We first bought shares of Rubicon Minerals Corporation (NYSEMKT:RBY) in one swell swoop back in May of 2010. Since then, like all metals and mining firms, it’s had its ups and downs. I said then, “Rubicon is a junior mining company that I think might just be ready to catapult itself into the big leagues. That is to say, I think it may be a better buy today than it was when it sold for half the current price.” I like it even more today at an even higher (albeit not much higher) price.
RBY has some great properties in the Red Lake area of Ontario, some of which have been independently documented as having as much as 20 grams of gold per ton or more. That’s big. The reason the stock has not participated in the gold upsurge to the degree some other companies have is that the British Columbia Securities Commission decided their probable reserve estimates were too aggressive. (Rubicon is headquartered in BC, hence that regulator’s mandate to protect investors.) The regulator's concerns are not surprising since such discoveries are few and far between. On the strength of the original independent studies, RBY claims nearly 5 million ounces of gold reserves, with the possibility of reaching, by extrapolation, somewhere north of 13 million ounces once the acreage is completely delineated. I personally believe that may prove to be a conservative estimate.
However, the independent consultants who produced these estimates, under pressure from the regulators to be ultra-conservative and from RBY not to upset any apple carts even though this was an independent appraisal, just last month reduced their estimate of the geological potential. This is weighing on the stock, giving us a chance to buy at what I believe is a great price-to-value.
This revised estimate does not necessarily mean that Rubicon's find won’t be every bit as strong as envisioned in the initial report, but merely responds to the BC Securities Commission’s comfort level and now is dialed back to something between 5 million to 9 million ounces of gold.
(It’s worth noting that Rubicon has conducted an additional 38,000 meters of exploration drilling since mid-2010, that were not included in the initial resource estimate that the BC regulators objected to, all of which look extremely favorable, as well!)
Rubicon’s acreage sort of checkerboards the much-larger Goldcorp’s successful delineations of its own properties in this area. I still like Rubicon's prospects and candor in showing actual delineations of its ore bodies. It is speculative, as are all junior miners, but I think RBY has the potential at Red Lake alone to leave the ranks of "junior" miners behind and join the intermediates. I like RBY enough to take our position up to closer to 7% of our Aggressive portfolio.
Disclosure: We, and/or those clients for whom it is appropriate, are long RBY.
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