Nineteen ninety-eight was not a banner year for mining, but for speculative investors eyeing juniors with projects in the Americas, things can only get better. Such is the conclusion drawn by analysts Douglas Leishman and Art Ettlinger, who, in a year-end report for Yorkton Securities, point out that opportunities for profit-making and profit-taking are on the increase.
As examples, they cite the buy-out of Mar-West Resources by
“Speculative investors should now be preparing themselves for an improved junior resource market,” the analysts state. “History has shown us that commodity prices and stock markets are cyclical. Few will argue that the senior markets are at or near the end of a business cycle, the time when capital historically shifts to the speculative markets. We believe, however, that when this shift does occur, the bulk of interest will lie with exploration companies working closer to home, namely the Western Hemisphere.” The report, titled Investing off the Bottom, highlights 11 junior companies that have assets in regions stretching from Alaska and the Northwest Territories to as far south as central Chile.
Alaska is enjoying an unheralded exploration boom, partly fueled by the discovery of the high-grade Pogo gold deposit in the east-central district known as Goodpaster.
Pogo is a joint venture, in which
The grassroots discovery of Pogo in an area where little exploration has been carried out over the past 70 years is capturing the attention of numerous companies. Although the deposit was initially discovered in 1994, its significance was not fully understood until Teck released a resource estimate after a 1997 drill program. Since July 1998, the number of claims in the Goodpaster district has quadrupled to 4,000, covering 1,600 sq. km.
Leishman and Ettlinger predict exploration in the area will increase this year, and recommended
Western Keltic, in partnership with Rimfire Minerals, staked ground contiguous with the eastern boundary of the Stoneboy property. The ground is divided into the California and Surf properties, plus a smaller property called Boogie, situated 20 km to the northeast. In addition to owning a half-interest in each property, Western Keltic has the option of earning an additional 20% stake in California and Surf, which lie along a projected east-southeasterly trend of the Pogo deposit and a series of surface gold showings on the Stoneboy property.
The analysts point out that mineralization at Pogo appears to lie along a west-northwesterly trending structure defined by linear magnetic low anomalies coinciding with a series of small plutonic bodies of Mid-Cretaceous and Late Cretaceous-Early Tertiary age.
A fall reconnaissance exploration program on the California claims identified angular blocks of quartz vein material with anomalous gold values. A geochemical stream-sediment program outlined areas of anomalous gold, arsenic and bismuth.
Western Keltic has approximately $700,000 in its treasury and 9.1 million shares outstanding, or 10.6 million fully diluted.
Hyder has meanwhile signed a letter-of-understanding with Rimfire to acquire up to a 70% interest in five claim blocks in the district. Two of these, Ogo and Fire, abut the northwestern corner of Stoneboy and lie along the same proposed Pogo trend.
Hyder can earn an initial 51% interest by spending $1.3 million on exploration and paying $230,000 in cash plus 200,000 shares by Dec. 31, 2001. The company will have the right to increase its interest to 70% by paying a further $1 million.
Hyder will need to raise cash for exploration. It has 22.8 million shares outstanding, or 26.1 million fully diluted.
The analysts recommend that speculative investors accumulate shares in both companies over the winter months in anticipation of summer field programs.
Western Keltic has a 52-week trading range of 65-10 cents per share and is currently trading at 46-48 cents, whereas Hyder has a 52-week range of 25-5 cents and is sitting at 13-14 cents.
The startup of the Ekati mine in the Northwest Territories is expected to boost investor interest in companies exploring for diamonds.
“There exist enormous opportunities for capital gains by speculating in selected junior diamond explorers that have either demonstrated technical abilities in this highly complex aspect of mineral exploration, or have a senior partner from the diamond sector managing their exploration projects,” state Leishman and Ettlinger.
