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Marco G.
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A veteran of the small cap wars, the Goombarh has survived both the glory and collapse of the internet boom and the 2008 bust. Now he is focused on oil, mining and commodity junior stocks. The world has evolved with the rising tide of demand from the emerging markets growth of their middle... More
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  • Why I bought Victoria Gold (VITFF) after the Drop - Newmont(NEM) and Kinross (KGC)

    I was browsing the internet and I found a reason that explains why I intuitively bought Victoria Gold after they declared an error on November 23rd, 2010 in their April, 2010 43-101 assessment of their Cove gold project in Nevada.  Adam Hamilton of Zeal, was writing zealously about the market's typical over reaction to bad news.  See the chart following depicting the sudden drop in VITFF's share price after the news of the error:  (Click to enlarge)


    That is reason number one, the market typically over reacts, and the price should stabilize and regain some of the loss.  I intuitively, knew, that something was wrong in such a large drop, and thanks to Hamilton, he provided an article that details the market psychology that typically over reacts to the down side on any bad news.

    Reason number two, is that I had been researching recently, about Reserve Recognition Accounting (RRA) and the rationale of reasonable certainty, that is expressed in the security regulations about the reserves and resources of oil and gas development firms.  This is very similar to the reserves and resources definitions used by the Canadian NI-43.101 standards, used by most mining companies.  So that morning, Victoria Gold had declared an error, that may invalidate the Upper Zone of their mineral resources in their Cove project as given in their March 5, 2010 NI 43-101 technical report. 

    Upon reading further in the release, the error was to do with four historical drill holes done by their predecessor explorer Echo Bay Mines.  The impact was that the calculations for the inferred resources would have to be re-done, and possibly the resources would not meet the guidelines for inclusion as a resource.  Oh horrors, the inferred resources, which in itself is the most uncertain of the resource categories, may be invalidated and may not meet the guidelines for inclusion.  As to this layman's interpretation of the importance of this revelation, I believe, it matters not one iota.  The mineral resources did not disappear off the face of this planet.  They may merely not meet the     NI-43.101 guidelines for inclusion in the stated resources, which to me, is no big deal, since it was an uncertain category to start with.  Victoria gold only needs to just poke further drill holes in there for more certainty, and they will come back into the definitions.  This estimation error in the NI-43.101 technical report for Victoria's Cove project in Nevada does not merit slashing 20% off the market valuation of Victoria Gold, and so I bought some shares after the decline.

    Reason number three was that I knew Kinross Gold Corp (KGC) holds 20% interest in Victoria Gold.  In fact Kinross was so diligent, that they actively participated in the August 24, 2010 private placement, maintaining their 20% share of Victoria.  Also, I knew that Newmont Mining (NEM) holds rights of backing into this Cove project should Victoria meet some progress criteria.  Victoria having two large gold miners invested in and interested in their projects does provide a measure of support for my own evaluation of value in this company.  The kicker came when I listened to Victoria Gold's  hastily convened conference call that morning.  They disclosed that the error was discovered by a third party performing due diligence upon their reserve and resources information for another party that is in the mining business.  Well, did I just hear the "ka-ching" of the gains coming, in the buy-out offer to come?

    Disclosure: The author is long Victoria Gold (VITFF, TSX:VIT).

    Important Disclaimer

    The information and opinions contained within this document reflect the personal views of the author and should be viewed as food for thought and amusement only. The author may from time to time have a position in any of the securities mentioned. There are no guarantees of the accuracy, reliability or completeness of the information contained herein. Independent due diligence and discussions with one’s own investment and business advisor is strongly recommended. These writings are not to be construed as an offer or solicitation with respect to the purchase or sale of any security or as an endorsement of any product or service. We do not request or receive compensation in any form in order to feature companies in this publication. It is prohibited to copy or redistribute this document to any type of third party without the express permission of the author. This document may be quoted, in context, provided proper credit is given.




