eResearch looks at junior golds

In their inaugural Junior Gold Quarterly, mining analysts Bruce Reid and Don Poirier of Toronto-based Independent Equity Research (eResearch) have found good value in six North American gold juniors.

The analysts describe Aurizon Mines (arz-t) as a “well-managed junior gold producer with a strong asset base” comprising two gold ventures in northwestern Quebec: a half-interest in the Sleeping Giant mine, co-owned by operator Cambior (cbj-t); and the advanced-stage Casa Berardi project.

For 2002, Aurizon expects Sleeping Giant to contribute 36,100 oz. gold and $3 million in cash flow to its account. While the mine has been nearing the end of its life, recent drilling has uncovered three new high-grade lenses of mineralization near the production shaft.

Still, the company’s real growth potential comes from Casa Berardi, which the analysts describe as “an exceptional project, especially for a junior gold producer.”

Aurizon acquired the past-producing Casa Berardi mine and surface facilities from TVX Gold (tvx-t) in 1998 for US$2 million plus another US$4 million due by mid-2003, and then completed a US$10-million development program that included 76,000 metres of surface and underground drilling.

In a 2000 economic study, Aurizon estimated that the West Mine portion contained a reserve of 6.9 million tonnes grading 6.7 grams gold per tonne (1.5 million contained ounces). Additional resources at the entire property stood at 4.5 million at 7.7 grams gold (1.1 million oz.).

The study projected that, with a capital investment of US$83 million, Casa Berardi could produce about 200,000 oz. annually for 7.5 years at a total cash cost of US$145 per oz.

This year, Aurizon plans to spend $2 million drilling possible depth extensions of two mineralized zones. The overall objective of the work is to add 300,000 oz. to reserves.

Reid and Poirier believe additional underground discoveries are possible at Casa Berardi since “systematic work at the mine over the past eight years has usually been successful in outlining new resources.”

In the shorter term, a major corporate restructuring last year — highlighted by the sale of the dormant Beaufor underground gold mine in Quebec to Richmont Mines (ric-t) — is expected to boost earnings and cash flow for Aurizon in 2002.

The analysts characterize Aurizon as being “inexpensive relative to its peer group” and rate the company a “speculative buy” with a target price of $1.

At presstime, the stock was trading at 74, up strongly from last December’s lows in the mid-20 range.

Reid and Poirier are equally impressed with Queenston Mining (qmi-t), which will be carrying out extensive drilling this year along the prolific, gold-bearing Kirkland Lake-Larder Lake deformation zone as part of its joint-venture agreement with Newmont Mining (nmc-t).

They describe Queenston as one of the best-funded Canadian explorers, with $9 million in working capital and “all the potential to be an extremely successful company.”

Deeming Queenston to have “excellent gold exploration exposure in Ontario,” the analysts rate the stock a “speculative buy” with a target price of $1.20. Recent trades have been in the 60 range.

Reid and Poirier also rate grassroots explorer Tri Origin Exploration (toe-v) a “speculative buy” for those gold investors seeking exposure to “a good land position over past producers, especially in Australia.”

Down Under, Tri Origin is active at three projects that have near-term production potential: Lewis Ponds, Woodlawn and Cobar. All are in New South Wales’ gold-rich Lachlan Fold Belt, 200 km west of Sydney.

The analysts have put a target price of 24 on the stock, which was recently trading at 11.

In Wolfden Resources (ywo-v), Reid and Poirier see a company with “excellent leverage to both base metal and gold exploration.”

They expect exciting exploration news this year from two of Wolfden’s projects: the Monument Bay deposit in Manitoba and the High Lake property in Nunavut’s Bathurst Inlet region.

The company is rated a “speculative buy” with a target price of $1.80, compared with recent trades at around the $1 mark.

Also recommended is X-Cal Resources (xcl-t), which will benefit from an improvement in investor sentiment toward gold companies. X-Cal’s main asset is its Sleeper gold project in Nevada, which the analysts describe as having “above-average exploration potential.”

Noting that “consolidation in the industry has resulted in few large-scale projects with multi-million-ounce potential,” the analysts rate X-Cal a “speculative buy” with a target price of 50. The shares recently traded in the 20-30 range.

Reid and Poirier regard J-Pacific Gold (jpn-v) as “a well-managed exploration and development company” that offers good exposure to the gold sector, especially with its Nevada assets.

In particular, they note the support that J-Pacific has received from Japanese gold-investment fund Jipangu, which also owns significant positions in Cambior and High River Gold (hrg-t).

However, the analysts have put a “hold” recommendation on the stock, with a target price of 55. At presstime, J-Pacific was trading at 40.

eResearch has an unusual business model in that it applies an upfront charge to companies that are to be covered, then strives to cover the company independently as it sells the reports to online subscribers.

A copy of the Junior Gold Quarterly is available free at www.eresearch.ca