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  • Mining News Review: Week of October 11th

    The Metal Augmentor's weekly Mining News Review is updated daily at www.metalaugmentor.com/eforum.

    You are also welcome to sign up to our free mailing list at www.metalaugmentor.com and you'll be sent updates whenever we add new content to our editorial forum.

    Bullion Monarch Mining
    (OTCBB: BULM)
    Bullion Monarch Management Comments on Surge in Share Price
    - October 11, 2010

    We’re not sure who or what caused the spike, and the company isn’t either. [Zurbo]

    pumpdump

    This isn’t technically a pump and dump without an identified culprit although the effect is certainly the same. [Silverax]

    Breakwater Resources (TSX: BWR; Pink Sheets: BWLRF)
    Strike Settled At Toqui
    - October 11, 2010

    To be honest we were hoping this hiccup would lead to a buying opportunity, but the market seems to have known better not to get too worried. Compared with the current estimated operating costs of $117/tonne (after accounting for treatment and marketing costs), the incremental cost of $1/tonne is silly in its insignificance.

    As a cash flow powerhouse we’ll continue to monitor the company closely. If a lower risk buying opportunity emerges, subscribers will be the first to know. [Zurbo]

    Great Panther Silver (TSX: GPR; Pink Sheets: GPRLF)
    Great Panther Reports Third Quarter Production and Updates Exploration & Development Programs
    - October 12, 2010

    Production for Q3 was largely in line with expectations. Having closed even for the day, the market seems to agree about there being no surprises. [Zurbo]

    Pelangio Mines (TSX-V: PX; Pink Sheets: PGXPF)
    Pelangio Exploration Intersects High Grade Gold in Oxide at the Manfo Property - October 13, 2010

    It looks like our theory that Pelangio has figured out where the gold is located at the Pokukrom West target was partially correct. The gold zone at this target is showing remarkable grade and width consistency even if just over a small area so far, and of course the upward extension of the gold at bonanza grades into the oxidized saprolite has positive implications for an eventual mining scenario. Results at Nfante East were a bit less impressive but there is gold at that location as well, meaning that Pelangio is 4-for-4 in its first pass drilling program. We should definitely keep an eye on how things progress here. [Silverax]

    Potash Corp. of Saskatchewan (NYSE: POT; TSX: POT)
    BHP Billiton
    (NYSE: BHP)
    Sinochem
    Corp.
    China’s Sinochem Abandons Potash Bid Plans
    - October 15, 2010

    “I’d be surprised if the Chinese formalized their withdrawal, but there’s no … way they are doing anything. It’s been dead for five to six weeks,” one source said.

    The assertion that any potential of an offer has been dead for 5-6 weeks seems exaggerated, but given the recent announcement of 8 new large potash discoveries in China with combined reserves of 468 million tons (equivalent to over 50 years of domestic consumption) such news isn’t all that surprising.

    We recently argued that the findings presented by the Conference Board of Canada showed the potential for significant future price weakness within the potash market. Forget about the risk of Sinochem overproducing potash in Saskatchewan, there is now the risk that they can overproduce it in their own backyard having potentially the same effect on world prices. This is probably great news for the world at large, but the people of Saskatchewan might be starting to get a little nervous about the potential impact on future revenue streams even without Sinochem moving in. [Zurbo]

    Salazar Resources (TSX-V: SRL; Pink Sheets: SRLZF)
    Corporate Update
    - October 15, 2010

    After being halted since September 10th, shares are finally expected to resume trading on or about Monday, October 18th. In line with what we wrote on Salazar in our Mining News Review for the Week of September 13th, we would love to see the shares open up weak, giving us a chance to establish a position at a more attractive price level.

    The updated resource estimate recently published on El Domo is not large, and is very similar in size and grade to the inferred resource published in February 2009 that Salazar was required to update before the cease trade order was removed. What makes the resource interesting is its grade, and if it can be significantly expanded it starts to look very interesting. But considering that according to Mr. Fredy Salazar, President & CEO, this updated resource “incorporates our latest drill hole results”, and that it was these drill results that presumably pushed the share price up from the C$1 level to C$1.30, in our view there is room for disappointment potentially leading to the opportunity to buy shares at or below the C$1 level even despite the strength in gold, copper, and zinc. Time will tell. [Zurbo]

    Mining Companies in Mexico
    Drug Gangs Threaten Mexican Mining Industry - October 14, 2010

    A very interesting article that highlights the dangers of operating in Mexico. We estimate that mining projects in jurisdictions surrounded by other mining operations are probably at much less risk than mines or exploration projects that are isolated. And operations that produce dore bars on site are probably more vulnerable to theft than those that do not. No doubt an added risk that should attempt to be taken into account when evaluating investment opportunities south of the border. [Zurbo]

    Inca Pacific Resources (TSX-V: IPR; Pink Sheets: IPRFF)
    Inca Pacific Disagrees With the Government of Peru’s Intention to Sell Magistral
    - October 12, 2010

    According to Inca Pacific:

    …the Government of Peru’s Agency for the Promotion of Private Investment (”ProInversion”) has run an advertisement in several newspapers in Peru calling for international bids for private investment in the development and exploitation of the mining concessions comprising the core of the Magistral Project.

    The Company is extremely disappointed that the Government of Peru has taken the action to sell Magistral prior to a decision by the arbitration panel with respect to the ongoing dispute…[this]action shows complete disregard for the contractually agreed process of solving disputes between parties and for what the arbitration panel…may think of the dispute.

    For the past ten months, the Company… has attempted to maintain a dialogue with the Peruvian Government…in an attempt to find a commercial resolution to the dispute. While progress has been slow, we believed that the parties were acting in good faith and were willing to find a solution. The actions today leave little doubt as to the intentions of the Government of Peru.

    Obviously there is a strained relationship between Inca Pacific and the government of Peru, and perhaps there is significant material information that has not been disclosed revealing more as to what has caused such ill will. But even if such undisclosed information were to show Inca as being 100% at fault, it is hard to imagine another buyer stepping into the fray given all the uncertainties surrounding the future of the project thanks to the actions taken so far by various governmental bodies in Peru. We aren’t likely to see any sort of resolution here for some time. Meanwhile Inca is slowly burning through its cash without any other exploration projects in its portfolio to potentially shift sentiment. [Zurbo]

    Orosur Mining (TSX-V: OMI; Pink Sheets: OROXF)
    Orosur Announces Results and Corporate Update for the First Quarter Ended August 31, 2010
    - October 12, 2010

    Production for the quarter totaled nearly 13,000 ounces gold, and even at a relatively high cash cost of of US$839 per ounce Orosur was able to generate very significant cash flow from operations–at an average realized gold price of US$1,260 per ounce.

    If it weren’t for the fact that Orosur’s flagship San Gregorio project had such a limited mine life, the company would probably be one of our top picks given its status as a quintessential cash flow king in the current elevated gold price environment. After all, the company trades at a market capitalization of just over $50 million even after rising from C$0.30 to over C$0.80 during the last few months.

    Given the company’s substantial cash position, its enterprise value (NYSE:EV) is currently closer to $35 million. In other words, had we been paying closer attention in the August/September window it would have been obvious that Orosur was due for a stunning quarter and was grossly undervalued. It is seriously hard to believe that this was trading in the low 0.30s in late August, with an EV of under $10 million for a profitable gold producer. Even now the company appears cheap compared to our valuation model’s base case target price of about C$1.80. And keep in mind that this target gives only minimal value to Pantonillo, a developing gold project in Chile with a scoping study in progress. M&A activity is another potential outlet for growth currently being evaluated by the company.

    We’ve already contacted management and await a response to several questions about the company’s mining operations and plans for Pantonillo before potentially writing a more detailed analysis for the benefit of subscribers if the price is right. [Zurbo]

    U.S. Silver (TSX-V: USA; Pink Sheets: USSIF)
    U.S. Silver Announces Q3 2010 Production - October 15, 2010

    We noted in our recent Silver Producers Report that U.S. Silver has leverage to a higher silver price because of its high cost of production and indeed the stock did fly from a summer low of around 20 cents to over 50 cents recently, but as the latest operating results demonstrate, the company has a ways to go still in order to achieve a stabilized, profitable operation. As part of our research for the Silver Producers Report, we sent the company a grade reconciliation worksheet so that we can start to understand where the grade shortfalls are taking place. Alas, we did not receive a response and therefore we are still clueless on that important operating criteria, which once again was the major reason why cash operation costs per ounce (net of by-product credits) remain stubbornly above $10. This is not a huge problem at $25 silver but it is still the highest out of all the silver producers in our model, and despite the recent run up in the share price, U.S. Silver is not likely to reach its baseline valuation without gaining control over costs.

    Of course the sequential and year-over-year drop in Q3′2010 production is also a problem — but this is perhaps related to a one-time event (in this case the unfortunate fatality of a contract mine worker). Then again, too many one-time events in a row a trend make, pointing to the possibility of a severe recurring operating hurdle. In the case of U.S. Silver’s Galena operation, one potential culprit would be poor ground conditions — namely, a tendency for rock bursts and rock falls in the underground stopes and workings. Assuming competent mining is taking place in new development headings, rock bursts should be a manageable problem (Hecla — NYSE: HL — has mostly got them under control at the nearby Lucky Friday mine) but in old workings there is only so much that can be done. We really do need to see progress from the company on stabilizing and ramping up production, increasing head grades and dealing with operating issues such as poor ground conditions before U.S. Silver can be considered part of the group of high quality silver miners. Perhaps we would be inclined to look at the company as a speculative prospect if we understood the grade reconciliation issues but absent that we are blind at this point. [Silverax]

    Silvercrest Mines (TSX-V: SVL; Pink Sheets: STVZF)
    Santa Elena’s First Dore Shipment
    - October 14, 2010

    Silvercrest is currently trading near our calculated fair value based on the Santa Elena mining operation which is expected to enter commercial production in early 2011 producing about 24,000 ounces gold and 500,000 ounces silver per year after taking into account the gold stream owed to Sandstorm Resources (TSX-V: SSL; Pink Sheets: SNXXF). The normal hiccups along the way to commercial production at Santa Elena have the potential to result in significant price weakness. That’s the time we would prefer to entertain opening a position, not now. If Silvercrest can demonstrate the profitability of Santa Elena, at that point it will make sense for us to more seriously evaluate the likelihood of expanding the mining operation to incorporate the El Zapote and Cruz de Mayo deposits as these could add significant value to the company. [Zurbo]

    Disclaimer: We own shares in several of the companies mentioned in this analysis (Metal Augmentor subscribers know which ones), but no compensation has been received from any of the companies mentioned. This is not investment advice; should you seek investment advice we recommend you discuss the company with a licensed investment advisor or broker.

    Oct 27 8:05 AM | Link | Comment!
  • Mining News Review: Week of October 4th
    The Metal Augmentor's weekly Mining News Review is updated daily at www.metalaugmentor.com/eforum.

    Taseko Mines (TSX: TKO; AMEX: TGB)
    Strong Third Quarter Production Results from Gibraltar Copper Mine
    - October 4, 2010

    During the third quarter, Gibraltar produced 25.7 million pounds of copper, a roughly 25% improvement over Q2 helped in part by improving copper recoveries. The mine is now well on its way to reaching its goal of producing 115 million pounds per year. Meanwhile molybdenum production came in at a healthy 265,000 pounds. Gibraltar boasts a mine life of at least 25 years. Just one more reason why we’re happy having implemented our speculative options strategy. [Zurbo]

    Tanzanian Royalty Exploration (TSX: TNX; AMEX: TRE)
    Closes Private Placements
    - October 4, 2010

    As Silverax wrote in a recent comment to subscribers regarding exploration companies in Africa:

    I don’t think anything explains the enigma of TRE. Their only press releases seem to be about private placements. Their Tanzania properties are not in the newly-discovered gold belt where Canaco is exploring but rather in the original Lake Victoria belt. I am not in favor of companies that provide virtually zero information in terms of hard numbers but rather ask shareholders to trust the superior wisdom and intelligence of management.

