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In 2011 Peter Epstein, CFA, left a $3 billion hedge fund where he was a senior natural resources analyst to help increase awareness of a number of natural resource companies in which he's invested in. PLEASE FOLLOW ME ON TWITTER: @peterepstein2 Mr. Epstein formed MockingJay, Inc., a... More
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  • CEO Chat Like CEO.CA On Steroids, Fast High Quality Market Commentary

    I, Peter Epstein, have no financial interest of any kind with CEO Chat.

    Rarely do I write about an informative, helpful, free, easy to use investment focused application. Why? Because I'm usually disappointed with how important company developments, industry commentary and articles/interviews get disseminated. The time it takes me to stumble upon high quality content I seek is getting ever longer. Who still visits company message boards? Anyone? There was a short window where, for example, Stockhouse's message boards were pretty good, but now they are almost unreadable. Arguments and rivalries develop and soon there's name calling and so forth.

    Other sincere users feel obligated to jump in and implore the bad actors to shut up and move along. Before long, the string of worthless messages means that one has to crawl through dozens to come across that one good one. Not only that, but each new post has to be loaded. God help those who's computer is running a bit slowly. Everyone is branded a pumper or a short. It's not just Stockhouse but a number of message boards like investorshub, hotcopper.au, (an Australian investment blog) and others.

    What about Twitter as a medium to obtain quick, relevant, actionable information? Well, Twitter is certainly better than the message boards, but it too has its challenges. Promotional posts, SPAM-like tweets and too much information of marginal value comes through the pipe. Therefore, even a prolific Tweeter who sometimes has good content to share can rapidly dilute his/her Twitter feed by posting and re-posting and re-posting posts, only a few of which are worth reading. Don't get me wrong, I use Twitter and think that it has a meaningful place to occupy online, but for pure investment discussions, it comes up short.

    That's why I want to point out Tommy Humphreys' new investment focused offering called chat.ceo.ca. Readers may recognize Tommy's name as the founder of CEO.CA, an investment blog that effectively screens out the noise and posts only a handful of articles per day. These articles are not puff pieces or merely summarized press releases- they are strong, actionable investment pieces.

    Importantly, in speaking with Tommy, he reminded me that CEO Chat is in its early days, a "soft launch" as he calls it. He said that many enhancements are planned. I asked him for a description of CEO Chat….

    "chat.ceo.ca was created to fill a void in connecting dedicated natural resources investors. I want to bring back the water cooler, so buzz can spread about new discoveries, and professionals, geologists, engineers and retail investors alike can discuss the news in real time. We have discussed every major junior mining story in CEO chat minutes if not hours ahead of everybody else since we soft launched the thing four weeks ago. We are adding stock charts, notifications and a mobile app in the next few weeks. Mobile user experience is the focus. Many newsletter writers and mining journalists are already using the service. Over 1,000 messages a day have been posted recently. The search function works great. To me it's like a quality junior mining conference in your pocket."

    CEO Chat is like CEO.CA on steroids, it moves fast, but key to the action is that virtually all of the posts are on point, i.e. no spam, no fighting, no wasted space, no wasted time. The reason why Humphrey's CEO Chat is able to bypass the faults of message boards and Twitter is that its users are largely investment professionals, focused on investment ideas and intelligent discussion. Links posted on CEO Chat are never spam, they direct users to valuable and timely content.

    Perhaps best of all, I can browse several hours worth of posts in a few minutes. On Twitter, I browse for 10-15 minutes and I've only scanned the last 45 minutes worth of posts. Both Twitter and the message boards contain search engines. However, how does one search those vehicles for all the stocks one owns as well as the companies that one is keeping a close eye on? It's impossible. chat.ceo.ca has an excellent search function, and since all of the content is investment-focused, the search results don't come back with unrelated information.

    I recommend that readers take CEO Chat for a test ride. It's incredibly easy to sign on, and if you don't like it, feel free to go back the message boards!

    Also, for those investors attending PDAC in Toronto this year, CEO.ca, along with Eric Coffin of Hard Rock Advisory and Keith Schaefer of Oil and Gas Investments Bulletin are hosting a one day exclusive conference in Toronto on February 28th with 15 of their top CEOs. This will be a great event because of the quality of presenters. Seating is limited so if you're in the area and a serious natural resources investor, you should register now (here's the link).

    @PeterEpstein2

    Feb 09 4:37 PM | Link | Comment!
  • Skeena Resources Has Serious Geologist Talent To Find 1 Million Oz Of Gold Within A Year

    Skeena Resources Has Serious Geologist Talent To Find 1 Million Oz Of Gold Within A Year

    By Peter Epstein, CFA - @peterepstein2

    Skeena Resources (SKE.V) (SKREF) is one of a number junior gold companies in Canada, but one with a secret weapon.

