ATAC Resources (OTCPK:ATADF) just reported its 2014 exploration results. After a 2-month bear market in the stock investors bid up shares on this news with the stock rising 5.5% on 5-times the normal volume on the Toronto Venture Exchange. Investors were reacting to the company's strong results, which include continued expansion of the Rackla Property's Sunrise and Conrad zones. The highlight of the report was a 31-meter drill hole containing 9.5 gpt. gold at the Conrad Zone, which supports my speculation thesis that the Rackla Property could contain one of the largest undeveloped gold deposits in the world.
Before speculating, however, investors should realize a few things about ATAC Resources. First and foremost the company doesn't have a lot of NI 43-101 compliant gold, and bulls are basing their optimism on strong drill results such as those reported this afternoon. Bulls are hoping that the company will find several high grade mines along its 100+ kilometer stretch of land. Second, the project is located in the Yukon, and while the Yukon is underexplored it is also in the proverbial middle of nowhere. It is also really cold, which is why ATAC ended its 2014 exploration program in August--the company cannot drill in the winter. This means that ATAC and its peers in the region need more time to explore, making exploration a much more speculative endeavor.
However the fact that the company is finding high grade gold near the surface of its Rackla Property is very promising. The company has a substantial cash hoard of over $20 million with which to continue exploring. Finally, with the release of a PEA for the Tiger Deposit the company might be setting up to develop a small mine that can generate cash-flow to further finance exploration so that management can bring out the full value of the Rackla Property.
The stock remains highly speculative, and investors should only purchase on weakness, which we have seen since my last article 3 weeks ago. We may have already seen a reversal with the positive response to this news, although I would rather wait for additional weakness.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.
Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.