    And that’s not an exaggeration. A full 7 of the last 10 press releases have had to do with private placements, and minor ones at that for a company trading for well over $600 million. [Zurbo]

    To be completely fair about it, those private placements were taken down by the CEO — Jim Sinclair, the gold bug who predicted $1,650 gold by January 2011 — and they have been favorable to the company with no warrants attached. But the point is still valid in that a “royalty” company with this group of assets and lengthy operations should be self-sufficient by now especially if it carries such a hefty market cap. [Silverax]

    Southern Arc Minerals (TSX-V: SA; Pink Sheets: SOACF)
    Vale S. A.
    (NYSE: VALE)
    Southern Arc and Vale Enter Into Option/Joint Venture Agreement
    - October 4, 2010

    Vale’s interest in Southern Arc’s early-stage Indonesian projects is certainly positive, but the flexibility of spending commitments and long time lines involved in the agreement keep us from getting too excited. Vale has only committed to spend $1.2 million in a phase 1 exploration program within 12 months of exploration permits being received. From there, Vale has the option to proceed with a multi-stage Phase 2 program. According to the agreement, if Vale chooses to go ahead with the Phase 2 program, it has 7 years from when Phase 2 commences until it needs to produce a bankable feasibility study. So basically we will need to see indications of Vale moving much more aggressively before these agreements become of any significant interest to Southern Arc, although they do demonstrate once again that the majors are not afraid of getting involved in Indonesia despite all the recent hooplah concerning environmental and forestry issues. [Zurbo]

    Kaminak Gold (TSX-V: KAM; Pink Sheets: KMKGF)
    Kaminak Continues to Intersect Wide Intervals of Gold Mineralization at Latte - October 4, 2010

    Kaminak’s Latte zone at the Coffee project in the Yukon is now recognized as containing two domains, an upper disseminated zone of oxidized gold grading up to 2 grams per tonne (gpt) across a structural width of up to 80 meters along a strike of 400+ meters and a lower zone of gold associated with sulfides (pyrite) grading 2-10 gpt across widths of up to 10 meters. The total strike length of the system remains unknown with both ends of the zone showing strong gold intercepts. Since the surface gold anomaly starts to get weaker at these end points, it is possible that the system continues under cover to the east and west. There is some apparent weakening at depth but the bottom of the mineralization is considered open as it has not yet been reached by the shallow drilling conducted so far. All in all, Latte is resolving as a ~1 million ounce gold deposit grading in the 1.5 gpt range combining the oxide and sulfide horizons. My guess for an initial inferred resource, on the high side, is 13 million tonnes containing 580,000 ounces of gold. As noted above, a portion of this resource appears to be unoxidized; if suspected to be at least partially refractory, it should ideally be presented separately in the resource estimate. With drilling at Latte completed for the current season, it will be a few months before we find out just how much larger the Latte deposit will get. In the meantime, assay results are pending at several other zones. Apparently some of the holes are visually well-mineralized so there is still hope for some excitement before the winter doldrums set in. Notably, the Double Double and Supremo zones to the north of Latte appear to generally have narrower widths but significantly-higher grade mineralization with the drill core textures and mineral assemblages suggesting the presence of both oxidized and sulfide domains being present here as well. It is encouraging that some of the high grade intercepts appear to be thoroughly oxidized; should these zones demonstrate continuity (there is some evidence for limited depth), these zones may quickly overtake Latte in economic importance. With two or three zones of mineralization on the scale of Latte, Kaminak arguably deserves its current market capitalization with plenty of upside remaining from future exploration success. [Silverax]

    Endeavour Silver (AMEX: EXK; TSX: EDR)
    Cream Minerals (TSX-V: CMA; Pink Sheets: CRMXF)
    Endeavour Silver Commences All Cash Offer to Acquire Cream Minerals - October 4, 2010

    The background to the offer provided by Endeavour Silver for Cream Minerals (TSX-V: CMA; Pink Sheets: CRMXF) is greatly appreciated as is the main risk facing the company:

    Risk of Cream Resource Disclosure: Cream’s mineral resources as disclosed in their National Instrument 43 101 (”NI 43 101″) reports on the Nuevo Milenio Property were prepared by Cream’s second largest shareholder and a Director, not by independent consultants as required under NI 43 101. In Endeavour’s opinion, the resources are not compliant with NI 43 101 and a substantial amount of work will be required to confirm resources in compliance with NI 43 101.

    Indeed, that particular shortcoming was one of the first things that caught our eye a while back although we didn’t recall the details until Endeavour kindly reminded us and other investors. That said, the 12 cent cash offer appears to be firm and we see little risk buying Cream at that price based on the hope that another suitor might come along during the next month or so. [Silverax]

    Amarillo Gold (TSX-V: AGC; Pink Sheets: AGCBF)
    Amarillo Commences 5,000 Metre Drilling Program at Mara Rosa Project Brazil - October 4, 2010

    The company continues to advance its feasibility work on the Mara Rosa project in Brazil yet the share price reveals neither the developmental progress nor the record high gold price. One possible reason the shares remainsmoribund is the somewhat complex metallurgy that continues to undergo further study and optimization of plant configuration: as reported on August 11, 2010, about half the resource at Mara Rosa is mildly refractory due to being tied up in tellurides. We expect a workable solution to be eventually identified and successfully tested but it could negatively impact project NPV via higher capital costs (though this might be offset by a higher gold recovery than the 80% currently modeled for agitated pulp leaching). Our suspicion is that things aren’t lined up yet for the big ride, but with that said, the shares are pretty cheap and won’t require much buying pressure to break out above a dollar, at which point C$1.50 seems inevitable. [Silverax]

    Gammon Gold (TSX: GAM; AMEX: GRS)
    El Cubo Labour Strike Declared Illegal - October 4, 2010

    It doesn’t matter much whether or not the strike at Gammon Gold’s El Cubo mine is legal, what matters is how soon the mine can be placed back into production. Firing almost 400 union workers and filing criminal charges against 7 union executives might have been an appropriate action by the company but we don’t see how it was “in the best interests of the union employees” as claimed by CEO Rene Marion. If Gammon Gold can lose its “antiMidas touch”, it might be worth a punt considering what could be another turnaround in the making at the troubled Ocampo mine, one that might be more-or-less permanent this time around. What would probably help the company a bit is some additional perspective about how mining is done in Mexico — we suspect Dr. Luis Chavez is often a lone voice of reason at board meetings. [Silverax]

    Searchlight Minerals (OTCBB: SRCH)
    Searchlight Minerals Corp. to Pursue Autoclaving to Extract Precious Metals From Clarkdale Slag Project - October 4, 2010

    After years of messing around with shortcuts leading to dead ends, it has finally come to this: high pressure grinding rolls (HPGR) followed by autoclaving of the iron-silica slag. Unfortunately, there are some hurdles to still overcome. First, HPGR can process the abrasive slag material but it probably needs to be integrated into a closed circuit milling flow sheet in order to ensure a consistent, optimum particle size. The company spent literally years experimenting with a vibratory grinding mill but it uses a wet slurry whereas HPGR is a dry grinding mill. As a result, the slag material will probably need to be dried out prior to introduction into the HPGR. While this isn’t likely to be a fatal flaw, it does add complexity and cost.

    Second, the autoclaving of the slag has nothing to do with oxidizing or neutralizing sulfides/arsenides, which is the primary purpose of all conventional pressure leaching applications. Rather, the autoclaving at Clarkdale apparently helps the leach solution penetrate into the slag particles (which have been fractured along grain boundaries during the HPGR stage) in order to come into direct contact with the metals to be leached. Furthermore, the pressure and temperature are supposed to prevent dissolution of iron and silica into, and the interference of carbon with, the gold-bearing solution. Even if technically possible, this would be a novel application providing little justification to conclude the following:

    Once the batch test results have been reduced and analyzed into a pre-feasibility document, a continuous pilot bulk test will be scheduled in a larger multi-compartment autoclave (30-50 liters) as part of the feasibility study. It is anticipated that this bulk test will be conducted in the fourth quarter of 2010, subject to completion of the pre-feasibility study and availability of the testing facility. This type of scale-up is common in the mining industry, and the majority of recent major autoclave installations have proven their feasibility utilizing bulk tests conducted with 30-50 liter autoclaves.

    Those 30-50 liter autoclaves used in the bulk tests are for standard pressure leaching applications involving refractory gold or sulfide ores. These are primarily conventional chemical processes (oxidation or hydrometallurgical isolation of sulfides) whereas the slag application would be a combination mechanical (penetration of slag particles) and novel chemical process (hydrometallurgical isolation of silica, iron and carbon). Pilot plant testing of such a process might not guarantee scalability and therefore the custom construction of a large processing facility may ultimately be required for bankable feasibility purposes. Such a “pilot plant” could ultimately cost tens — if not hundreds — of millions of dollars, thereby obviating the need for the “bankable” feasibility study and thereby creating a Catch-22 scenario.

    If the above issues are not as technically complex as we imagine them to be, then Searchlight could be a few months away from salvation and the shares might represent a good speculative punt. [Silverax]

    Peregrine Metals (TSX: PGM; Pink Sheets: PTTDF)
    Peregrine Metals: Measured and Indicated Resource at Altar Increases 74 % to 802 Million Tonnes Grading 0.44% Cu Equivalent Containing 7.41 Billion Pounds of Copper and 1.53 Million Oz. of Gold - October 4, 2010

    The deposit growth has not added substantially to near-surface oxides and consequent the leached copper cap still does not represent a resource base that is compelling as a standalone operation despite management’s goal of evaluating Altar as an initial oxide copper heal leach mine. For this reason: “Peregrine Metals is proceeding with a Preliminary Economic Assessment (”PEA”) on a combination leach and concentrator mining operation to examine the best scenarios for mining and processing this large copper-gold deposit.” Alas, neither the overall grade nor the geometry and layout of the porphyry system at Altar suggest to us that a robust mining scenario can be outlined based on the discoveries made to date. The attraction of Altar for us was the oxide copper potential and, to a lesser extent, the peripheral gold potential but the company doesn’t seem particularly interested in pursuing them at the current juncture. [Silverax]

    Heatherdale Resources (TSX-V: HTR; Pink Sheets: HTRRF)
    Niblack Mineral Development (TSX-V: NIB; Pink Sheets; NIBMF)
    High Grade Results Continue To Expand And Upgrade Lookout Zone At Niblack & High Grade Results Continue To Expand And Upgrade Lookout Zone At Niblack - October 4, 2010

    It seems all the VMS (volcanogenic massive sulfide) exploration companies appear to have market caps in the C$50 million range and here are two more that get us there on a combined basis. The valuations are relatively even with Heatherdale about twice the enterprise value of Niblack, matching the eventual 70/30 joint venture split of their Niblack property in southeastern Alaska. The existing resource inventory is still on the smallish side although recent exploration success suggests that a meaningful increase will be made after the completion of the current drilling program. Stated another way, it’s not unreasonable in our opinion to hold the viewpoint that a VMS deposit or deposits located far away from an already-operating concentrator will probably need an in situ metal value of over US$1 billion before being taken seriously. By that measure, the Niblack project is at least half way there. [Silverax]

    Donner Metals (TSX-V: DON; Pink Sheets; DONFF)
    Donner Metals Ltd.: Xstrata Zinc To Conduct Definition Drilling at PD1 Deposit - October 4, 2010

    The potential upside and downside of the arrangement with Xstrata Zinc is demonstrated by the recent “positive” feasibility report published on the Bracemac-MacLeod deposit: highly sensitive to rising metal prices but potentially disastrous at lower metal prices due to the funding requirement. Simply put, if metal prices drop to or below those used in the feasibility study (U$0.80/lb zinc, US$2.50/lb copper), it would be nearly impossible for Donner Metals to raise the funds for its pro rata share of the US$163.7 million in estimated capital costs. Meanwhile, Xstrata Zinc might still go ahead with the project for its own reasons and it would likely be able to obtain the funds for construction. The result would be Donner defaulting on the joint venture agreement, the consequences of which we haven’t looked into but suspect cannot be very good. [Silverax]

    On the plus side, Donner is not required to contribute any capital until May 31, 2011 so it still has plenty of time to arrange its share of project financing which is initially estimated at about US$40 million. This seems feasible, but only if metal prices–particularly zinc and copper–don’t take a significant hit between now and then. [Zurbo]

    Soho Resources (TSX-V: SOH; Pink Sheets: SHRJF)
    Soho Resources Corp. Announces Positive Preliminary Economic Assessment for Current Resource Identified on Its Tahuehueto Project - October 4, 2010

    The project is coming together but there is much work left to be done and the company is scraping the bottom of the barrel trying to come up with the funds. There isn’t enough gold or silver in the resource category to get investors very excited at this point even if a decent and reasonably-profitable small mining operating can be established. On top of that, the combination of underground and open pit mining as well as the production of two concentrates makes this project as proposed quite complex for its size. [Silverax]

    Dundee Precious Metals (TSX: DPM; Pink Sheets: DPMLF)
    Sabina Gold & Silver
    (TSX: SBB; Pink Sheets: SGSVF)
    Sabina Gold & Silver Announces More Significant Results at Umwelt Discovery, Back River Project, Nunavut
    - October 4, 2010

