Mining will emerge from Twilight Zone: Yorkton analysts

Mining analysts Douglas Leishman and Art Ettlinger of Yorkton Securities are optimistic that better times are ahead for the mining sector. In a recent research report titled 2000 and Beyond: The Journey out of the Twilight Zone, they note that mining, despite market perception, is a not a twilight industry: “The world needs mineral resources and, time and time again, Canadian-based juniors come up with the goods.”

The report was timed so that investors could take advantage of “end-of-year” tax-loss selling, which can depress share prices well into the New Year, thus creating buying opportunities. Eight companies were featured, most of which are active on properties in the Americas, though an Australian project and an industrial mineral property in Africa also made the list.

Ashton Mining of Canada (ACA-T) was recommended as “a speculative buy,” contingent on its ability to raise funds for its numerous diamond exploration projects in Canada. The company, which has 26.4 million shares outstanding (28 million fully diluted) currently trades at just over 50, down considerably from its 52-week high of $1.60.

By the end of 1999, the company had spent $14 million exploring its various projects in the Northwest Territories, Nunavut, Alberta, Ontario and Michigan. At least four diamond-bearing pipes were identified in northern Canada, whereas 32 pipes (mostly diamondiferous) were found in Alberta.

The analysts note that although an economic pipe has yet to be identified, “additional sampling is warranted for some of the pipes previously discovered, and a real potential exists for the discovery of new pipes in both northern Canada and Alberta.”

Junior Berland Resources (BNL-V) — formed as a result of a spinoff of non-core assets of Cumberland Resources — also made the list as “a speculative buy.” The junior currently trades at 12 and has 6.7 million shares outstanding (8.7 million fully diluted).

The analysts note that Berland’s most interesting project area is in northern Ontario, just south of Kapuskasing. Its two main properties, Cargill and Fenton, cover a portion of the Saganash greenstone belt, which is believed to be prospective for volcanogenic massive sulphide (VMS) deposits. Falconbridge (FL-T), which holds ground in the same region, took an interest in Berland’s properties and signed an option agreement with the junior last fall. The partners intend to focus on base metal deposits, with Falco as operator. However, Berland’s two properties are near ground being explored for diamonds, adding a new exploration dimension to the land package.

“We like this play because Berland’s agreement with Falconbridge has given them immediate access to 17 separate airborne electromagnetic targets,” Leishman and Ettlinter write. “A number of these have had ground geophysics completed and are drill-ready. In addition, Berland gains access to other target types.”

Australian-listed Black Range Minerals was recommended as “a speculative buy” based on its main asset, the Syerston nickel-cobalt project in Eastern Australia. The analysts consider the nickel laterite project to be one of the superior Australian nickel-cobalt projects under development, with respect to metallurgy, grade and infrastructure. A feasibility study is under way that will update the previous resource estimate of 100 million tonnes averaging 0.66% nickel and 0.11% cobalt.

Meanwhile, in West Africa, Champion Resources (CHL-V) is being watched for progress at its Farim phosphate deposit in Guinea Bissau. The junior trades at about 75 and has 24.2 million shares outstanding (32.8 million fully diluted).

“Early indications are that attempts to market phosphate from Farim will be successful,” the analysts state, citing an initial agreement for the annual purchase of 750,000 tonnes of phosphate rock concentrate over five years. “This represents half of the planned production rate.”

The project was also given the thumbs-up for its easy access. It is on the shore of a navigable river that is amenable to low-cost barge transport of ore to a deep-sea port 160 km down-river.

A previous feasibility study calculated a “potentially exploitable reserve” of 105 million tons grading 29.8% phosphate in a global geologic resource of 350 million tons. The reserve has a stripping ratio of 10-to-1 and a minimum thickness of 3 metres.

On the metallurgical front, the analysts note that “chemical analyses and bench-scale metallurgical testing of Farim ore indicate acceptable levels of cadmium, magnesium, iron, aluminum and silica — the usual contaminants of concern.” Additional tests are planned.