     



    Disclosure: The author is long Victoria Gold (VITFF, TSX:VIT).
    Tags: NEM, KGC, Gold Miner, Gold
    Nov 28 1:29 PM | Link | 1 Comment
  • Great Basin Gold's (GBG) Bonanza Grades - A Closer Look


    Great Basin announced the highest "Bonanza Grades" of Gold found, 2560 ounces per ton,  that the author has ever encountered this morning:

    Great Basin Encounters Bonanza Grades in Blanket Style Mineralization at Hollister

    VANCOUVER, Nov. 9 /CNW/ - Great Basin Gold Ltd. ("Great Basin" or the "Company"), (TSX: GBG; NYSE Amex: GBG; JSE: GBG) announces that trial mining in the Blanket Zone above the Main Clementine vein (number sign)18 at its Hollister project in Nevada has encountered bonanza grades of gold and silver. The Company cautions investors and readers that we are making this announcement out of an abundance of concern over interpretation of this information and, as the information may be known locally in the region of the mine site, the Company felt obligated to make it public.

    Channel sampling carried out in conjunction with trial mining in the Blanket Zone has encountered the bonanza grades over a strike distance of 170 feet (57 meters).Channel samples taken every 10 feet (3 meters) gave values ranging from a low of 1.5 oz/ton(52.0g/t) Au and 3.2 oz/ton(111.9 g/t) Ag to a high of 2,560.4 oz/ton (88,845.9 g/t) Au and 1,829.8 oz/ton (63,494.1 g/t) Ag over channel widths from 0.3 to 2 feet wide. The current stope is continuously mineralized along its 180-foot (60-meter) length. Diluted over 3.5 feet (the width of the stope development), the average sample values were 66.4 oz/ton (2,404 g/t) Au and 78.5oz/ton (2,723.9 g/t) Ag. Muck piles have also been sampled; grabs are taken over the pile to collect as representative a sample as possible (between 10-15 lb. are collected every 10 feet). The fully diluted value of the muck samples taken from the stope to date averages 22.3 oz/t (773.8 g/t) Au and 23.4 oz/ton (811.9 g/t) Ag.

    The Blanket style mineralization at Hollister is typified by very fine grained disseminated gold hosted by tuffaceous horizons in the Tertiary (10-15 million years old) volcanics that lie unconformably on the basement Ordovician (~430 million year old) metasediments. These zones of mineralization are thought to be "mineralization plumes" directly related to the activity of fluid which has focused in structures that control the underlying epithermal quartz - adularia veins, and propagated into the Tertiary volcanic pile.

    Blanket mineralization was previously exploited by opencast methods during 1990-1992 by the Touchstone - Galactic Joint Venture. According to historic records, 115,000 ounces of gold were produced by a heap leach operation that treated low grade ore (~0.003 oz/ton or 1 g/t Au). Great Basin modeled all 46 drill intersections above the Tertiary unconformity, and +1 g/t grade shells generally locate above known mineralized quartz - adularia veins. In general, this style has been located in the first ~30 feet (10 meters) above the unconformity, and may have dimensions in excess of 150 feet (50 meters) long and 60 feet (20 meters) wide. Grades from these 46 drill intersections average 0.45 oz/ton Au (15.4 g/t) and 1.7 oz/ton Ag (59 g/t).

    Extrapolation of stope 3000N 1E to surface (approximately 200 feet or 67 meters vertically above), places this zone 300 feet (100 meters) west of the historical Clementine mercury mine. It supports the near surface working metal zonation and gold deposition model for the Hollister mine, and indicates additional exploration potential.

    Ferdi Dippenaar, President and CEO, commented: "In the past, we have identified the Blanket Zone as a target area worth exploring, and trial mining at the top of vein (number sign)18 has turned out to be a great way to test the prospective nature of this style of mineralization. Although we have encountered a limited amount of this high grade material through trial stoping, drilling is underway to determine the full extent of mineralization. More information will be made available as and when it becomes available. Based on our experience in the Main Clementine vein (number sign)18, we are evaluating the possibility of returning to previously stoped out areas above the Gwenivere high grade veins."