    These are some phenomenal results, and remembering Dundee to be the company that sold the Back River project to Sabina in June 2009, we couldn’t help but thinking they must be kicking themselves as they watch the Sabina share price  power higher and higher. But then we recalled that Dundee was given 17 million shares and 10 million special warrants in that transaction, and that these share and warrants are now worth over C$150 million. That’s not too shabby! Meanwhile Dundee’s current cash position comes in at around C$100 million, leaving it sufficiently funded to complete a major expansion at the flagship Chelopech mining operation. We’ll have more to say about Dundee in the next update to our mid-tier Gold Producers Report. Preliminary it looks undervalued within our model, which gives it a base case valuation target of C$11.00 per share. [Zurbo]

    Sabina is not in our analysis because there are no recent economic studies but clearly the Back River resource adds very significant value to the project and makes its remote location no longer the one critical issue that blocks development of the project beyond the resource definition stage. There is upside here but winter doldrums are likely to set in and we may see a decent pullback. Hopefully by then we will have more information about the economic parameters of a proposed mining  operation. This is one of the companies that we identified early on but never got on board because we did not formally document our thinking — that has  now changed with this Mining News Review approach.[Silverax]

    Golden Minerals (TSX: AUM: AMEX: AUMN)
    Golden Minerals Announces Equity Financing - October 6, 2010

    Golden Minerals is now up 10x from where we originally featured the company (and up about 3 times from the level where we eventually sold the last of our position). There are few opportunities that are as certain as Golden Minerals trading at $2 with more than $8 per share in cash (as it did in June 2009), but this is a company that doesn’t like holes being burnt in its pockets — so it was quick to spend what it had on holes in the ground and is now on its second major financing during the past year. The current value of the company is primarily due to the bonanza silver located in the central and western Yaxtche zone at its El Quivar project in Argentine but the opportunity is no longer as certain. As noted previously, the company is doing the right thing by re-evaluating its initial proposal to build a low tonnage, low grade mine at El Quivar and we look forward to reviewing the results of the preliminary economics. Until then, we congratulate the patient shareholders who have held since those early days of certainty and wish them continuing success. [Silverax]

    North Country Gold (TSX-V: NCG)
    North Country Gold Corp. Announces $5 Million Private Placement Unit Financing & North Country Gold Corp. Announces Increase to the Private Placement Unit Financing - October 6, 2010

    Do we detect a pattern here? Apparently the funds want into the gold and silver juniors bad. Be that as it may, the timing is pretty good for North Country Gold even though they won’t be putting the money to use until next spring. Unfortunately the half warrants at 60 cents are a giveaway and we are likely to get significant selling once the placement shares become free trading sometime in February. My guess, and it’s admittedly tinged with cynicism, is that the updated NI43-101 resource will be conveniently released sometime around then. With the mammoth issuance of stock options also out of the way, we hope to have no further distractions of the dilution frenzy-type going forward. In any case, the Three Bluffs project is one we can believe in and the primary question at this point is, when should we buy? [Silverax]

    Megastar Development (TSX-V: MDV; Pink Sheets: MSTJF)
    Eloro Resources (TSX: ELO; Pink Sheets: ELRRF)
    Megastar and Eloro Announce Megastar Annual and Special Meeting - October 6, 2010

    Let’s see, Megastar shareholders get 70 million shares of Eloro on a pro rata basis in exchange for Megastar selling its 50% share of the Simkar property in the Val d’Or gold camp of Quebec to Eloro. Megastar has about 45 million shares fully diluted so that is 1.5 Eloro shares for each Megastar share. Eloro currently trades at 10 cents while Megastar is at 13 cents. In other words, if you buy a Megastar share today for 13 cents you will in the future get 1.5 Eloro shares currently worth 15 cents assuming the deal is approved. That looks like a free lunch, or at least getting something for nothing, and we generally like that scenario even if there is a chance things can go wrong. That is called speculation. As for the Simkar property, it is what it is — a valid exploration project with fair odds of discovering a lode-style ore shoot below the historic mine workings. We probably wouldn’t pay more than $20 million for something like that at such an early stage but that is where Eloro will be when the deal is done assuming the share price remains the same. [Silverax]

    Eastmain Resources (TSX: ER; Pink Sheets: EANRF)
    New High-grade veins & Bulk tonnage targets at Clearwater - October 6, 2010

    The Eau Claire resource was previously modeled as a lode vein deposit. In fact, that is how the resource update due this past summer (and before that, in late 2009) was supposed to model it. But somewhere along the way Eastmain recognized the open pit potential of the project. Alas, the hand wasn’t speaking to the foot until somebody at SRK Consulting, tasked to audit the internal modeling as part of the NI43-101 process, pointed out the obvious: if you plan to potentially mine a portion of the deposit as an open pit, then you should resource model that portion as an open pit. The implications are two fold: one, the updated resource will take a while longer to complete, which is a negative; and (2) the resource number, when finally reported, could surprise some people, which is a positive. Even at a million ounces of open pittable resource this would be a valuable property given the nature of the gold (mostly free milling and contained in visually recognizable host rocks), not to mention the exploration upside. [Silverax]

    Kodiak Exploration (TSX-V: KXL; Pink Sheets: KXLAF)
    Kodiak Drills 35m Grading 2.21 gpt Gold including 4m Grading 16.6 gpt Gold at Milestone - October 6, 2010

    Two holes about 200 meters apart had good results, the rest not so much. One hole (MS10-48) may be a fluke given the low grades of two other holes drilled from the same setup. Hole MS10-49, the other good hole from this set of assays is in the same smallish zone as holes MS10-38 to MS10-40 reported earlier. Much more needs to be done along the lines of finding similar high grade zones (shoots?) at Milestone before we start getting excited. [Silverax]

    Eagle Plains Resources (TSX-V: EPL; Pink Sheets: EGPLF)
    Eagle Plains Samples New High-Grade Gold Discovery at Yellowjacket Gold Project, Atlin, B.C. - October 6, 2010

    What we are focusing on for a bit of perspective:

    The 1903 Report of the Minister of Mines describes the Rock of Ages workings as: “…a shaft has been sunk 60 feet. From the bottom of this a cross-cut was run 7 feet and struck the hanging wall of the ledge. A drift was run down-stream 60 feet at this level, and one upstream on the 30 foot level. The ledge wherever tapped is about 14 feet in width, mostly low grade ore, although many extremely rich patches are encountered.” Eagle Plains geologists have mapped and sampled the local area and have now received partial results, including an interval which returned 51.36 g/t over 5.2m.

    In light of the possible “extremely rich patches”, what we’d like to know is what are some of the other intervals in those partial results besides the 51.36 g/t over 5.2m. [Silverax]

    Fire River Gold (TSX-V: FAU; Pink Sheets: FVGCF)
    Fire River Gold Announces Mineral Resource Estimate For the Nixon Fork Gold Mine, Alaska - October 6, 2010

    The resource estimate was from work performed prior to Fire River Gold taking over, consisting of 1,233 drill holes and 17,693 samples. You know that size is a concern when a company reports a gold resource in grams. We did some math and came up with 3,267 grams of resource per drill hole and 357 grams per sample. That probably includes some double-counting but it also should temper excessive hopes about the ongoing 28,000 meter drilling program. Namely, if we assume each drill hole will average 50 meters (it will probably be more than that from surface but less from underground), we get 560 total drill holes for the program. At the historic rate of 3,267 grams per drill hole, that is a level-set expectation of 1,829,520 grams of resource expansion. For the number-challenged among you, the converted figure is 58,821 ounces. All kidding aside, the Nixon Fork Gold Mine sits on top of a small, high-grade gold deposit. After the current drilling program or any other future drilling programs, the mine will still sit on top of a small, high-grade gold deposit. Not to say it can’t make some money — just a small amount of it. [Silverax]

    Trevali Resources (TSX: TV; Pink Sheets: TREVF)
    Trevali Commences Trading on Toronto Stock Exchange; Appoints Dr. Anthony Holler as Chairman - October 6, 2010

    We are intrigued by the unique deal structure with Glencore at the Santander project in Peru that has the metals trading giant responsible for plant construction and mine operation while Trevali gets 100% of the upside in the form of potential mine operating profits. Unfortunately, there are no external economic studies and so we are left with back-of-napkin calculations that suggest the upside for Trevali may be limited in the near term assuming the market will value the company on the basis of its existing zinc-silver-lead resource at a 2000 tonne per day mining rate. We also assume that Glencore’s services don’t come cheap; Trevali will have to pay for them eventually out of future mining cash flows. In any case, trading on the Toronto exchange will hopefully create some liquidity in the months ahead so that we can take advantage of any attractive opportunities that may present themselves. [Silverax]

    Atna Resources (TSX: ATN; OTCBB: ATNAF)
    Atna Reports Strong Production at Briggs Mine - October 6, 2010

    Higher gold prices might do wonders for companies like this with a small current gold production profile that also have one or more development-stage projects that together could make them a 100,000+ ounce per annum mid-tier gold producer. Unfortunately, Atna is partially hedged as a result of what appears to be a “mini-Barrick” delusion of grandeur (hopefully now cured given that even Barrick has stopped being insane) as well as a US$14.5 million “gold bond” issued in 2009 to provide funds for the purchase of equipment and for startup capital at the Briggs Mine in California(!). Terms of these gold bonds will make it somewhat difficult for Atna to generate significant cash flow in the near term from the Briggs operation even at $1,350 gold. Future drivers for the share price would include meaningful development progress on the company’s other projects, several of which appear to have solid prospects, and of course abstaining from hedging policies that eliminate upside leverage to higher gold prices (there are other ways to lock in minimum gold prices that don’t come at such a steep cost). [Silverax]

    Amarok Resources (OTCBB: AMOK)
    Phase I Drill Program Confirms Gold Potential of Rodeo Creek Project - October 6, 2010

    How shall we describe this one, gentle reader? How about one word? Fraud. Of course if we need to tell you that, you need to immediately sell all of your gold stocks and buy a nice safe mutual fund (okay, it can be a gold mutual fund). And if you listen to anybody who has said anything positive about this company — Grass Roots Research, Liberty Analytics, Skymark Research, Emerging Stock Report, et cetera — even gold mutual funds are probably too much for you to handle. [Silverax]

    Titan Uranium (TSX: TUE; Pink Sheets: TUEFF)
    Titan Uranium Continues Baseline Environmental Studies And Engineering Design At Sheep Mountain Project, Wyoming - October 6, 2010

    Is it considered progress when there is little chance you are going to get a mining permit? Titan Uranium was C$3 during the uranium boom of 2006-2007 but there is little chance of it ever trading that high again. It could go back up to its 2009 high of 60 cents for one irrelevant reason or another but unless you have strong faith in state and federal regulatory agencies approving open pit heap leach uranium mines ever again in the United States, it would be better to wait for the actual permits before jumping on board — even if the share price is 60 cents when that happens. [Silverax]

    Yukon-Nevada Gold (TSX: YNG; Pink Sheets: YNGFF)
    Ketza IP Target Proves to Bear Significant Gold Intercepts - October 6, 2010

    The headline is wrong on two counts. First, it is not “intercepts” as in plural but rather “intercept” as in singular. Second, it isn’t “significant” unless you consider 2.3 grams per tonne gold over 2.99 meters to be significant. It might seem nitpicky to focus on a press release about a minor exploration project but this stuff speaks strongly to a company’s credibility especially when you’re a gold mining turnaround play with a C$750 million fully diluted market cap — such a valuation suggests the market has come a long way in trusting the company’s contention that a turnaround is in fact in progress at Jerritt Canyon. So let’s look at the press release a bit closer. Note this statement by the company:

    The top of the IP anomaly starts at approximately 700 meters below the surface. The first two drill holes (KR-10-1477 and KR-10-1478) encountered significant intervals of fault zones and failed to reach their target depths (IP anomaly zones) before being lost due to very poor rock conditions.

    In other words, the IP target is located below 700 meters so none of the gold intercepts, significant or not, from the first two drill holes prove anything with respect to the IP target. Now let’s look at this statement:

    Drill hole number KR-10-1479, was completed to 862 meters (2,827 feet) and encountered several zones of Au mineralization prior to reaching the depth of the IP target. The rock in the bottom half of this drill hole averages about 3 percent total sulfides and is sufficiently high enough to explain the IP anomaly. No intrusive rock was intersected.

