason to own Miramar.”
The company operates the Con and Giant gold mines in Yellowknife, N.W.T. Miramar has owned Con since 1993 and was looking for more mill feed to process through the Con mill when it acquired the Giant mine in late 1999. The company’s gold production is expected to decline to about 90,000 oz. in each of 2003 and 2004 at cash costs of about US$255 per oz., and all in costs of about US$260 per oz.
The company’s flagship property is Hope Bay in Nunavut, where Miramar controls 1,180 sq. km, or virtually the entire Hope Bay greenstone belt. The junior is determined to evaluate the mineral potential of the entire belt, which extends more than 80 km north-south and up to 20 km east-west. Arctic tidewater marks the northern margin of the belt.
So far the junior has defined three gold deposits, the largest being Boston, near the southern end of the belt. The others, Doris and Madrid, are on the northern end.
Miramar intends to develop the Doris North area as a springboard for development of the additional resources already defined on the rest of the Hope Bay belt. A recently tabled feasibility study at the deposit suggests that at a gold price of US$325 per oz. the mine could, on a daily basis, pull 467,157 tonnes grading 21.9 grams gold. Capital costs are pegged at US$39.3 million, and cash operating costs, at US$109 per oz. The pretax rate of return on investment would be 136% with a payback period of 6.6 months.
At last count, the three deposits at the Hope Bay project held measured and indicated resources of 3.4 million tonnes grading 15.4 grams gold, or 1.7 million contained ounces of gold. There is also an inferred resource of 6.7 million tonnes grading 12.3 grams gold, or 2.65 million contained ounces. Looking to increase these numbers, the company will carry out 43,000 metres of core drilling and 4,500 metres of RC drilling this year.
“The company recently began an aggressive, $13-million drill program in the Hope Bay greenstone belt,” says Bishop, “and my attitude is that if you control the geology and drill in an under-explored greenstone belt, ounces will come. With a 22-million-oz. average in Canadian greenstone belts, Miramar seems assured of making significant additions to its reserve and resource base.”
Bishop remains keen on
“Nonetheless, management, projects, and low price compel me to go with NVR again,” he says.
Navigator controls, or holds an interest in, about 2,800 sq. km in the Northwest Territories, Nunavut, Ontario and Alaska. This translates into 358 claims, five prospecting permits and eight mining leases.
Diamond properties represent the bulk of its landholdings, though it also has gold and base metal assets, and even a few tantalum projects.
Among the diamond interests is Severn, shared equally with
De Beers Canada recently purchased three Kat project claims from the joint-venture partners for $350,000. The claims are near De Beers’ Victor kimberlite, which will undergo full-scale feasibility work this year. The first drill program on the Kat project was performed in early 2001 and resulted in the discovery of the diamondiferous AT-56 kimberlite. Canabrava and Navigator retain ownership of the AT-56 claim, as well as several claims located in the Attawapiskat Kimberlite cluster, all of which are in good standing until 2007.
In the Northwest Territories, 300 km northeast of Yellowknife, Navigator holds the LDG property, which consists of one large contiguous claim block, as well as several smaller outlying claims that cover specific targets. Its total landholdings in area amount to 570 sq. km. De Beers
Canada Exploration has an option to earn a 60% stake in the property by making all expenditures up to and including the completion of a feasibility study. At last report, De Beers was performing ground geophysical surveys.
In the Coronation Gulf area of Nunavut, Navigator holds interests in the Bear, James River and Jewel properties. The junior can earn 70% of the Bear project by spending $1 million on exploration and issuing shares to a British Columbia numbered company.
The Bear property consists of 223 sq. km immediately east of the Kikerk Lake property of
At the 647-sq.-km Jewel property, 60 km southeast of Kugluktuk, airborne geophysics outlined 27 targets, and 300 till samples were collected.
The James river property consists of 536 sq. km in the heart of the Coronation Diamond district.
Meanwhile, the junior has completed a 1,429-metre drill program on its ORO gold claims, in Nunavut’s Hope Bay Greenstone belt. The 41.2-sq.-km property is 3 km north of the Doris gold deposit, controlled by Miramar Mining. No ore-grade assays were returned; however, Navigator continues to explore the area. In the northern part of the property, several targets require additional prospecting, mapping and ground geophysics. Mapping and prospecting in the Wolf Lake area identified a geologically and structurally complex target where grab samples returned elevated gold values of up to 36 grams per tonne.
At the Tingo property, near Arseno Lake in the Northwest Territories, field work has outlined gold-bearing quartz veins, which were trenched and sampled between 1939 and 1946. Last summer, geologists collected 38 quartz vein samples from blast piles next to these trenches (the trenches had been flooded and grown over). A total of 17 samples returned assay values in excess of 5 grams gold per tonne, and eight of these assayed greater than 30 grams gold, up to a maximum of 122 grams gold. Interpretation of recently collected geophysical and geological data will determine exploration plans.
Bishop regards
“I expect silver will get dragged along in a rising gold market, and probably exceed gold’s gains on a percentage basis. At Cardero’s silver project in Argentina, I think there are high prospects for exploration success.”
The 250-sq.-km Olaroz project is 230 km northwest of San Salvador de Jujuy in the country’s northwestern region. Attention is focused on the property’s La Providencia prospect, where, between 1986 and 1996, about 200,000 tonnes of ore were mined from several pits. Estimated mill head grade: 350-600 grams silver per tonne.
Also, Cardero has acquired the nearby Chingolo deposit, on the basis of its geological similarity to La Providencia.
Chip sampling at La Providencia returned weighted average silver values of 494.8 grams per tonne and outlined deposits of copper grading 0.47%, lead grading 0.47%, and zinc grading 0.44%. These results lead Cardero to believe La Providencia represents the upper levels of a low-sulphidation epithermal silver deposit. More recent channel sampling in the pits returned 22 metres averaging 416 grams silver, 0.26% copper, 0.3% lead and 0.58% zinc in Panel 1. Panel 3 returned 20 metres averaging 722 grams silver, 0.45% copper, 0.24% lead and 0.48% zinc. Panel 7 returned 30 metres averaging 269 grams silver, 0.23% copper, 1.07% lead and 0.25% zinc.At the Chingolo prospect, Cardero has collected nine surface chip samples from weathered conglomerate and jasperoid cap rocks. Silver values range from 20 to 391 grams per tonne, and the samples also returned elevated copper, lead and zinc values.Exploration at the Olaroz project consists of geological mapping, geochemical sampling, and channel sampling. Drilling is planned for the La Providencia and the Chingolo prospects in particular.Says Bishop: “La Providencia is an under-explored property, but, given its history and recent sampling results, this is a good place to be looking for a sizable silver deposit.”In addition, Cardero has exposure to two early-stage gold projects, in Mexico and Argentina.Bishop predicts a good year for
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