    Great Basin Gold's Hollister Mine in Nevada is already one of the highest grade Gold producing mines in the world, with 1.64 million ounces of Gold estimated at an average grade of measured and indicated resources at 1.3 ounces of Gold per ton.   This morning's news of such bonanza grades certainly bears some examination.

    From previous background knowledge and from researching the terms within the news release, the author pieces together what this is may mean.  For help in understanding the basic geology, the author had his assistant "My Right Hand With Mouse" put together a rough diagram displayed following:

    Figure 1:  Model of Great Basin Gold's bonanza gold grades found above their Clementine Vein.

    With reference to the above diagram, Great Basin's Hollister mine is constructed to mine the underground Gold veins.  These veins are in the basement sedimentary rocks, which refers to the lower layer of rock geology, the "Ordovician" which are 439 million years old.  This basement is covered with a more recent geological layer of volcanic rocks named the "Tertiary", which are only 10 - 15 million years old.  The meeting point of these two rock layers is termed the "Unconformity", or joining between the two rock types. 

    The Gold veins that Great Basin are mining are formed from magmatic fluids that originated deep in the Earth's crust and flowed through faults and fissures in the basement rocks coming up to the surface.  There are two main types of deposits formed from these magma fluids, high sulphidation and low sulphidation deposits. 

    Great Basin's geologists believe that Hollister is an example of low sulphidation deposits.  As the fluids left the Unconformity and entered the Tertiary volcanics, the fluids encountered groundwater.  The magma fluids then interacted with the ground water causing violent boiling and depositing of the metals and minerals.  The act of depositing minerals seals off the fault and so the magma fluids seek another way to surface.  Again, more groundwater is encountered and more furious boiling occurs.  The boiling drops the minerals and seals the fissure again.  These cycles of furious action results in more and more of the minerals being deposited in the fissures within this area of volcanics above the Unconformity. 

    Eventually the magmatic fluids reach near surface and dissipates and mixes thoroughly with the surface rocks.  This results in a broad disseminated layer of mineral deposits that is termed the "Blanket Zone" at Great Basin's Hollister mine.

    In this style of low sulphidation depositing at Hollister, the minerals deposited by the repeated action of the magma encountering ground water has resulted in very high Bonanza grades of Gold and Silver that Great Basin has just announced.  These high grades appear to be concentrated above the existing Hollister Gold veins, between the existing mine tunnels and the surface Blanket Zone.  These high grades positioned where they are gives Great Basin a large amount of  bonanza mineralization in a location where it will be easy to mine. 

    Another way of looking at this is the average grade of their "muck".  Muck is the broken rock ore, that will be refined in the milling circuit.  Their average muck grade is spectacular at:

    The fully diluted value of the muck samples taken from the stope to date averages 22.3 oz/t (773.8 g/t) Au and 23.4 oz/ton (811.9 g/t) Ag.

    Compare this grade of 22 ounces of Gold per ton with anything else, you read about gold miners anywhere.  Compare this with the grade at their Burnstone mine in South Africa, which has an average grade of 5 grams (.15 oz) Gold per ton, which is considered high grade.  This grade is at least two orders of magnitude or 100 times higher.

    Great Basin are understating in saying, that this model, " indicates additional exploration potential".

    Disclosure: The author holds shares of Great Basin Gold (GBG).

    Important Disclaimer

    The information and opinions contained within this document reflect the personal views of the author and should be viewed as food for thought and amusement only. The author may from time to time have a position in any of the securities mentioned. There are no guarantees of the accuracy, reliability or completeness of the information contained herein. Independent due diligence and discussions with one’s own investment and business advisor is strongly recommended. These writings are not to be construed as an offer or solicitation with respect to the purchase or sale of any security or as an endorsement of any product or service. We do not request or receive compensation in any form in order to feature companies in this publication. It is prohibited to copy or redistribute this document to any type of third party without the express permission of the author. This document may be quoted, in context, provided proper credit is given.