    The initial impression is that the third hole also failed to intercept any gold at or below the target level of the IP anomaly but the assay table does reveal the aforementioned 2.3 grams per tonne gold over 2.99 meters starting at a downhole depth of 743.9 meters. Then again, if this drill hole was inclined more than a few percent from vertical, that downhole depth would actually be less than 700 meters below surface and therefore it would actually be above the depth of the IP target as well. Indeed, that interpretation seems to be more consistent with the company’s own statement referenced above, rendering the entire headline a lie. [Silverax]

    Oro Silver (TSX-V: OSR: Pink Sheets: OROSF)
    Drilling Commenced at Oro Silver’s El Compas Project, Zacatecas, Mexico - October 6, 2010

    It would have been nice to know in advance that the company has started a new drill program but nevertheless the initial results from the first three holes provide a bit of excitement. It should be noted that both the El Orito vein and the El Compas vein likely contain relatively small ore shoots that might each eventually host on the order of 100,000 - 200,000 ounces of gold (including equivalent silver). Thus they don’t represent major exploration targets or blue sky potential. There is some indication that vein extensions or new veins could host additional ore shoots but the real potential exists at depth. Alas, the company does not appear to have plans to drill deep targets in the near future. [Silverax]

    Crocodile Gold (TSX: CRK; Pink Sheets: CROCF)
    Crocodile Gold Pours 10,000 Ounces of Gold in September 2010 Setting New Monthly Record - October 6, 2010

    Crocodile Gold is now officially a mid-tier gold producer according to our definition of 100,000 - 1,000,000 ounces of annual gold production and we will be adding the company to our Mid-Tier Gold Producer model that we are currently updating and will have ready in a few weeks (probably just in time for a gold correction knowing our sometimes-rotten timing). On initial look the company looks a bit expensive at C$1.50 but it does have some very decent assets, competent management and grand plans to grow production and resource base. Production growth so far seems to have been accomplished without many hitches, which is quite impressive given that several smaller, diverse (open pit and underground) operations are involved. [Silverax]

    Corex Gold (TSX-V: CGE; Pink Sheets: CGEKF)
    Corex steps out on two holes and Intersects 29.0 m of 0.71 g/t Au, and 56.4 m of 0.47 g/t Au including 6.1 m of 2.1 g/t Au - October 6, 2010

    More potential open pit oxide gold in Mexico — this one has lots of “boring” drilling still ahead so no huge hurry to accumulate other than the fact that the shares are hitting a 52 week low just as gold is hitting yet another record high. Gammon Gold (TSX: GAM; AMEX: GRS) became involved with the company over the summer by way of an equity investment as well as a seat on the Corex Technical Advisory Board, but as noted elsewhere Gammon suffers from the “antiMidas touch” so it’s not clear if the association is negative or positive. In all seriousness, it is unclear what the potential tonnage of an initial 43-101 resource might be from the moderate-sized gold zones discovered to date and the timing of a resource estimate — assuming one is being planned — is also uncertain. [Silverax]

    Medusa Mining (TSX: MLL; ASX/AIM: MML; Pink Sheets; MDSMF)
    Medusa Mining Limited: Confirmation of Dividend Payment - October 6, 2010

    It’s hard to blame new mid-tier gold producer Medusa Mining for not knowing what to do with all the cash the company’s Co-O Mine is throwing off other than to pay it out as a dividend. The market cap looks rich for the current production profile and resource base but the distribution, size and extent of the classic epithermal gold veins at Co-O suggest that the deposit could be world class. The mine is already producing gold at an extremely low cost thanks to the consistently-high gold grades and cheap cost of Phillipine labor. We wouldn’t buy here but then again Medusa doesn’t look all that different to us than Andean Resources (TSX: AND; Pink Sheets: ANDPF) and Goldcorp did cough up US$3.4 billion for that one. [Silverax]

    Mines Management (AMEX: MGN; TSX: MGT)
    Montanore Project Reaches Another Critical Permitting Milestone - October 6, 2010

    If you need to understand why the Mines Management share price continues to struggle, you need look no further than this latest press release announcing a critical permitting milestone that heretofore was totally unknown to the majority of investors. Considering that permitting is the main risk at this point, one would assume the company is keeping shareholders updated on what has been accomplished to date and what still needs to be accomplished. But no such luck out of a management team who dared claim in 2004 that permitting would be a cakewalk because Noranda had already done most of the required work back in the 1990’s– only to be still several years away from completion in 2010. There is simply no urgency to own this stock, it will still be there in a year or two, probably at more or less the same price (unless the markets enter another all-boats-rise phase in the meantime). [Silverax]

    First Majestic Silver (TSX: FR; Pink Sheets: FRMSF)
    First Majestic Silver Corp.: Another New Record for Silver Production; 1,823,370 oz Silver Produced in Q3 - October 6, 2010

    First Majestic is well on its way to producing over 10 million ounces of silver per year at which point it can arguably be considered a “senior” silver producer. We suspect First Majestic’s claim to fame as the “purest” silver producer was initially recognized as a result of the Silver Producers Report we introduced over the summer. In any case, the company has done extremely well the past few weeks and is now arguably fully valued and therefore likely to trade more-or-less in lockstep with silver prices (not a bad thing in, and of, itself). We look forward to adding the latest operating results to our model when they become available as well as modeling the proposed Del Toro Silver Mine, which may represent further upside once the economic parameters are better known. [Silverax]

    Great Basin Gold (TSX/JSE/AMEX: GBG)
    Great Basin Provides update on the Burnstone Mine Project - October 6, 2010

    Full commissioning at Burnstone is nearly at hand and commercial production should be declared within weeks (possibly months, depending on the company’s interpretation of accounting or operational definitions). There is still a credibility gap that will probably only be cured by demonstration of competent, profitable gold production, at which point the shares should move toward full valuation in the $3.00 to $3.50 range (based on current gold prices). We just advised subscribers on the matter of the soon-to-expire warrants we recommended a while back, which are up a tidy 100%+. [Silverax]

    Alexco (TSX: AXR; AMEX: AXU)
    Alexco Intersects 10.4 Meters of 44.3 Ounces Per Ton Silver, Expands Onek Zinc-Silver Deposit at Keno Hill - October 6, 2010

    The market reaction is arguably justified by silver prices over $23/ounce but not by these drill results, which look spectacular until we read the fine print that they define a compact area adjacent to the historic Onek mine area where past drilling identified about 1 million ounces of silver plus about 35 million pounds combined lead and zinc. The 2010 Alexco drilling program probably expanded on that, but not by much. In the meantime, Alexco continues to ramp up for production but frankly at a market cap above C$300 million the share price is getting a bit ahead of itself, silver prices notwithstanding. Resumption of underground mining in historic workings is always a difficult task as Alexco and its shareholders are about to find out. [Silverax]

    American Manganese (TSX-V: AMY; Pink Sheets: AMYZF)
    Expanding Manganese Resource at Artillery Peak Grows by 45% - October 6, 2010

    This is purely for the manganese bug — all three of them worldwide. There probably will never be a manganese mania, which means Jim Dines probably won’t claim to be the “original manganese bug” either. But seriously, this idea is way out there and could actually work out. What’s needed are offtake agreements or industrial partners who will guarantee a market for the product and might even fund the mine construction. A separate issue is the patent-pending hydrometallurgical process developed for the Artillery Peak deposit. Anytime you have something brand new in mining, you are adding operational and execution risk to a business that is already inherently high risk. Ultimately, it comes down to whether or not the company can bring a credible partner to the table and we see no reason for the average investor to buy in until that happens. Unless of course you are a manganese bug, in which case please have at it. [Silverax]

    AngloGold Ashanti (NYSE: AU)
    AngloGold Ashanti eliminates hedge book, gains full exposure to gold - October 7, 2010

    That was fast, over 2 million ounces bought back in under a month at an average price of US$1,300, which means most of that was in the past few days. That much gold buying could very well help explain the steep rise in gold prices so far in October. This will probably go down as one of the stupidest moves in gold mining history along with last fall’s mea culpa from Barrick, whose similar move a year ago was only a bit less stupid on account of it being earlier and at a slightly lower gold price. If you should ever again listen to either the “gold price experts” at AngloGold Ashanti or Barrick, then you deserve what the market is going to hand you. So now that the gold miners have finally bought back all the gold at record high prices (after having sold it forward at record low gold prices), let’s hope they all start putting out predictions for lower gold prices going forward. In a similar vein, if you should ever find yourself agreeing with any central banker about gold prices, consider banishing yourself from gold investing for the sake of your net worth. [Silverax]

    Pelangio Exploration (TSX-V: PX; Pink Sheets: PGXPF)
    Pelangio Exploration Announces Third Gold Discovery at the Manfo Property-24.7 g/t Over 5 Metres - October 7, 2010

    These holes at Pokukrom East are decent but not spectacular. The soil anomaly suggested wider structures than what have been drilled although it is possible there are several stacked zones to account for the width. Note that the mineralization appears to dip west or northwest toward the drill hole collars and therefore the holes may have overshot the center of the system. Another possibility is that the mineralization does not extend very deep. In any case, it’s fairly obvious that there is potential for good continuity of a 25-50 meter wide gold zone along a strike of at least 500 meters and to a depth of 100 meters right from surface, open in all directions. With modest stepouts from these initial 5 holes, this could be a 250,000 oz. gold target grading ~1 gram per tonne of gold. That is not very interesting by itself because a multitude of similar targets will need to be drilled on the property before we can start talking about a mine, but ideally these separate gold systems will expand to depth and along strike beyond the surface contour of the anomalies. With five holes remaining in the inaugural program, we can’t yet consider our speculation (about prioritizing the highest potential targets last) to be finished but it’s a close call. [Silverax]

    Cameco Corp. (NYSE: CCJ; TSX: CCO)
    Steelworkers Vote to Strike at Cameco Mines
    - October 5, 2010

    Although the union members at Cameco’s Key Lake and MacArthur Lake mines won’t be in a legal strike position until October 22 and hope to reach an agreement before then, if none can be reached this could have a significant impact on the uranium spot price. A situation worth monitoring as it could lead to an overreaction and provide the fuel for a rally in the smaller uranium explorers and developers. [Zurbo]

    Belo Sun Mining (TSX-V: BSX; Pink Sheets: VNNHF)
    Belo Sun Mining Intersects 31.90 Meters Grading 3.05 g/t Gold Including 14.05 Meters Grading 5.13 g/t Gold at Volta Grande Project, Brazil
    - October 7, 2010

    In many ways Belo’s Volta Grande project is similar to Tocantinzinho, the flagship project of Brazauro Resources before it was acquired by Eldorado Gold (AMEX: EGO; TSX: ELD) for about $115 million or what would currently be equivalent to about $1.35 per share. Both projects are located in Brazil, are 100% gold, grade about 1 g/t, have total estimated capital costs of slightly over $300 million, and have life-of-mine estimated production of 1.6-1.7 million ounces at a cash cost of around $500 per ounce.

    According to our model, fair value for Brazauro based on its Tocantinzinho project was about C$2.70 per share, which means it was acquired at a roughly 50% discount to fair value. Belo Sun currently has a calculated fair value of about C$1.70 per share, so a similar offer would put Belo at roughly C$0.85 per share. [Zurbo]

    General Moly (AMEX:/TSX GMO)|
    General Moly Announces Hanlong’s Receipt of Key Chinese Governmental Approval - October 8, 2010

    General Moly’s Mt. Hope deposit in Nevada is to our knowlege one of the only mining projects in the United States that is being financed by Chinese equity investments and loans. The Chinese have of course already moved into Canadian mining in recent years after getting comfortable in Africa and South America. The situation is interesting because China hasn’t had much luck with the mining sector in the United States. For example, the proposed purchase of a majority stake in Firstgold (Pink Sheets: FGOCQ) by a Chinese firm last year was scuttled due to politics and Firstgold subsequently filed bankruptcy. Now in the case of Mt. Hope the Chinese are not taking majority control and the Fallon naval air station is about 200 miles from Mt. Hope, so we probably won’t see a similar national security argument being made. Yet there still might be some debate given that Firstgold owns some minor gold projects whereas Mt. Hope is a major US$1 billion mining project. Mt. Hope still has significant hurdles to clear including securing water rights, completing the environmental review and obtaining permits, so hopefully the politicians will be enlightened enough by the time financing is at hand to give the Chinese investors and lenders a fair shake. In any case, the Chinese are probably watching this deal with great interest in order to get a better feel for exactly what, where and how they can invest in the U.S. natural resource sector (which would be a great way to cash in their dollars). [Silverax]

    Gold Canyon (TSX-V: GCU; Pink Sheets: GDCRF)
    Gold Canyon Intersects 305 Meters at 1.03 Grams Per Tonne Gold at Its Springpole Gold Project - October 8, 2010

    To make sure that I wasn’t missing anything, I’ve re-read the 2006 technical report on the Springpole Gold Project, noting that historical estimates of the contained gold were in the 1 million ounce range. Drilling during the 1990s apparently defined a system up to 800 meters long and 300 meters deep despite a poor understanding of ore controls. The current drilling program has so far identified what appears to be the same 2 main areas of mineralization (in holes SP10-007 and SP10-008) along the Portage Zone that had been drilled historically. There is no indication so far that these areas, about 500-600 meters apart, are continously mineralized. Indeed, the technical report suggests that these are pipe-like or tabular bodies along trend without much continuity in between. Hole SP10-016 does admittedly demonstrate that the system is open to the southeast but the 50 meter distance from Hole SP10-008 does not represent a major stepout.