    Its Chairman, Ron Netolitzky, happens to be one of the foremost geologists in the world, especially so in the Golden Triangle of northwest British Columbia. Mr. Netolitzky is one of the primary developers behind the Snip Mine and Eskay Creek mines. For these achievements, among many others, Mr. Netolitzky received the Prospector of the Year award from the PDAC, and Developer of the Year award from the BC & Yukon Chamber of Mines. Add to the list Netolitzky's induction into the Canadian Mining Hall of Fame just a few weeks ago.

    Please see this video clip describing Netolitzky's prolific achievements.

    In addition, on January 11, 2015, the Northern Miner profiled Mr. Netolitzky in this two page article. Not only is Mr. Netolitzky the Chairman, but he's also the second largest shareholder, having invested $2 million of hard cash over the years. Make no mistake, with Netolitzky as Chairman, Skeena Resources is as well placed to find additional resources suitable for an economically viable mine as any junior in Canada.

    Skeena Resources is lucky to have a strong team around Netolitzky, including Rupert Allan B. Sc., P. Geol., Vice-President, Exploration & Director, Walter Coles, Jr., President & CEO, Wendy T. Chan, B. Sc., MBA and Michael Cathro, M. Sc.,P. Geo. Skeena therefore has not one, but three very accomplished geologists on board, virtually unheard of for a company of this size.

    The Company's Spectrum project already has an historical, non NI 43-101 compliant, resource of high grade (12.3g/t) material containing an estimated 243,600 ounces of gold. In addition, Skeena has an extensive and valuable database of historic data including geological mapping, geochemical sampling, trenching and more than 100 diamond drill holes (>12,000 m). With a highly experienced team and armed with ample historical data, Skeena hopes to delineate 1 million ounces of NI 43-101 compliant Indicated & Inferred gold resources within 12 months and subsequently up to 2-3 million ounces. A key takeaway is the results of the company's first 9 drill holes, drilled in 2014, which are discussed below.

    The following interview of Mr. Netolitzky took place by phone and email between January 30th and February 2nd. I, Peter Epstein, interviewed Mr. Netolitzky and I own shares in the company that I paid for myself. I have no prior or existing business relationship with Skeena or any company named in this interview. Skeena is a highly speculative investment opportunity. Readers should conduct their own due diligence and consult with their own investment advisors.

    Mr. Netolitzky, thank you for taking the time with me for this interview, can we please start with a description of Skeena Resources?

    Skeena Resources is most focused on advancing its Spectrum gold & copper exploration property located in the, "Golden Triangle" in northwest British Columbia. Our 3,580 hectare property is approximately 37 km west of Imperial Metals' Red Chris mine and 16 km west-northwest of the NGEx/Teck GJ deposit.

    The Spectrum resource appears to be a high-grade deposit that has extensive historical data, including geological mapping, geochemical sampling, trenching, more than 100 diamond drill holes (>12,000 m), and one small underground adit (278m of drift and crosscuts). The majority of this valuable data dates back to Columbia Gold Mines work from 1990-1992. At the time, an 'inferred' non NI 43-101 compliant resource of 614,000 tonnes grading 12.3 g/t Au containing 243,600 oz. was estimated to a projected depth of approximately 150 meters. Given our recent successful drill campaign, and ample historical data, we hope to establish a NI 43-101 resource of 1 million ounces of gold within the next 12 months.

    Skeena has put out two press releases regarding drill results on a total of 9 holes, were the results as good as hoped for?

    We are very pleased with the results of our 9 hole drill campaign last year. Highlights can be found in the two press releases, first 5 holes last 4 holes [NOTE: For convenience, highlights from the two press releases are reprinted here] 23.84 g/t over 6.5 m, including 40.43 g/t over 3.5 m in 14-SP-003; 10.63 g/t over 27.0 m, including 66.00 g/t over 2.0 m and 20.4 g/t over 2.0 m, 9.2 g/t over 2.0 m; 8.0 g/t over 2.0 m; and 22.7 g/t over 2.0 m in 14-SP-004; 18.60 g/t over 2.0 m, 3.19 g/t over 4.0 m, 7.32 g/t over 2.0 m, and 6.88 g/t over 2.0 m in 14-SP-005; 43.80 g/t over 2.0 m in 14-SP-006; 9.50 g/t over 2.0m in 14-SP-007; 4.58 g/t over 9.0 m in 14-SP-008; 13.70 g/t over 4.0 m and 254.50 g/t over 2.0 m in hole 14-SP-009. Importantly, this last intercept represents the deepest intersection of significant mineralization obtained to date (from 285 m to 287 m) and the deposit remains open on strike and at depth. Intercepts averaged 50 m beneath historic intersections, and exhibited excellent vertical continuity, suggesting high-grade mineralization may extend to significant depths.

    Why do you think that you might be successful in finding an economic deposit in a basin that's been actively explored for decades?