They recommend
Ascot holds an interest in five newly discovered diamondiferous kimberlites on Victoria Island in the far north. Monopros, the exploration arm of
Monopros discovered the five kimberlite bodies in the summer of 1998 while conducting an initial program of shallow drilling on eight targets. Based on their geophysical signature, the kimberlites appear to be a mix of dyke and pipe-like bodies. Microdiamond results are summarized as follows: * the Snowy Owl kimberlite yielded 90 microdiamonds from 88 kg of drill sample;
* Golden Plover returned 2 macros (a macro measures more than 0.5 mm in one dimension) and 42 micros from 180 kg of kimberlite;
* Longspur produced 2 macros and 37 micros from a 90-kg sample; and * Whimbrel yielded a single micro from 180 kg.
Monopros is preparing to return to Victoria Island in April to carry out an 8-to-10-hole program of core delineation drilling.
The analysts note that Ascot offers a measure of downside protection, owing to its exposure to base metals. The company has interests in three properties in the Cranbrook area of southeastern British Columbia that are prospective for Sullivan-type sedimentary exhalative mineralization.
Ascot has 20.4 million shares outstanding, or 27.8 million fully diluted, and $500,000 in its treasury. The company has a 52-week trading range of $1.03-16 cents and is currently trading at 30-25 cents.
Winspear has a 67.76% interest in the NW Snap Lake project, 110 km south of the Ekati mine, and is also operator.
“The kimberlite dyke discovery made by Winspear on its Camsell Lake property in the Northwest Territories potentially ranks as one of the most significant diamond discoveries in Canada,” the analysts state.
Last year, two 100-tonne samples of the NW dyke, collected from surface pits set 235 metres apart on a peninsula that juts into the northwestern corner of Snap Lake, yielded a 226.72-carat parcel of diamonds for a preliminary grade of 1.14 carats per tonne. The diamonds were determined to be worth an average of US$301 per carat, giving an implied value of US$343 per tonne (or about $500 per tonne in Canadian dollars).
The NW dyke has been identified over a strike length of 1,350 metres and was encountered in
limited, widely spaced drilling as far as 2,200 metres east of its exposure on the peninsula. The dyke averages a thickness of 2.4 metres based on 73 drill intercepts.
The results of a scoping study prepared by MRDI Canada, a division of H.A.
Simons, on the economics of either an open-pit or a combined open-pit/underground mine are described by Leishman and Ettlinger as “robust.”
MRDI estimates that the portion of the NW dyke underlying the peninsula contains a resource of 1.3 million tonnes, of which 667,000 tonnes could be mined by open-pit methods at the rate of 1,000 tonnes per day over a life of 25 months. Capital costs are estimated at $61 million; operating costs, at $73.80 per tonne. Assuming an ore value of $400 per tonne, the after-tax discounted cash flow rate of return is pegged at 54.3%.
A second model incorporates the open pit with underground mining by projecting a 500-metre downdip extension from the eastern edges of the pit.
MRDI assumes a potential 3.5-million-tonne resource, which would warrant a mine life of 10 years based on a 1,000-tonne-per-day rate. Capital costs are estimated at $103.8 million; operating costs, at $87 per tonne; and the after-tax discounted cash-flow rate-of-return, at 55.6%.
The analysts caution that these numbers are preliminary and are based on a small parcel of diamonds recovered from limited sampling. It is generally acknowledged that at least 5,000 carats are required for valuation purposes.
The 226.72-carat parcel includes 25 diamonds weighing more than 1 carat, with the three largest stones — 10.82, 8.42 and 6.04 carats — accounting for 75% of the value. If the three largest stones are removed, the value of the remaining diamonds falls to US$83.26 per carat, for an implied value of US$94.90 per carat.
As part of a planned $12-million program to advance the project, Winspear will collect a 6,000-tonne bulk sample from three sample sites. As well, a minimum of 15,000 metres will be drilled in an attempt to identify 3.5-5 million tonnes of kimberlite for a feasibility study.
Winspear is regarded by Leishman and Ettlinger as a speculative buy.
“Since early October, Winspear has offered speculative investors enormous opportunity for share price appreciation and trading opportunities,” they write. “We believe this trend will continue through the winter and spring in anticipation of diamond valuations from the critical 5,000-to-6,000-tonne bulk sample collected this coming winter.”
Winspear has 39.1 million shares outstanding (48.5 million fully diluted) and is sitting with $12.1 million in cash. It has a 52-week trading range of $4.85-43 cents and is trading in the range of $3.70-3.21.