    There are several other red flags here as well. One is that half of the holes in the current program are being drilled in other zones on the property that historically did not prove up significant gold despite drill hole density approaching swiss cheese. Some of these holes may have decent assay results — suggesting perhaps that numerous areas of the property are highly prospective for gold — but in the scheme of things this drilling is meaningless because there does not appear to be new geological or other information that is relevant for generating new targets. I would go so far as to suggest that drilling these other holes was a waste of money unless they result in the discovery of new high grade structures. Something else to notice is the following technical slip found in the paragraph describing Hole SP10-016: “the structure hosting economic gold mineralization in the Portage Zone”. This might not seem like a big deal, but the fact is that there has been no work done to determine what, if anything, constitutes “economic gold mineralization” in the Portage Zone especially considering it lies underneath a lake and the metallurgy/rock composition is complex. It’s little things like this that can sometimes illustrate management’s frame of mind and in this instance we suspect the operative word is “chauffeur” — as in shareholders are possibly being taken for a ride. [Silverax]

    Rubicon Minerals (TSX: RMX; AMEX: RBY)
    Rubicon Minerals Announces Closing of the Secondary Offering of Its Common Shares - October 5, 2010

    I don’t know about the various tipping points for Rubicon to break out above $4 after the McEwen divestiture but but I doubt they will release a NI43-101 resource anytime soon and certainly not before the bulk sampling and underground drilling programs (if not several of them) and related evaluation work are completed. The F2 zone appears to be at an intersection between fold structures creating a central (core) area of dilation with stacked ore lenses and shoots having potentially-significant vertical extent but limited lateral continuity. Modeling something like this is very difficult and not within the capability of analysts.

    If we look at the F2 zone closely, we’ll note that it has been defined so far on at least 1000 meters of strike and 1000 meters to depth in terms of a minimum “10 gram-meter” envelope with a 3 gram per tonne cutoff. You calculate gram-meters by multiplying the grade of a drill intercept by its width. The dimensions of this system suggest something really big but when you do the math we get 300,000 750,000 ounces of gold at the minimum threshold (don’t forget to apply the density factor like I did initially, I’m using 2.5). Now clearly there are numerous high grade structures within this envelope that can grade above 1000 gram/meters but the job of someone trying to take a guess at the overall resource potential is to determine what portion of the total area consists of such high grade structures. The exercise is complicated by the stacked nature of the mineralization such that it doesn’t represent a discrete vein.

    Obviously, there isn’t 30 million ounces of gold (which would require the entire F2 zone to grade above 1000 gram-meters) so we are left with the possibility that the number is somewhere between 300,000 750,000 ounces and 30 75 million ounces.

    You can get a feel for the range of gram-meter values by looking at the table of F2 drill results and while the numbers are all over the place, a common range of intercepts seems to be around the 50-100 gram-meter value, which would imply a possible overall resource in the 1.5 3.75 million to 3.0 7.50 million ounce range. But this is irrelevant for resource modeling purposes as drilling to date has not been able to establish grade distribution or continuity with any degree of accuracy.

    Ideally, Rubicon would be able to define high grade zones that are several hundred meters long and tens of meters wide and thick. Such individual zones can contain hundreds of thousands of ounces of gold and represent obvious targets for initial mining operations. There are likely to be structures like this at F2 given the drilling results to date (e.g., the “core zone”) but that doesn’t mean they are easy to delineate. Moreover, the extent to which bulk sampling and close-up underground drilling can do so is also uncertain.

    For the above reasons, I don’t think a resource estimate is the tipping point for Rubicon but rather it is the discovery or delineation of a high grade zone or zones demonstrating grade continuity and predictable distribution. The presence or absence of such zone(s) at F2 is the main uncertainty that keeps the market cap from being larger and is also possibly why Goldcorp or others have not made a move (but if someone did so, Goldcorp would probably engage in a bidding war to keep Red Lake entirely in its own hands). By contrast, it was the recent discovery of structures with good continuity at Cerro Negro that resulted in Andean (TSX/ASX: AND; Pink Sheets: ANDPF) being acquired by Goldcorp over the summer.

    Sorry for the long comment but in summary the tipping point for Rubicon is likely to be exploration success and as such the company very much remains a discovery play that will live or die by the drill bit. It is very possible that the “discovery” will be in an area that has already seen high grade results and certainly the “core zone” that is the target of the bulk sampling would be the top contender — so results from this program should be watched and evaluated closely. [Silverax]

    Andean Resources (TSX/ASX: AND; Pink Sheets: ANDPF)
    Andean Provides Corporate Update - October 7, 2010

    Included in this update are the results of recent drilling including the Mariana Central zone that confirms the size of this ore shoot likely exceeds 1 million ounces at a grade that could approach 1 ounce per ton. This is world class and unlikely to be the last such ore body to be discovered at Cerro Negro. The key to the value of this deposit is the continuity of mineralization that allows the geologists to contour a grade envelope at various gram-meter intervals. Mining this ore shoot should be as easy as modeling it. Contrast this with Rubicon (TSX: RMX; AMEX: RBY) where ore controls and distribution are in the early stages of being understood. [Silverax]

    Riva Gold (not listed yet)
    Riva Closes $3.25 Million Private Placement and Grants Stock Options - October 7, 2010

    This is a spinout from Wildcat Silver (TSX-V: WS; Pink Sheets: WLDVF) that is due to start trading on the TSX-V in a couple of weeks. The projects in Guyana are interesting for the possible extension of high grade veins and bulk tonnage potential. With ~50 million shares outstanding and an implied value of 50 cents per share based on the private placement, this company already has a significant market cap for an early stage exploration play but the projects appear capable of generating at least initial excitement so we’ll keep an eye on this one as it starts trading. Of particular interest is the Higgins zone at the Noseno project where the presence of several high-grade veins has been confirmed; drilling commenced in September. The thing to watch for are indications that there are additional gold-bearing veins or styles of gold mineralization that could together combine to form a bulk tonnage gold deposit that can be mined by open pit. [Silverax]

    South American Silver (TSX: SAC; Pink Sheets: SOHAF)
    South American Silver Announces New Drill Results Extending Higher Grade Mineralization at the Malku Khota Silver Indium Project - October 7, 2010

    Cross sections reveal most of the silver value continues to be located near surface in association with the sandwiched Malku Khota sandstone. There is a large envelope of lower grade silver and indium that accounts for the sizeable resource of 300 million+ ounces  at the minimum cutoff grade but it would be a questionable decision to include these lower grade, deeper resources in any mine plan. There also appears to be a higher grade zone toward the bottom of the system as defined by recent drilling in the footwall sandstone but it has little meaning at this point because there does not appear to be continuity with the higher grade zone near surface. As such, talk of resource expansion based on deeper drilling is promotional fluff at best and an unnecessary distraction from rapid project development at worst. On a separate note, there are open questions about the relationship between the indium and silver given the occurrence of several zones of indium absence associated with higher grades of silver and vice versa. Metallurgy is an open question as well given management’s apparent preference for a run-of-mine heap leach plan to be followed by various hydrometallurgical processes to extract the metals from the leach solution. Things could get costly and complicated in a hurry whereas the situation is actually screaming for a simple startup mine plan that could potentially be put in place at a relatively low cost by focusing on the higher grade zone that outcrops at surface. Remembering that the project is in Bolivia should compel management toward simplicity and low cost instead of ambition and grandiosity, but the company’s statements and presentations tend to suggest an attitude infused with the latter. In conclusion, the Malku Khota project looks like a valuable opportunity that can be easily screwed up by bad strategy. The updated preliminary economic assessment due at the end of the year (we’d be suprised if it can be completed by then) should reveal more of the strategy, good or bad. [Silverax]

    Evolving Gold (TSX-V: EVG; Pink Sheets: EVOGF)
    Evolving Gold Reports Additional Gold Intersections from Rattlesnake Hills - October 7, 2010

    We need to see substantial stepouts from the main gold zones at North Stock and Antelope Basin to get the market excited about drill results at this point. Both zones have structural controls that can presumably be systematically tested on trend yet the company has only been hitting gold in “spiderweb” drilling within close proximity to the smallish gold zones identified to date. This creates suspicion that the zones are closed off along strike yet that perception is misplaced because by their nature these porphyry-related systems can localize mineralization in multiple zones such as the diorite plug at Antelope Basin and the diatreme-porphyry breccia at North Stock. Find other favorable host structures or receptive rocks and you will likely find more gold. The deep porphyry target needs to show higher grades to become newsworthy given that a low grade bulk tonnage deposit is meaningless at the projected depth of 500 - 1000+ meters. The company also tagged on a Nevada drilling update to the bottom of the press release, which is a near-certain sign that results are not expected to be stellar — a guess supported by the verbal description given of the drill core. Evolving Gold’s projects remain prospective for the discovery of major gold deposits but we’ll probably have to wait until at least the next program. [Silverax]

    Ucore Rare Metals (TSX-V: UCU; Pink Sheets: UURAF)
    Ucore Comments on the Passage of Domestic Rare Earths Legislation by the U.S. House of Representatives - October 7, 2010

    The legislation passed the House in a largely bipartisan manner although there was significant Republican opposition — including from the clueless Rep. Donald Young of Alaska –  probably because the proposed act is another alleged interference by government in the free markets. The same free markets, mind you, that have left China with 97% of global REE production and the United States in a strategic bind should there be an REE embargo by our good friends in China. In any case, the act still requires Senate approval and signing by the President; you can follow progress here. As previously noted, we won’t comment on the various early-stage light REE projects being explored during this latest investment craze but heavy REE is a different matter and Ucore’s Bokan Mountain project in Alaska is worth watching as one of few heavy REE dominant deposits in the world. [Silverax]

    Disclaimer:  We own shares in several of the companies mentioned in this analysis (Metal Augmentor subscribers know which ones), but no compensation has been received from any of the companies mentioned. This is not investment advice; should you seek investment advice we recommend you discuss the company with a licensed investment advisor or broker.

    Oct 12 9:23 PM | Link | Comment!
  • Mining News Review: Week of September 27th

    Fire River Gold (TSX-V: FAU; Pink Sheets: FVGCF)
    Results of Preliminary Economic Assessment for Leaching Historic Tailings at Nixon Fork Gold Mine, Alaska
    - September 29, 2010

    A $7.7 million net present value at $1,200 gold isn’t going to win you many friends when your market capitalization is over $30 million. To be fair, the leaching of historic tailings is not the main attraction of the Nixon Fork Gold Mine. As we have noted in the growing Company Index area of our website, the company expects to define a 150,000+ ounce high grade underground resource in 2010 to be followed by a preliminary economic assessment. This would be incremental to the leaching of tailings, and would hopefully have a much more substantial net present value attached. [Zurbo]

    St. Eugene Mining (TSX-V: SEM)
    Announces Private Placement Offering at C$0.12 Per Unit for Gross Proceeds of up to $750,000 - September 29, 2010

    This explains why the price rose as much as 50% the past few days. It is good news that St. Eugene is attempting to raise some money at C$0.12 rather than C$0.08, but this is still only in the offering stage and would only represent a small slice of the estimated $6 million to bring the small Tartan Lake mine back into production. More information on the company is available at our Company Index page. [Zurbo]

    Goldgroup Mining (TSX: GGA; Pink Sheets: GGAZF)
    New 18,500 Metre Drilling Program Begins at San José de Gracia
    - September 29, 2010

    Combined with the recently announced 30,000m drilling and exploration program at its Caballo Blanco project, Goldgroup is heading well the words of Brad Neely’s comic creation named Baby Cakes, “Be aggressive, b…e… aggressive”. The company is on our radar screen as a well financed junior gold producer with the right attitude and a will to get things done. [Zurbo]

    Capstone Mining (TSX: CS; Pink Sheets: CSFFF)
    Reports Exceptionally High grade Copper-Zinc Intercepts from Kutcho Project - September 27, 2010

    Without question, the highlight of this release was hold KC10-184, grading 10.3% copper, 19.8% zinc, 2.9 g/t gold, and 666 g/t silver over 11.2 meters. Results from the remaining 17 holes were reported on September 28, 2010. Although nothing nearly as eye popping as hole KC10-184, several greater than 10m intercepts of 3-5% copper were reported.

