Investment comment Juniors mining stocks still offer bear market

The current bear market may have driven down the appetite of retail investors for junior mining stocks, but there are still some juniors out there to keep an eye on, says Yorkton Securities mining analyst Mike Pickens.

Here are two of his examples:

The involvement of Hecla Mining of Canada in the Mooseland joint venture in Nova Scotia makes Biron Bay Resources (ASE), an issue to watch, he says. Drill inferred reserves stand at 2 million tons grading 0.39 oz gold per ton and work crews are clearing the site for construction of a 330-m shaft.

Hecla Canada, a subsidiary of one of America’s leading gold and silver producers, underlined its confidence in the property (where Biron Bay is earning a 25% interest), by agreeing to spend $5.34 million to bring the property to production.

Biron Bay traded recently on the Alberta Stock Exchange at $2.20, up from $1.25 in May. As official property fundraiser, Biron Bay is expected to have about $10 million in its treasury this month.

In the more speculative category, Pickens likes Omni Resources which is attempting to bring the Yukon- based Skukum Creek project into production.

Located 55 miles south of Whitehorse, the property’s reserves stand at 821,000 tons of grade 0.225 oz gold and 8.96 oz silver. It also contains an additional 131,000 tons of grade 0.261 oz gold and 4.95 oz silver.

A sound geological environment, capable project management and Skukum Creek’s status as a near- term producer are Picken’s reasons for selecting Omni.

The Omni issue was trading recently on the Vancouver Stock Exchange at $2.35 in a 52-week range of $4.75 and $1.95

“Since the company is being carried for 60% by partner and affiliate Skukum Gold, theoretically there should be no more dilution of the stock,” Pickens told The Northern Miner.

While it is still in the throws of an ownership battle over the Page- Williams mine in Hemlo, Ont., shares of Toronto-based Corona Corp. (TSE) offer the best relative value among senior gold producers, according to a report by Alfred Bunting Co. Ltd. One of North America’s newest seniors, it is being recommended by several Toronto brokerage houses at a time when shares of senior gold producers can be bought at what analysts regard as bargain prices.

Corona Corp. is the result of an amalgamation involving International Corona Resources, Royex Gold, Mascot Gold, Lacana Mining and Galveston Resources. It should be capable of producing 600,000 oz gold next year, says Bunting analyst Electa Aust.

However, an ownership dispute with Lac Minerals (TSE) over the Page-Williams mine means that Corona could still lose one of its chief assets. After the Supreme Court of Ontario awarded a 50% mine ownership to Corona, upheld by the Ontario Court of Appeal, Lac Minerals launched its second appeal and the case will be heard in the Supreme Court of Canada, Oct 11.

“At a current price of $9.25 per share on the Toronto Stock Exchange, the downside risks (posed by a court decision favoring Lac Minerals) seem small in relation to the potential rewards,” says Richard Cohen, an analyst with Brown Balwin Nisker James Capel Inc.

“As the real potential of the Williams Mine is now being uncovered, it is easy to understand why an out of court settlement between Corona and Lac hasn’t happened yet,” he says.

Meanwhile a number of the senior gold issues can be bought so cheaply that you don’t have to look to the juniors to make money, says Cohen.

With Corona Corp. on his recommended list, Cohen said he is only touting seniors at the moment because the Oct 19 stock market downturn took the retail investor out of the market.

“The juniors won’t get rolling again until retail investors return to the market,” he says. “When a company like Placer Dome Inc. (TSE) is $6 to $8 undervalued relative to other seniors like Echo Bay Mines (TSE), it looks like a good risk to me.”

Placer Dome was trading recently on the Toronto Stock Exchange at $16 in a 52-week range of $28.25 and $13.88. Echo Bay was trading in Toronto at $22.63 recently.