Minefinders has 14.1 million shares outstanding, or 15.7 million fully diluted, plus $2 million in the treasury.
Minefinders holds a 100% interest in the Dolores gold project, situated in the Sierra Madre Occidental mountains of Chihuahua state. The project centres on a past-producing gold mining camp that had seen no modern exploration until Minefinders showed up in 1994. The company has since developed the property into a 1.6-million-oz. gold resource.
A scoping study by MRDI estimates an indicated and inferred resource of 61 million tonnes grading 0.83 gram gold and 44.05 grams silver, equivalent to 1.6 million contained ounces gold and 86.3 million contained ounces silver.
The estimate is based on 53,898 metres of drilling (127 core holes and 111 reverse-circulation holes) and limits the influence of high-grade intercepts by capping gold at 4 grams and silver at 220 grams, with a lower cutoff grade of 0.5 gram gold-equivalent.
MRDI’s scoping study shows the economic potential for an open-pit, heap-leach mine.
Drilling to date has tested 2,700 metres of strike, most of which is focused on a 1,900-metre length of the trend. Surface geochemical sampling reveals a northwesterly trending zone of mineralization extending for at least 4,000 metres along strike and 600 metres in width.
Management’s goal is to bring Dolores to a production decision in the year 2000 by accelerating exploration to include infill drilling on the Main zone, stepout drilling on extensions of that zone, and exploration of adjacent structures. The objective is to define a drill-indicated resource of 2 million oz. gold, with an additional inferred resource of 1-2 million oz.
“We believe Minefinders’ share price will likely respond to an increase in the gold price and from exploration results generated on some of the other projects held by the company,” say the analysts. “In particular, the La Bolsa-Oro Blanco properties, which straddle the international boundary between Arizona and Mexico, present such an opportunity.”
The Yorkton report recommends
The company is focused on the Dominican Republic, where it controls 27 concessions covering 90,000 ha. Some of these are wholly owned, while others are held through earn-in and back-in rights.
Energold recently completed a first phase of drilling on its wholly owned Longyear concession, 3.5 km southwest of the Pueblo Viejo gold deposit. A 20-hole program was designed test the oxide potential, as well as the upper part of any sulphide mineralization, of a 300-by-700-metre area. Surface pit, trench and outcrop samples from the area average better than 1 gram gold, with full results expected later this month.
The zone forms part of a larger, 700-by-1,600-metre multi-element soil anomaly that is underlain by strong induced-polarization and resistivity geophysical anomalies.
In related news,
Energold has 14.3 million shares outstanding, or 17.1 million fully diluted, as well as $1.9 million in cash. The issue has been trading 73-57 cents within a 52-week range of 90-30 cents.
Prior to the merger of
The new amalgamated company has retained the name Lyon Lake Mines and has 38.7 million shares outstanding and $5.5 million in cash. Its trading range is 41-25 cents.
Lyon Lake’s principal asset is the Cerro Crucitas gold deposit in Costa Rica, which it can acquire by making three equal payments totalling US$3 million and issuing 500,000 shares to two individuals who optioned the property to
Placer retains the right to back-in at the time of a production decision for a half-interest. If it chooses not to exercise this right, the major will receive a sliding-scale NSR of 1-3%, payable only after the vendors of the property have been paid.
Placer spent US$28 million in exploration over the past five years before determining that Cerro Crucitas was too small for its needs. Three separate zones that make up the deposit host a resource totalling 93 million tonnes of 1.03 grams, equivalent to 2.7 million contained ounces.
“In our opinion, Cerro Crucitas is probably the most significant new gold deposit discovered in Central America in the last decade,” write Leishman and Ettlinger. “It has the potential of being a significant and low-cost producer of gold.”
A scoping study by Cambior indicates that an 8,000-to-10,000-tonne-per-day open-pit and conventional milling operation could produce an average
of 175,000 oz. per year over a life of eight years at a cash cost of US$181 per oz. A minable resource is estimated at 27.9 million tonnes grading 1.68 grams gold and 2.25 grams silver, with a stripping ratio of 0.9-to-1. Gold recovery is projected to be 93%.