    Kutcho is a known high grade copper deposit, so besides hole KC10-184 and some other highlights from recent drilling to better define inferred resources, the results aren’t completely unexpected. According to our comparative valuation model, Capstone is significantly undervalued but nevertheless not to the same extent as plenty of other copper producers and developers–see last week’s Mining News Review where we profiled Taseko Mines (NYSEMKT:TGB) for more details. But if the company can successfully upgrade Kutcho’s inferred resources into the mine plan and potentially at higher-than-expected grades, Capstone could eventually move to the front of the pack. [Zurbo]

    Baja Mining (TSX: BAJ; Pink Sheets: BAJFF)
    Signs $858 Million of Financing Facilities for the Development of Boleo Project
    - September 29, 2010

    This time it wasn’t just talk. Baja appears to have finally mustered up the financial means to advance its Boleo project towards eventual production. But be careful. Beyond the project’s metallurgical complexities that can only be ultimately resolved during production, the project debt will require a significant amount of hedging and is an awfully heavy burden for a sub-$200 million company if things don’t go as smoothly as planned.

    Boleo is expected to produce significant amounts of copper, cobalt and lead, with the potential to recover manganese currently being evaluated. It will be an interesting one to watch as the project is advanced, but we’re comfortable on the sidelines for now. [Zurbo]

    Quest Rare Minerals (TSX-V: QRM; Pink Sheets: QSURD)
    Preliminary Economic Assessment (PEA) of the Strange Lake B-Zone Rare Earth Element Project
    - September 27, 2010

    In this press release we’re informed that Strange Lake B-Zone boasts a net present value (NYSE:NPV) of over $2.3 billion using an 8% discount rate, all at a capital cost of under C$600 million. If this were a gold or silver project without any significant caveats we’d be rushing out to buy shares. But this is a rare earth elements project ladies and gentlemen, and with that comes some serious caveats.

    For starters, rare earths are a highly complex market with obscure pricing information. Even Quest admits the difficulty when disclosing that “pricing used in the study is based on 2010 projections reported for a similar Rare Earth project”. Then there is the small size of the rare earths market. If too many projects are developed, there is a real possibility that without a huge increase in demand, the market for these metals will be overwhelmed with supply causing a collapse in prices. At the project level there is the question of where material will be processed. If the company is assuming that processing will take place in China, what will the terms be, and what about the possibility that China decides it no longer wants to process material from Strange Lake opting instead for domestic supply? In conclusion, be careful not to get carried away with the headline NPV figure at this stage in the game. It shows us that the project is robust if all the other pieces fall into place. Now it’s time to start paying attention to all those other pieces. If things progress to the point where we’re comfortable taking a position, then our Subscribers will be the first to know. [Zurbo]

    Catalyst Copper (TSX-V: CCY; Pink Sheets: CATXF)
    Catalyst hits 0.42% Copper over 634.8 meters - September 29, 2010

    The company is currently conducting a program to verify the historical results that defined approximately 75 million tonnes of 0.7% copper (about 1 billion pounds). Catalyst’s ~$40 million fully diluted market cap is probably fairly priced for that size of deposit. Upside would come from new discoveries to be targeted in subsequent drilling although apparently the company plans to test, during the current program, an induced polarization anomaly identified during the 125 line kilometers of surveying that has been completed to date. Odds of hitting something major with an initial drill hole are remote but we should review the results for mineralogical or other indications that a new copper porphyry might have been discovered. [Silverax]

    Intrepid Mines (TSX, ASX: IAU)
    Maiden Porphyry Copper-Gold Resource Estimate 500 Million Tonnes at 0.4% Copper, 0.5g/t Gold - September 29, 2010

    As we noted a couple of weeks ago, this looks to be a large deposit but very close to shoreline. The resource estimate includes a high grade zone that only appears reachable by an open pit whose western lip would extend into the ocean. [Silverax]

    Rare Element Resources (AMEX: REE; TSX-V: RES)
    Positive Results of Scoping Study on Bear Lodge Rare-Earths Project
    - September 28, 2010

     

    From under $2 in July to hitting a high of $9.58 on Tuesday (currently about $8), it has been one heck of a ride for those lucky enough to be on board. The Bear Lodge project certainly looks interesting and potentially a cash flow powerhouse not unlike Quest’s Strange Lake project, but with many of the same caveats.

    Of particular interest to us is that the scoping study provides us with some statistics on the size of the rare earth elements (NYSEMKT:REE) market, compliments of the Industrial Minerals Company of Australia (IMCOA). Specifically, we are told the following:

    [IMCOA] forecasts growth in global demand for REE at a rate of nearly 10% per year until 2020, from approximately 125,000 tonnes in 2010 to 200,000 tonnes by 2015 to 280,000 tonnes by 2020, expressed as “TREO” (total rare-earth oxides or the sum of all 14 REE plus yttrium). During this period, primary supply sources located mainly in China are not expected to increase production significantly, creating a growing supply/demand gap. China has been reducing its exports of rare earths for several years and announced a major reduction in exports in early July 2010. These policies have already caused significant price increases for most REE and created opportunities for new primary suppliers to enter the market. [emphasis ours]

    Based on these demand assumptions, the Bear Lodge project would provide about 5% of the world’s supply of TREO at its assumed annual production rate of 11,400 tonnes of REE contained within concentrates. Strange Lake is of similar size, so together they would make up about 10% of projected demand in 2015. Goes to show you just how small the REE market, and that assumptions like “primary supply sources…in China are not expected to increase production significantly” are extremely important to get right.

    Prices of many rare earth metals have risen exponentially during the past few months, as is shown in REE’s scoping study as well as a composite chart that can be found in a recent article appearing in The Economist. Have we reached a new plateau, or will prices fall back once new sources of supply are developed? In such a small and esoteric market — due to China’s overwhelming and precarious influence, and a rapidly changing demand landscape — it is difficult to tell.

    Certainly some rare metals will be favored over others, and it will take a fair amount of expertise to successfully navigate the investment waters. In the words of John Kaiser of Kaiser Bottom-Fish Online, “the problem of supply is easily solved. It just takes three to five years and billions of dollars.” Which projects will those billions flow to? Time will tell, and hopefully next time a Rare Element Resources is trading at $2 we’ll be brave enough to pull the trigger, knowing that you can’t wait until you have all the answers if you want to make money riding the waves of sentiment. [Zurbo]

    International Minerals Corp. (TSX: IMZ)
    Net Income (Before Taxes) of US$15.5 Million for the Fiscal Year Ended June 30, 2010. Equity Earnings of US$27.5 Million from Pallancata Silver Mine, Peru
    - September 28, 2010

    International Minerals is a mid-tier silver producer, with a 40% ownership interest in Pallancata, the 5th largest primary silver mine in the world. Pallancata is expected to produce 10 million ounces silver and over 30,000 ounces gold in 2010. Assuming current resources are converted to reserves, the mine should produce for at least another 7 years, and there is good potential to expand the mine life further.

    Following its acquisition of Ventura Gold and Metallic Ventures in 2009, IMZ now owns 5 projects besides Pallancata, 4 of which are in the development stage, as well as a 3% NSR on Barrick Gold’s (NYSE: ABX) Ruby Hill mine — providing cash flow of $3+ million per year. A quick overview of IMZ’s development projects is shown below:

    (1) Goldfield (100%, Nevada) is expected to produce over 50,000 ounces gold per year beginning in 2013.
    (2) Inmaculada (70%, Peru) is expected to produce 114,000 ounces gold and 3.9 million ounces silver per year beginning in 2014.
    (3) Rio Blanco (100%, Ecuador) is expected to produce 71,000 ounces gold and 400,000 ounces silver beginning in 2014.
    (4) Gaby (60%, Ecuador) has the potential to produce over 300,000 ounces gold per year beginning as early as 2015. However, Gaby is a marginal project due to its high capital cost, and therefore significantly riskier than the other 3 development assets.

    Our valuation model estimates fair value to be about C$8 per share. That’s nothing to write home about considering that about 70% of the target comes from development projects 2+ years away from production. But certainly worth keeping an eye on, especially considering the company’s willingness to pursue M&A opportunities. Metal Augmentor subscribers know which silver producers we like best, and we’ll be sure to include IMZ in the next version of our Silver Producer Report. [Zurbo]

    Cream Minerals (TSX-V: CMA; Pink Sheets: CRMXF)
    Endeavour Silver (TSX: EDR; AMEX: EXK)
    Endeavour Silver To Make All Cash Offer to Acquire Cream Minerals - September 27, 2010

    It’s interesting to see the pace of mergers picking up in the junior space even if this is a case of unrequited love. Just last week we had the marriage between Silvermex (TSX-V: SMR; Pink Sheets: SLVXF) and Genco (TSX: GGC; Pink Sheets: GGCRF) and we’ll probably see some more soon. Cream’s’ Nuevo Milenio project is cheap at $10 million but needs some tender care before it is ready to be a mine. A company like Endeavour Silver is capable of providing the necessary love and Cream management shouldn’t be too quick to straight-arm them unless there are other suitors waiting in the wings. Even then one should consider the competence of the suitor before going with the highest bidder especially if it is a share deal. I would guess they eventually agree to a buyout south of 20 cents that is part or all shares. [Silverax]

    Cream Minerals (TSX-V: CMA; Pink Sheets: CRMXF)
    Endeavour Silver
    (TSX: EDR; AMEX: EXK)
    Cream Minerals Responds To Endeavour Silver Announcement - September 28, 2010

    Translation: Give us a lot more cash or at least some shares. [Silverax]

    Timmins Gold (TSX-V: TMM; Pink Sheets: TMGOF)
    Capital Gold (TXS, AMEX: CGC)
    Timmins Gold Corp. makes proposal to merge with Capital Gold Corporation - September 27, 2010

    Sure enough, the merger mania among juniors seems to be on. Hopefully this is not a sign of an intermediate market top. In any case, despite the fair price being offered to Capital Gold (Timmins is arguably just as undervalued), this is another instance of unrequited love. The combined company would have a ~C$600 market cap producing shy of 200,000 oz. of gold per year but with some growth plans. That said, both Timmins and Capital Gold need to expand mine reserves. If they can, the potential is not multi-bagger upside but still decent. [Silverax]

    Timmins Gold (TSX-V: TMM; Pink Sheets: TMGOF)
    Capital Gold (TXS, AMEX: CGC)
    Capital Gold Responds to Timmins Announcement - September 27, 2010

    Translation: We have the Toronto and AMEX listing and you guys are offering us Venture Exchange paper. We should be acquiring you, not the other way around. [Silverax]

    Seabridge Gold (TSX: SEA; AMEX: SA)
    Drills Upgrading Large Resource at Seabridge Gold’s Courageous Lake Project - September 27, 2010

    This press release makes some confusing statements about resources and reserves so we’ll correct them. Here is the main offender:

    Seabridge President Rudi Fronk noted that “our 2008 Preliminary Assessment on Courageous Lake demonstrated that the FAT deposit has outstanding economic potential at current gold prices. The issue is to upgrade the deposit’s large inferred resource. We have now drilled 22 consecutive holes this summer containing significant widths of gold mineralization well above the resource cut-off grade. It is increasingly clear to us that most of the Courageous Lake resource should qualify as reserves in our Preliminary Feasibility Study scheduled for completion in early 2012.”

    What’s missing from the above is the logical progression that an inferred resource must first be upgraded to indicated or measured before it can be further upgraded to reserves (proven or probable). Confidence level only applies to resources, not reserves, with inferred having the lowest level of confidence followed by indicated and finally measured having the highest level of confidence. Meanwhile, reserves have nothing to do with confidence, they have to do with the portion of the measured and indicated resources that can be mined for a profit given a feasible mining method and realistic pricing assumptions. The economic portion of indicated resources becomes probable reserves and the economic portion of measured resources becomes proven reserves based on the results of a feasibility study. This isn’t the first time Mr. Fronk has conflated these concepts.