    That's an excellent question. The simple answer is that our 3,580 hectare property hasn't been systematically explored, (except directly on the Central Zone), especially using modern techniques. The property was inactive for 22 years due to government issued right-of way restrictions, recently resolved, allowing the project to move forward. Further, the vendor of the property to Skeena was difficult to deal with. I spent years trying to cut a deal with him before he relented. This opportunity is in my sweet spot, a high-grade zone(s) occurring within a broader halo of low-grade porphyry-style Au-Cu mineralization about 50 m wide and about 600 m strike length. The kind of high-grade, low cap-ex prospect that, if it reaches 1.0 million ounces with good continuity, will very likely become a mine.

    Please tell us about the East Creek Zone and its potential importance?

    The East Creek Zone, some 1.5 kilometers further to the north of the Central Zone, is a north-trending, 5 m wide silicified zone with gold, pyrite, arsenopyrite, chalcopyrite and sphalerite, traced at surface for a 600 m strike length. A trench sample yielded 58.4 g/t Au over 2.6 m. The East Creek Zone has only been tested with 3 drill holes to date. Two of those drill holes yielded 1 to 2 g/t over less than 2 m, while the third hole yielded 34.45 g/t over 2.6 m. Apart from a single drill hole to the north of the Central Zone Fault, most of the intervening 1.5 km section between the Central and East Creek Zones has not been drill tested and provides an attractive exploration target. If we find continuity between the Central Zone and the East Creek Zone, we could have a very significant deposit with multiple millions of ounces.

    Can we get a snapshot of your capital structure? Is there any debt?

    As of February 2nd, Skeena has 163 million shares outstanding [89,102,207 shares are subject to Exchange escrow, 360,000 options are escrowed, and 180,000 warrants are escrowed]. Additionally, 80,000,000 of the escrowed shares are further subject to a Pooling Agreement, managed by Mr. Netolitzky, Chairman of Skeena], plus approximate 42 million warrants at $0.10 (essentially at-the-money) and 16 million at-the-money $0.10 stock options. Fully diluted, including at-the-money shares = 221 million. Currently we have no debt. We will probably raise $3-$4 million for the 2015 drilling and for general corporate purposes.

    After raising new capital, how long will that fund the company for?

    This important capital raise will largely fund us for 2015 and into 2016. Interest in the project has been high. We raised $3 million in Q4 of 2014, which in this particularly inhospitable financing environment is a strong vote of confidence in the technical merit of the Spectrum project and the strong management team. Frankly, the drill results from our first 9 holes were better than we expected. As such, we are optimistic that we will continue to be able to raise capital to advance this very rare high grade gold project. Nevertheless, we plan on maintaining at least $1.0 million of cash on our balance sheet to withstand market uncertainties.

    Do you have contact with any First Nations groups, if so, how are your relations with them?

    An Archaeological Impact Assessment was undertaken on the in September, 2012 in conjunction with Rescan and a JV company of the Tahltan First Nation, without any significant archaeological issues being uncovered. Skeena looks forward to working with the Tahltan First Nation and other local stakeholders in order to advance a profitable, financially stable, project that the Company hopes will create value for all stakeholders and lasting economic and social benefits for the region.

    Please describe in what ways Skeena's property is like and is different from other Golden Triangle operating mines and/or exploration projects.

    The property contains more than 10 different showings of high-grade sulphide-gold mineralization, spatially associated with steeply-dipping fracture zones contained within a broad area. This is the same type of geological setting as many of the major copper-gold deposits in the Golden Triangle area of northwest British Columbia except that Spectrum has demonstrated much higher gold grades.

    Skeena's corporate presentation says that your property is near critical infrastructure and resources, please explain.

    First and foremost we have excellent access to roads [paved Highway No. 37] and power [the new hydro line into the Red Chris Mine], each built or upgraded in the past decade. Furthermore, an experienced labor force is available in the region. The port of Stewart is also available to us. We're not shipping a bulk commodity like coal, so the overall logistics aren't particularly onerous.

    What's Skeena's exit plan, will you go into production or advance the Spectrum property enough to try to sell it?

    We strongly believe that a great deal of the upside in a junior exploration company comes from discoveries, followed by resource reports, followed by infill drilling to better delineate the resource, followed by building a detailed model of what might be there, followed by more drilling and modeling to compile a Preliminary Economic Assessment, "PEA." At that stage, my experience has been that suitors start to take a serious look sometime after 1.0 million ounces have been defined in a NI-43-101 compliant resource and/or after the subsequent PEA. If Skeena has what I think it does, namely high-grade gold with relatively low cap-ex and operating costs, then it will be an attractive takeover target.

    Feb 04 1:44 PM | Link | Comment!
  • Galane Gold Trading Near Cash Value, Producing 50k Ounces This Year.