Capital costs are forecast at US$135 million, including US$16 million in contingency and US$8 million in sustaining costs. The project has a payback of 3.1 years and an internal rate-of-return before taxes of 15%. The study is based on a gold price of US$350 per oz. and a silver price of US$5 per oz.
Cambior’s report calls for a full feasibility study to be carried out at a cost of slightly more than US$1 million.
While Denver-based
Leishman and Ettlinger recommend General Minerals at $1.45 on the basis of its Escalones copper-gold property, 100 km southeast of Santiago.
Situated in the Andes, the property was the site of limited phases of high-grade copper mining in the 1930s from two short adits. However, because of poor accessibility and an unco-operative owner, drilling was never carried out. General Minerals acquired the property in early 1997 and outlined a large, 6-sq.-km zone of alteration thought to represent the top part of a leached copper porphyry target. Copper-gold skarn mineralization is exposed on surface, and geophysical surveys identified a 4-sq.-km self-potential anomaly within the zone of alteration.
Widely spaced drilling began in November 1998, and the first of five holes reported to date encountered alternating skarn and intrusive-style mineralization averaging 0.63% copper over 377 metres, starting from surface. Within this interval are three separate, higher-grade sections of copper-gold-molybdenum mineralization. The top 77 metres of the hole averaged 1.3% copper and 0.0015% molybdenum, plus 0.13 gram gold and 4.1 grams silver per tonne.
Hole 5 stepped out 80 metres south of hole 1 and hit 203 metres of magnetite skarn averaging 0.81% copper and anomalous gold, starting within 6 metres of surface. The top 113 metres ran 1.1% copper.
Drilling continues to test the extent of the copper mineralization, while a second rig focuses on a porphyry target in the Baja area, west of the initial drilling.
Elsewhere, General Minerals is carrying out 3-hole program on its wholly owned Iman iron property, 600 km north of Santiago. The holes will test a coincident magnetic and induced-polarization anomaly. The outer edge of this anomaly was previously tested by BHP Minerals in 1996, returning 260 metres of greater than 30% iron.
Teck recently entered into a joint-venture agreement with General Minerals on the Productura copper-gold property, which is in the same geographic district as Iman. The major can earn a 60% interest by spending a minimum of US$750,000 in 1999 and US$500,000 thereafter over a 5-year period. During this time, Teck must complete a prefeasibility study. General Minerals remains the operator for the first year of the agreement.
A geophysical survey is planned, to be followed by a 3,000-metre drill program.
General Minerals is trading $1-86 cents within a 52-week range of $1.75-45 cents. The company has 17.8 million shares outstanding (19.5 million fully diluted) and, as of Dec. 31, 1998, held $13.1 million in cash.
Peruvian copper and gold projects form the focus of
Situated in the north-central part of the country, Santa Rosa covers two separate porphyry targets. While initial drilling on the Santa Rosa target encountered values of up to 0.25% copper over 234 metres, a single hole drilled into the Aquila target cut 400 metres averaging 0.63% copper, 0.04% molybdenum, 0.04 gram gold and 1.9 grams silver, starting from surface.
The Aquila porphyry is exposed over a 450-by-200-metre area and lies within a magnetic feature measuring 500 by 750 metres. In 1971, drilling carried out north of hole 1 returned several holes grading more than 1% copper.
Another key asset is the Free Maria gold property, a 50-50 joint venture with
MacMillan also holds the Armonia epithermal gold prospect, in which
“With drill programs planned for three projects in 1999, any significant success could add value to MacMillan’s relatively low share price,” state the analysts.
MacMillan has 17.9 million shares outstanding, or 21.2 million fully diluted, and $1.8 million in cash. It is trading at 36-34 cents within a 52-week range of 56-25 cents.
The company has since elected to return the El Corazon property to the vendor and seek other opportunities. Yorkton’s analysts do note that Balaclava might abandon this project if drill results fail to establish a better understanding of the mineral structures. “We have confidence in management and their ability to identify and acquire new assets for the future success of the company,” say Leishman and Ettlinger.
Balaclava has 12.2 million shares outstanding, or 13.2 million on a fully diluted basis.
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