    The Courageous Lake drill results themselves appear to be quite good but the better grades, with a few exceptions, seem to be located at depths of 300 meters or deeper. This is relevant because a significant portion of the drilling might not be within the economic pit limits — in other words, upgrading the resource from inferred to indicated or measured will not automatically result in conversion to reserves upon successful completion of a positive feasibility study. Neither will finding more mineralization “well above the resource cut-off grade”. In any case, the company has a long way to go before a preliminary feasibility study is completed at Courageous Lake and meanwhile the best thing the project has going for it is a rising gold price (at sustained $1,500 gold and current energy/capital costs, a project like this would be worth quite a bit). [Silverax]

    U.S. Gold (TSX, AMEX: UXG)
    El Gallo Continues to Expand in Multiple Directions. 116.5 gpt Silver over 50.5 m. Updated Resource Estimate Due in 4 Weeks. - September 27, 2010

    Frankly these are minor results for a company that has a market cap of US$600 million. El Gallo is okay as far as Mexican silver-gold projects go but it doesn’t seem particularly exciting and we aren’t convinced that it is going to be a 5-10 million ounce silver producer (plus gold) in 3 years. Even then, the silver-dominant El Gallo at this point overshadows U.S. Gold’s Nevada properties on the Cortez Trend to such an extent that the company should change its name to “Mexican Silver” instead (conveniently, that name is now available as a result of a recent merger in which Rio Alto — TSX-V: RIO — was the survivor). In any case, if your idea of a gold company is one where the main pride is the CEO owning 22% of the shares and whose main goal is to become a member of the S&P500, go for it. For my part, I am the petulant type, prone to constantly asking “what have you done for me lately?”. In the case of Rob McEwen, the answer is “not much since handing off Goldcorp”. Maybe it’s time for another miracle? [Silverax]

    VMS Ventures (TSX-V: VMS; Pink Sheets: VMSTF)
    VMS Receives First In-Fill Drill Results From Reed Lake Joint Venture Project-Reports 9.90 Metres of 5.56% Copper and 38.55 Metres of 3.81% Copper; $3 Million Exploration Program Approved - September 27, 2010

    VMS Ventures is another Manitoba volcanogenic massive sulfide play similar to Halo Resources (TSX-V: HLO; Pink Sheets: HLOSD.PK), which had exploration news last week. Like Halo, VMS Ventures has a joint venture with Hudbay on part of its land position. The initial drill results reported here are quite impressive but keep in mind these are infill holes intended to support an initial NI43-101 resource estimate. The 20 hole program is being drilled on a 40-50 meter grid totaling 250 x 250 meters maximum. Assuming a 10 meter thickness of mineralization, that amounts to about 1 million tonnes. In other words, these are early days and like Halo we’ll watch the results with interest but for now will not be dipping in our toes unless the company makes significant new discoveries confirming the presence of a large VMS field on its properties. [Silverax]

    Crowflight Minerals (TSX: CML: Pink Sheets: CMLGF)
    Crowflight to Introduce Own Mining Equipment and Mining Team at Bucko Lake Mine; Will Temporarily Suspend Operations to Facilitate Improvements - October 1, 2010

    Oh yeah, if you make it to the end of the press release after all the great news they have for shareholders, you will find that the Jinchuan offer is effectively terminated. Crowflight is in a death spiral and it looks like Kings Place will get the Bucko Mine after all — in bankruptcy. [Silverax]

    Gabriel Resources (TSX: GBU; Pink Sheets: GBRRF)
    Rosia Montana Project Update - October 1, 2010

    Rosia Montana is starting to move through the permitting process and so we will look at the project to see if it meets our criteria for speculative or investment purposes. The shares have risen steadily for the past year but preliminary back-of-envelope calculations suggest there is still upside based on comparative value, assuming the project gets permits and construction go-ahead. [Silverax]

    Aldridge Minerals (TSX-V: AGM; Pink Sheets: AGMIF)
    Aldridge Minerals Announces Extension to Option Agreement with Anatolia - October 1, 2010

    We aren’t very familiar with the recent happenings at Aldridge but our preliminary view is highly favorable. The gold-rich VMS deposit in Turkey looks like it could become a highly-profitable, moderate-sized mine with relatively-low capital costs. We suspect the preliminary economic assessment due in 4-6 weeks will be quite positive and may drive new investors to the story. There are some other prospective projects in the property portfolio as well but the near-term focus is Yenipazar VMS project. The shares have been beaten up during the past few years, just recently bottoming at 50 cents (now recovered to almost C$1) after managing to stay above C$2 during the 2008 financial crisis. The stock has the mark of a large shareholder or group of shareholders dribbling their position into the market over a period of many months but that seems to be over now. Perhaps one uncertainty is management but we can’t fault the current corporate strategy or the progress made during the past few months. The market isn’t providing many obvious value plays like Aldridge these days. [Silverax]

    Habanero Resources (TSX-V: HAO; Pink Sheets: HBNRF)
    Habanero Acquires 5,400 Acres Bordering Beaufield Resources Tortigny Prospect - October 1, 2010

    “Closeology” is a special discipline within geology based on the premise that the closer your property is to a bona fide discovery the greater the likelihood you will make a discovery yourself. Closeology also holds that the market will give a damn if you chase rainbows. Habanero Resources is a faithful believer in closeology, but who knows, even faulty theories can sometimes succeed when carried to an extreme. [Silverax]

    Gammon Gold (NYSE: GRS; TSX: GAM)
    Capital Gold
    (TXS, AMEX: CGC)
    Gammon Gold and Capital Gold Sign Definitive Merger Agreement
    -October 1, 2010

    Back in March ‘09 Gammon signed a letter of intent to acquire Capital Gold. The price on offer was 0.1028 Gammon shares for each Capital Gold common share outstanding, equivalent to about US$0.76 per share at the time. Those merger discussions ended on March 31, 2009. Apparently Timmins’ merger proposal announced earlier this month lit a fire under Gammon, because now a definitive merger agreement has been signed at about 6x the price on offer 19 months ago. Whereas previously Gammon was offering 0.1028 shares, it is now offering 0.5209 shares plus a cash payment in the amount of US$0.79 per share. Way to call their bluff Capital Gold! [Zurbo]

    Looking at the share price performance of Gammon Gold vs. Timmins, it’s possible Capital Gold execs are looking for an exit instead of a long-term relationship. Gammon Gold has had the “anti-Midas touch” for a long time now — wherein everything they touch turns from gold to rust. Perhaps this acquisition will mark the turnaround but I’m not holding my breath. [Silverax]

    Bullion Monarch Mining (OTCBB: BULM)
    Eurasian Minerals
    (TSX-V: EMX; Pink Sheets: ESMNF)
    Bullion Monarch Receives Acquisition Offer from Eurasian Minerals
    & Eurasian Minerals Responds to Bullion Monarch -September 30, 2010

    Considering that Eurasian Minerals is probably mostly interested in Bullion Monarch for its royalty on the Leeville mine, and we calculate fair value on this royalty to be in the area of C$0.90-C$1.00 per share, this sounded like an excellent proposal. After all, 0.44 shares of Eurasian is currently equivalent to about C$1.14 per share.

    But in the press release we are told that after receiving the initial proposal on August 4, 2010 and then again verbally on September 14, 2010, Bullion’s board of directors still decided this offer was not in the best interest of shareholders. That’s dissappointing news, especially given that it was an all-share proposal by a high quality company that is arguably undervalued itself.

    What’s interesting about Eurasian’s response is that they say the indicative proposal expired on August 10, 2010 and give no mention of a verbal reiteration in September. In the end we’re told that discussions are over, and there is no outstanding offer after all. Say it ain’t so Bullion Monarch. [Zurbo]

    Aluminum Corp of China (NYSE: ACH)
    Jiangxi Rare Earth and Rare Metals Tungsten Group

    Chinalco to Invest $1.5 Billion in Rare Earths
    - September 27, 2010

    Aluminum Corp of China, known as Chinalco, plans to invest $1.5 billion into Jiangxi over the next 3-5 years to help it develop its rare earth projects in southern China and become its controlling shareholder as a result of the investment. Chinalco aims to become a leader in the rare earth metals sector, and considering the small size of the rare earths market (est. $5 billion in sales per year) this is a huge step in the right direction. This of course isn’t good news for juniors trying to develop their own projects because there is the risk that investments like that being made by Chinalco will lead to significantly greater production within China to the extent that exports are freed back up and prices fall back down to earth. But since we’re likely to be several years away from anything like that happening the rare earths frenzy could easily continue to bid up share prices in the juniors to far greater heights even despite the reality that even the most advanced  juniors are several years away from production themselves. [Zurbo]

    Centerra Gold (TSX: CG; Pink Sheets: CAGDF)
    Centerra Gold Kumtor Mine Work Stoppage - October 1, 2010

    I suppose when you are operating in Kyrgyzstan, a strike at your flagship gold mine is not going to have a big impact on your share price. Still, Centerra’s C$3.5 billion plus market cap leaves plenty of room to the downside. We don’t mind geopolitical risk in our gold or resource stocks but we prefer to own them at a big discount so that we have a good balance between risk and reward. Our subscribers know about a company with substantial geopolitical risk and a similar future gold production profile that trades at about 1/20th Centerra’s valuation. [Silverax]

    Fission Energy (TSX-V: FIS; Pink Sheets: FSSIF)
    Fission Summer Drill Program Successfully Expands J-Zone to ~120m x 50m Remains Open in all Directions Hole WAT10-111D Identifies More Off-Scale Radioactivity - September 27, 2010

    Fission is on its way to defining a resource of perhaps 5-10 million pounds of U3O8 based on the currently-known extent of its J-Zone at the Waterbury Lake property in Saskatchewan’s Athabasca Basin. The deposit is located right next to Hathor’s (TSX-V: HAT; Pink Sheets: HTHXF) Roughrider discovery that also continues to grow. The J-Zone appears to have better continuity because it is basically a pancake but so far it is significantly smaller in size compared to the 25 million or more pounds of U3O8 delineated thus far at Roughrider (including Roughrider East). On a combined basis, the J-Zone and Roughrider have now approached a size that begins to look very interesting to the uranium producers like Cameco, AREVA and Denison, and of course the Korean nuclear utility KEPCO’s involvement with Fission adds to the possibilities. There will be a deal announced on these projects at some point in the future and we expect it to be at a significant premium to the companies’ current share prices. For now, we believe Hathor is the better value and we do hold a position in the shares but Fission under 60 cents looks pretty good as well. [Silverax]

    Santa Fe Gold (OTCBB: SFEG)
    Columbus Silver
    (TSX-V: CSC; Pink Sheets: CSLVF)
    Santa Fe Gold To Acquire Columbus Silver & Columbus Silver To Merge With Santa Fe Gold Corporation - September 27, 2010

    Yet another junior merger! Columbus Silver has had limited success making a significant new discovery at the Mogollon (pronounced “muggy-own”) silver project in southwestern New Mexico. There is still some silver there, but it seems to be located in ore shoots that have little vertical continuity. In any case, Santa Fe Gold is looking for additional gold and silver to feed its Lordsburg mill in the longer term, and the Columbus Silver properties represent decent, if uninspiring, exploration targets. The strategy of a central processing location being fed by several nearby mines is similar to that being pursued by Gold Resource Corp (AMEX: GORO) in southern Mexico and Barkerville Gold (TSX-V: BGM; Pink Sheets: BGMZF) in British Columbia. All three are in the start up and/or ramp up stage and all three will need several quarters of stable operations to establish viability. Of the three, Gold Resource has the highest quality project but it also faces the greatest risk due to its US$1 billion market cap. That said, production isn’t really the main story at any of these companies, it is actually exploration success, given the relatively short mine lives and limited resource bases. [Silverax]

    Hana Mining (TSX-V: HMG)
    Assay results from RC drilling confirm copper-silver mineralization is continuous over entire 64.0 km strike length at the Banana Zone - September 27, 2010

    The Ghanzi project in Botswana covers an apparently huge mineralized area but as we understand it the most prospective ore zones are limited to discreet folds and limbs in the sedimentary package that have brought the primary “redox” horizon near surface and where the copper-silver mineralization has been upgraded through secondary hydrothermal action. Still, the strike length of the prospective ore zones is impressive and a substantial amount of high-potential ground remains untested. That said, even though the grades in some zones appear high enough to support underground mining, the apparently-weak hanging wall rocks and moderate pitch of the mineralization combine to create an extraction challenge. Therefore the likely target of a mining effort, at least initially, would be the near-surface, wider zones where open pit mining might make sense. Future test mining could establish an underground extraction method that would work for this type of deposit and that could bring the deeper mineralization into play. At such point, extending the mineralized zones downdip would make sense and that could result in a major increase in the potential resource base. We look forward to reviewing upcoming reports on the ongoing technical work (preliminary metallurgy, scoping, etc.) as well as the evaluation of underground extraction methods. [Silverax]

    Valdez Gold (TSX-V: VAZ; Pink Sheets: VLDZF)
    Valdez Gold Announces Proposed Acquisition of Ryan Gold - September 27, 2010