    Disclosure: Long Great Basin Gold - GBG
    Nov 09 2:06 PM | Link | 1 Comment
  • Mining Business Environmental Changes
    Introduction
    Production mining is a difficult endeavour, and there are no shortcuts to success. In the modern business world, there is a sea of change that is happening in how the public perceives mining companies and their environmental practices. Investors are advised to monitor this trend.
    Taseko "Prosperity" Cancelled
    The Canadian government delivered a rounding blow to Taseko Mines (TGB) on November 1, 2010. In a scathing rebuke to the Canadian miner about their proposed copper and gold "Prosperity" project in British Columbia, Environment Minister Prentice denied their operating permit. 
     
    This observer was appalled at Taseko's proposed actions of filling in the area Native's ancestral grounds on "Fish Lake" with mine tailings. "Oh, don't worry, it will be all right, we will dig you another lake". In 2010, for a supposed modern miner to behave in such a fashion, was astounding, and I do not know how the markets could not see this? Franco-Nevada (FNNVF.PK) even had signed a royalty agreement in May 2010 of $350 million with Taseko for future off take of the Gold production. 
     
    Both Taseko and Franco-Nevada management must have been wearing blinders for them to not understand the enormity of this environmental issue.
    China Closing Smaller Coal Mines
    Does the reader remember the incident of the 100 kilometer long traffic jam in Northern China this summer? Well, is the reader aware of the cause of the traffic jam?  China has been closing and consolidating smaller environmentally unsound and unsafe coal mines
    China relies on coal for around 70 per cent of its energy needs. About half of this is local coal, a large proportion coming from the small and inefficient mines that litter inland China. For many years, thousands of small and illegal coal mines in Shanxi province (west of Beijing) supplied the capital and surrounding towns with cheap coal. Given the lack of investment by mine owners in safety, compounded by the poor implementation of standards by local authorities, these mines are the most dangerous in the world.
    The main cause of the traffic jam was the flood of coal trucks bringing coal from further away areas to the Beijing capital region. 
     
    Even with electrical shortages looming, due to the coal shortage, the Chinese government is acting to revamp the mining landscape in China. Smaller coal mines with unsafe and unsound practices are being forced to close. Larger miners are designated as consolidators and they have the option of purchasing and revamping the smaller closed mines. This is being enacted upon thousands of small coal mines in China
    Gold Miners in Latin America
    There has been a spate of environmental issues that have cropped up for large Gold miners in Latin America this year. Investors in New Gold (NGD) were surprised earlier this year when the Mexican authorities cancelled their Environmental Impact Statement with  their Mexican Cerro San Pedro mine. Similarly Barrick (ABX) and Gold Corp (GG) denied any possible sulphide leakage from their Pueblo Viejo mine in the Dominican Republic.  Most recently in October, the Guatemala government is charging  Gold Corp (GG) with pollution at their Marlin Mine in Guatemala.
    Summary
    These are examples of governmental responses to unpopular, unsound and unsafe mining practices. There is a sea of change in environmental business practices that are impacting miners around the globe. Investors are well advised to monitor this trend and take resulting action for their investments.
     
     
    Disclosure: The author has no stake in the miners mentioned but is long junior mining equities.

    Important Disclaimer

    The information and opinions contained within this document reflect the personal views of the author and should be viewed as food for thought and amusement only. The author may from time to time have a position in any of the securities mentioned. There are no guarantees of the accuracy, reliability or completeness of the information contained herein. Independent due diligence and discussions with one’s own investment and business advisor is strongly recommended. These writings are not to be construed as an offer or solicitation with respect to the purchase or sale of any security or as an endorsement of any product or service. We do not request or receive compensation in any form in order to feature companies in this publication. It is prohibited to copy or redistribute this document to any type of third party without the express permission of the author. This document may be quoted, in context, provided proper credit is given.


    Disclosure: Long junior mining equities
    Nov 04 10:58 PM | Link | Comment!
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