    Galane Gold Ltd. (GG.v) (GGGOF) is an unhedged gold producer and explorer with mining operations and exploration tenements in the Republic of Botswana. The company is committed to operating at world-class standards and is focused on the safety of its employees, respecting the environment, and contributing to the communities in which it operates. Galane has been producing gold from the Mupane operation since 2005. Galane's operations are just an hour's flight from Johannesburg and are endowed with the infrastructure to produce up to 50,000 ounces of gold per year. 2015 is an especially good time to consider an investment in this undervalued company.

    Gold Companies Like Galane Gold, Currently in Production, Warrant a Premium Valuation

    Gold companies that are currently in production, generating free cash flow warrant a premium valuation to those in development. Intuitively we all know this to be the case. The leap to production from development is much more difficult then investors recognize. In many cases, development companies still need to raise large sums of capital, which is no easy feat in today's financing environment. Even if successful, development companies remain in the mode of repeated equity dilution or entering into expensive and risky debt arrangements with onerous debt covenants.

    However, the challenges don't end with obtaining financing, a development company has to hire an operating team, get final permits, foster a strong social license to operate with locals, nail down all of the infrastructure (roads, airstrips, rail, port) and resources (water, labor, power) and integrate this myriad of factors. Ramping up to nameplate capacity frequently takes a years, not months. The timing of reaching commercial production. Time is money, for example delays could mean another dilutive equity raise. Free cash flow generators like Galane Gold have been through all of these challenges and are demonstrably less risky.

    New Management Team in Place

    In 2014 Galane received a $5.0 million pre-payment against future gold deliveries from a strategic partner, the Korean multinational Samsung. Galane will deliver approximately 1,600 ounces of gold per month to Samsung for 2 years, at 98.5% of prevailing spot price in the first year, and 99.5% of spot price in the second year. The company has no explicit need to dilute shareholders ever again... unless for an accretive tuck-in acquisition. Galane's mine has been successfully producing gold since 2005.

    A new management team is in place, led by Rovi Sood, a financier and venture capitalist. He has founded several natural resources based businesses including Feronia Inc., one of Africa's largest employers, where he serves as Chairman. Mr. Sood was also a director of Elgin Mining Inc, a 45,000 oz per year gold producer, not dissimilar to Galane. Elgin was sold to Mandalay Resources in a deal that closed September, 2014 valuing the company at [$72.0 million], a price nearly ten times Galane's market cap. Therefore, in addition to a tried and true operating team, Mr. Sood provides the deal making experience in Africa and abroad to grow Galane through opportunistic acquisitions of cheap or distressed assets. I would not be surprised to see an acquisition this year.

    2015 Should be a Strong Year for Galane Gold

    Even without growth though acquisition Galane is poised for a strong 2015. One of the key achievements of the Galane management team has been to slash operating costs. In 2015, the company is expected to produce greater than 45,000 ounces of gold at an all-in cost modestly below $1,000/oz. That means if the gold price were to average $1,300/oz, the company would make roughly $300/oz x 45,000 ounces = $13.5mm of operating cash flow. Importantly, Galane's unhedged position means that every $100/oz increase in the gold price equates to about $4.5 million of incremental cash flow. Ascribing a 5x multiple to that extra cash flow alone would produce a valuation uptick of nearly three times the current market cap! This leverage to the gold price is unheard of among peer producers around the globe.

    One reason for this pure-play on gold being so undervalued is that Galane has not been touting its operations and prospective acquisition opportunities. Few people know about the company. Instead, Galane has been entirely committed to lowering operating costs and optimizing the mine plan. In 2014, Galane experience a SAG Mill motor outage that set it back several months as the company acquired and installed a new one. Now, the company has a spare motor because they were able to successfully refurbish the old one. As a testament to the operating skill of the team, Galane was able to operate the damaged SAG Mill at a diminished rate such that the company did not burn cash in the second and third quarters of 2014. All systems are go for 2015.

    Conclusion

    How significant are the valuation figures outlined above? Very. The capital structure includes moderate debt and 52 million outstanding shares at a current share price of C$ 0.15 for a market cap of C$ 7.8 million. Factoring in positive working capital, the Enterprise Value, "EV" [market cap + debt - cash) is meaningfully below the market cap. All of the upside, not just in the price of gold, but also from the firm executing on 45k + ounces, is in place to capture this year. To reiterate, this is a near-term catalyst that could propel the stock meaningfully higher. Galane is not promising initial gold in 2017 or 2018, it's right here, right now. With operations stabilized, senior management is ready to start telling the story. A higher stock price, which seems like a no-brainer, would give Galane a stronger currency with which to make acquisitions in Africa and abroad. Finally, if the company can't find cheap and distressed assets to buy, it could institute a share buyback program later this year or next.

    Feb 04 9:45 AM | Link | Comment!
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