    Well, it turns out the halt had nothing to do with any of Valdez Gold’s current projects but rather a merger with Ryan Gold, which is the namesake of Yukon prospector Shawn Ryan, the man responsible for originally staking both Underworld’s (now Kinross — NYSE: KGC) White Gold property and Kaminak’s (TSX-V: KAM; Pink Sheets: KMKGF) Coffee property. In any case, this isn’t as much an acquisition of Ryan Gold by Valdez Gold as it is a reverse IPO of Ryan Gold using Valdez Gold essentially as the shell. Whichever way you look at it, the property portfolio of the combined company means lots of exploration possibilities in the Yukon far into the future. Can Shawn Ryan perform a hat trick by having a third vended property become a market darling? The answer is yes, although we must recognize that the man has been quite prolific, vending properties into a multitude of companies and not just Ryan Gold. Most of the properties and most of the companies will not have a big gold discovery and our preference with respect to these Yukon Gold Rush plays is to keep our ears peeled for the whistle and only board the train as it is leaving the station. [Silverax]

    Golden Tag Resources (TSX-V: GOG; Pink Sheets: GTAGF)
    Golden Tag Reports Initial Rulings of Arbitration-ECU is Removed as Operator of San Diego Joint Venture - September 27, 2010

    Here we have the other side of the story and sure enough Golden Tag claims that it is “pleased to announce” what we must assume are considered positive results by Golden Tag from the arbitration hearing with ECU Silver (TSX: ECU; Pink Sheets: ECUXF). Last week, ECU Silver claimed that it considered the arbitration to be positive for its own position in the litigation but reading over Golden Tag’s perspective on the situation certainly takes the shine off ECU’s supposed victory. We repeat that until ECU Silver cleans up its management practices there is little reason to own the shares despite the potential that a significant mine can be eventually built and profitably operated at Velardeña. [Silverax]

    Advanced Explorations (TSX-V: AXI; Pink Sheets: ADEXF)
    Advanced Explorations and XinXing Pipes Group Execute Formal Agreement to Develop Roche Bay Project
    - September 27, 2010

    Advanced Explorations has seen its share price rise over 200% since forming a strategic relationship with XinXing Pipes Group (XXP). Specifically, Advanced Explorations and XXP have established the basis for collaborative development of the Roche Bay Project, with XXP able to earn a 50% interest in the project by providing $20M to complete a feasibility study and a further $30M of working capital upon its completion. XXP would also provide up to $1 billion in financing to build the project. In return, XXP will also have the right to 50% off-take on all iron products.

    It appears the company now has about 175 million shares fully diluted, which is still relatively cheap given the potential of Roche Bay not to mention a host of other opportunities that are now likely to be considered with XinXing as a strategic investor in the company.

    More generally this news is further confirmation that iron ore juniors and their development projects are in play, and similarly explosive growth is likely to happen more or less overnight for other explorers in this peer group such as our favorite iron ore play which arguably possesses several projects of similar merit as Roche Bay. And did we mention that it is debt free and yet it is still trading for less than the value of its cash and investments? Seller beware. [Zurbo]

    Advanced Explorations (TSX-V: AXI; Pink Sheets: ADEXF)
    Expands Development Options through Agreement with Shandong Fulun Steel - September 30, 2010

    The deals are coming in rapid fire succession for Advanced Explorations — this time it’s an agreement with a Chinese steel company to co-develop the junior explorer’s secondary iron ore projects. These are strategic, long term relationships that clearly demonstrate Chinese appetite for commodities will continue long into the future. [Silverax]

    Dynasty Metals & Mining (TSX: DMM; Pink Sheets:DMMIF)
    Completes Additional Shipment of Gold and Comments on Ecuadorian Police Protest
    - September 30, 2010

    Lots of drama over in Ecuador these past few days with a coup attempt by ex-President Lucio Guitierrez. We had hoped skittish investors would give us more of a buying opportunity, but alas Dynasty has weathered the storm well and continues to ramp up production at its flagship Zaruma project. Our thanks go out to Mark of Inka Kola News for his timely updates on the situation. [Zurbo]

    China Gold International Resources (TSX: CGG; Pink Sheets: JINFF) - Formerly Jinshan Gold Mines
    Support for Purchase of Jiama Mine Recommended by Two Leading Independent Proxy Advisory Firms
    - September 30, 2010

    On the surface this looks like a wildly expensive acquisition, especially considering that the Jiama Mine is a polymetallic operation and typically polymetallic producers trade at significantly lower multiples to primary gold producers. Then again, Jinshan already looks overvalued in our model, so the fact that it is attempting to buy the Jiama Mine in an all-share transaction may even turn out to be accretive. But it is important to recognize that if the transaction turns out to be accretive under reasonable long term metal price assumptions because China Gold is buying Jiama with overvalued currency (i.e. China Gold stock), this still doesn’t make China Gold a good value just less bad of one.

    Once we have time to crunch the numbers on China Gold and its peer group of mid-tier gold producers we’ll be able to make more definitive statements about which gold companies represent the best value. As a subscriber to the Metal Augmentor service you’ll be the first to know. [Zurbo]

    Gammon Gold (NYSE: GRS; TSX: GAM)
    Capital Gold
    (TXS, AMEX: CGC)
    Law Offices of Howard G. Smith Announces Investigation On Behalf of Shareholders of Capital Gold Corporation in Connection with the Proposed Acquisition of the Company by Gammon Gold
    - October 1, 2010

    Looks like not everyone is taking so kindly to the proposed acquisition. We’re not altogether surprised at the opposition, but considering our base case valuation target for Capital Gold is US$5.36 per share, we think Gammon is making a very fair offer. Nevertheless, all three of these firms are conducting an investigation into alleged breaches of fiduciary duties, with two of them referencing unnamed analysts who set price targets for Capital Gold of $9.00 and $12.13. These targets are very rich, and statements about this offer being unfair because of such targets existing removes credibility. Other law firms are also getting into the act:

    Levetown & Jenkins, LLP Announces an Investigation of the Acquisition of Capital Gold Corp. by Gammon Gold - October 2, 2010
    Shareholder Alert: Faruqi & Faruqi, LLP Announces Investigation Related to the Acquisition of Capital Gold
    - October 4, 2010

    Our research shows that both Capital Gold and Gammon Gold are about fairly valued based on their current operating and development projects. If they merge, a larger company is born that is still fairly valued. No surprises here. [Zurbo]

    Lexam Explorations (TSX-V: LEX; Pink Sheets: LEXEF)
    VG Gold
    (TSX: VG; Pink Sheets: VGGCF)
    VG Gold and Lexam Explorations to Combine
    - September 29, 2010

    Other than owning a few early-stage oil & gas and uranium projects, Lexam is essentially a shell with $10 million cash and 75 million shares of VG Gold. The combination then isn’t something that’s particularly strategic, just an obvious move to consolidate. Enough has already been said about the potential of VG Gold in our Mining News Review for the Week of September 13th. [Zurbo]

    Typhoon Exploration (TSX-V: TYP; Pink Sheets: TYPFF)
    Aurizon Mines
    (AMEX: AZK; TSX: ARZ)
    The Typhoon-Aurizon Tandem Intersects 112.5 g/t Au on 6 Meters on Fayolle Project
    - September 29, 2010

    While impressive, the current drilling program on the Fayolle project is putting holes into an area where an inferred resource has already been defined. What interests us is the fact that Aurizon Mines is interested, having signed a $27 million option agreement back in May 2010. Aurizon wouldn’t be involved if they only thought the area had the potential for a few hundred thousand ounces of gold. Obviously $27 million is a lot of money, but there is the risk that Aurizon walks away from the project well before that much spending takes place, and this decision could come suddenly at any time over the next several years.

    Typhoon may have less than 20 millions shares outstanding, but having rallied from C$0.50 to C$1.50 over the past couple months, even with its tight share structure it is starting to look expensive. Perhaps it should consider raising a few thousand dollars at the current price in order to upgrade its website and get a new domain name. Now that would be a good investment. [Zurbo]

    Aurcana (TSX-V: AUN; Pink Sheets: AUNFF)
    Aurcana Reports Positive Feasibility Study on Shafter Silver Mine - September 30, 2010

    We will plug the slightly-revised feasibility numbers into our valuation model in preparation for the updated version of our Silver Producers Report but we still feel that a project site visit and detailed review of the mine plan with the company’s technical representatives are required before we can properly evaluate the odds of success. [Silverax]

    Sandstorm Resources (TSX-V: SSL; Pink Sheets: SNDXF)
    Sandstorm Resources Provides Gold Production Updates - September 30, 2010

    Record gold prices are certainly timely for Sandstorm, and with the generation of royalty payments at two of the company’s projects, we will be entering the details into our Royalty Company Report that we are in the process of updating. [Silverax]

    Beaufield Resources (TSX-V: BFD; Pink Sheets: BFDRF)
    Beaufield Drills 322.15 Metres of 4.20% Zinc, 2.72% Copper, 72.02 g/t Silver and 0.53 g/t Gold at Tortigny - September 30, 2010

    There is really not a lot of new information being provided by this drill program that wasn’t already known more-or-less — the headline assay represents a hole drilled, according to the company’s own statement, parallel to the hinge fold of a deformed massive sulfide (probably VMS) body representing the length of the mineralization instead of its width or thickness. It’s still impressive but not worth sending the shares 200% higher over the course of a couple hours. Even a clarification press release issued a short while later was able to dampen the enthusiasm only to the tune of a sustained 100% gain on the day’s trading. So what did Beaufield do? Why, what every good exploration company knows to do: seize the money when it is being handed to you. Thus, a C$3 million flow-through share deal was put together the very next business day. Despite all the hooplay, Beaufield actually appears to be a decent junior explorer although it will need to extend the known deposit at Torgigny in order to get much more share price follow-through.[Silverax]

    Geologix Explorations (TSX: GIX; Pink Sheets: GXEXF)
    Tepal Oxide Cap Metallurgical Test Work Delivers 78.4% Gold Recovery - September 30, 2010

    Here we have another small gold project in Mexico that is in early development but appears to have a good chance of eventually making it. Hard to say what value to assign to something like this at a relatively early stage: a 40,000 oz. gold plus 20 million pound copper annual production profile with decent exploration upside. An eventual market cap of $100 million or more seems reasonable but how much of that would come from share dilution instead of share price appreciation? It can’t hurt to pick the stock up cheap — a market cap closer to C$10 million rather than C$50 million — because that obviously gives you the better odds of snagging a 10x gain, which is what you’d want to have a shot at in order to balance out the risk. [Silverax]

    Macusani Yellowcake (TSX-V: YEL; Pink Sheets: MCYWF)
    Macusani Yellowcake Announces High Grade Discovery at Kihitian Uranium Property, Peru – September 30, 2010

    These are excellent grades for a near-surface, potentially-bulk-mineable uranium deposit. Grades on the Macusani Plateau in Peru can vary but they tend to be quite low on average owing to the volcanogenic source of the uranium mineralization. Indeed, the occurrence of U3O8 grades above 3% in a volcanogenic setting is very interesting because such high grades are typically associated with intrusive-related mesothermal deposits like those of the Athabasca Basin in Saskatchewan. The company reported adit sampling assays earlier in the year that originally revealed the occurrence of high-grade uranium at the Chilcuno zone so these drill holes cannot be considered a true discovery, but whatever you call it, this is one of a few interesting uranium exploration stories currently out there. [Silverax]

    Goldbrook Ventures (TSX-V:GKB; Pink Sheets: GBKVF)
    Jilin Jien Nickel

    Jilin Jien Nickel Announces Funding Terms of its Subsidiary, Jien Canada Mining
    - September 28, 2010

    What a mess. Goldbrook recently stated that Jien’s attempt to increase its interest from 75% to nearly 96% on the developing Nunavik Nickel project is not permitted under the joint operating agreement. Nevertheless Jien is still going ahead with its plans to raise $122 million and unless Goldbrook can come up with its fair share of the money within 30 days it faces a David vs. Goliath battle to avoid near extinction. The real worry is how two companies could have such a different understanding of a joint operating agreement. One thinks they are free carried and the other that both parties are fully responsible for project funding? It seems like this should be pretty standard boilerplate language, but it somehow got muddled along the way with this one. However this one turns out, relations are going to be strained. [Zurbo]

    Disclaimer:  We own shares in several of the companies mentioned in this analysis (Metal Augmentor subscribers know which ones), but no compensation has been received from any of the companies mentioned. This is not investment advice; should you seek investment advice we recommend you discuss the company with a licensed investment advisor or broker.

    Oct 12 9:08 PM | Link | Comment!
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