The analysts cite political uncertainty as “probably the greatest risk to project success.” The West African nation is one of the poorest in the world and in great need of industrial development.

Closer to home, Diamondex Resources (DSP-V) was recommended as “a speculative buy for the risk-oriented investor.” The junior, which trades at about 85 and has 5 million shares outstanding (5.7 million fully diluted), is a new diamond company resulting from the spring 1999 spinoff of the exploration assets of Winspear Resources (WSP-V), excluding the advanced Camsell Lake project.

Diamondex holds interests in 10 properties covering about 580,000 acres of the Slave Craton in northern Canada. One of the most advanced is the Hilltop areas, which hosts diamond indicator mineral trains, as well as geophysical targets.

Also getting the nod as a speculative buy is Nickelodeon Minerals (NKM-V). The exploration company has properties in Africa, but is now focusing its efforts on Ireland. Its two main properties are Avoca, in the Republic of Ireland, and Tyrone, in Northern Ireland.

The Avoca property is a past-producer of copper, lead and zinc, with the total tonnage mined believed to be 66 million tonnes of stringer-to-massive-sulphide ore. “The targets being sought by Nickelodeon on this property are precious-metal-enriched VMS deposits,” the analysts write. A drill program is expected to resume shortly.

The Tyrone property includes the Curraghinalt gold deposits, which is reported to host a geological resource of 469,000 tonnes grading 17.3 grams gold per tonne, confined to two main veins.

“While the Curraghinalt deposit is interesting, the exploration concessions were acquired for their potential to host VMS-style mineralization,” the Yorkton analysts write. “According to Nickelodeon, the favourable Tyrone group stratigraphy, which has a strike extent of 30 km on the property, is similar in age and origin to those rocks hosting the VMS deposits in Bathurst, N.B., and the Buchans deposits in Newfoundland.”

Field work has identified numerous targets that will be further explored this year. Navigator Exploration (NVR-V) can acquire up to a half-interest in Nickelodeon’s Irish properties.

Nickelodeon trades at about 13 and has 9 million shares outstanding (9.4 million fully diluted). The management team includes Ron Netolitzky, Larry Nagy and Terry Tucker.

Leishman and Ettlinger gave a nod to Radius Explorations (RDU-V) as “a speculative buy for those wanting to participate in a well managed company involved in early-stage exploration for large, precious metal deposits in Mexico and Central America.”

The junior, which has 5.4 million shares outstanding (8.7 million fully diluted) and trades at about 74, is managed by Simon Ridgway and Robert Wasylyshyn (previously with Mar-West Resources). Early last year, they implemented a research program to evaluate the gold potential of a hot springs in Mexico’s Trans-Mexican volcanic belt. Several gold-silver camps are spatially related to this belt.

Radius is focusing much of its effort on the Salitre concession in Guanahuanto state, 15 km west of the city of Queretaro. “Plans are being made to drill-test El Salitre, but, in the meantime, Radius intends to continue its low-budget exploration throughout the belt,” the analysts note.

Valerie Gold Resources (VLG-V) also made the grade as a “speculative buy for the risk-oriented investor,” mostly owing to its work at the Santa Barbara property in Ecuador.

The junior trades at about 74 and has 12.2 million shares outstanding (13.8 million fully diluted), as well as $11 million in cash.

Valerie can earn a 50% stake in the property by spending US$4 million over three years. Previous work by other parties identified three targets for followup: Santa Barbara (copper-gold); Napintza (zinc-gold); and El Hito (copper).

A first-phase drill program was recently completed at Santa Barbara, with eight of 10 holes returning anomalous-to-potentially-sub-economic values of gold (0.64 to 1.5 grams per tonne) over widths ranging from 20 to 190 metres. Copper values were low.

“With additional hints of success combined with a healthy treasury, Valerie Gold is in an excellent position to advance the potential of this property,” the analysts conclude.