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S. E. Wells
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I'm a middle aged guy who's falling apart at the seams and trying to make a few bucks for retirement. I've had a lot of experience mining gold with artisanal methods and by dredging. I understand gold geology pretty well and can make sense of geological reports so I tend toward investing in what... More
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  • An analysis of Rubicon Minerals (RBY) exploratory drilling by zone
    Rubicon has identified several zones of interest at their F2 project in Red Lake, Ontario, Canada. These zones can be seen here: http://www.rubiconminerals.com/i/maps/2010-05-17_NRM2.jpg All reported intercepts in this drilling can be found here: http://www.rubiconminerals.com/s/NewsReleases.asp?ReportID=401691&_Type=&_Title=Assay-Table

    I thought it would be interesting to see how these zones stack up against each other and in relation to the initial discovery at the F2 Core Zone. To do this, I worked from the companies news releases and figured out which intercepts were in which zones. Then, I used the drill reports to calculate how much of each intercept was at what grade expressed in grams per ton. Lastly, I took weighted averages for grams per ton and simple numerical average interval width grouped by zone.  
     
    You should note that figuring out which drill intercepts are in which zone is a subjective process as it is a matter of interpreting news releases from the company which are not entirely specific on this issue. Additionally, there are subjective elements in figuring out what grade to apply to each intercept in cases where a broad intercept has included intercepts. I tried to make reasonable inferences in both cases and I think I have gotten it about right. However there are subjective elements involved in the process so keep this in mind. You can see exactly how I interpreted the data in a PDF here:
    74.172.169.226/mining/Average_GramMeters...
    I identified 9 categories in which to classify the results of exploratory drilling at F2 to date.

    These are:
     
    Zone 1 – This is the Core Zone (where the initial F2 discovery was made)
    Zone 2 – The Crown Zone
    Zone 3 – The Northern Extension
    Zone 4 – The West Limb Area
    Zone 5 – The 122-10 Zone
    Zone 6 – The 122-40 Zone
    Zone 7 – The Hanging Wall Zone
    Zone 8 – This is a catch all “Zone” for all drilling hits that are in the main corridor of F2 but are not in an identified zone
    Zone 9 – This is a catch all “Zone” for all drilling hits that are outside the main corridor of F2 and not in an identified zone.

    Here's the number of intercepts analyzed  per zone

    Zone 1 - 265 intercepts
    Zone 2 - 20 intercepts
    Zone 3 - 54 intercepts
    Zone 4 - 43 intercepts
    Zone 5-  46 intercepts
    Zone 6 - 5 intercepts
    Zone 7 - 8 intercepts
    Zone 8 - 49 intercepts
    Zone 9 - 52 intercepts

    Here is the weighted average grade expressed in grams per ton and the average intercept width expressed in meters for each zone.
     
    Zone 1 Core zone - 15.54 GPT over 3.77 meters
    Zone 2 Crown zone - 14.22 GPT over 6.19 meters
    Zone 3 Northern Extension - 12.36 GPT over 3.37 meters
    Zone 4 West Limb Area - 11.37 GPT over 2.87 meters
    Zone 5 122-10 zone - 10.46 GPT over 4.84 meters
    Zone 6 122-40 zone - 31.95 GPT over 4.06 meters
    Zone 7 Hanging Wall Zone - 128.40 GPT over 2.5 meters
    Zone 8 In F2 corridor, no zone - 7.87 GPT over 3.15 meters
    Zone 9 Outside F2 corridor - 30.04 GPT over 1.77 meters

    The main surprise to result from this analysis for me is not the continued extraordinary drilling results Rubicon is experiencing in the F2 corridor itself. It’s been clear (at least to me) for some time that Rubicon has an extraordinary gold deposit in the main corridor of F2. I was very surprised to see that the intercepts made to date outside the main corridor of F2 are also high grade and of good extent.

    I think this bodes very well for the potential to discover more gold zones outside the main F2 corridor and it seems to me that most analysts are not reflecting the values outside the main F2 corridor in their estimates for the F2.

    I am also very encouraged to see the results coming out of the new Hanging Wall zone. There has been little drilling there yet but the grades reported so far are extraordinary.






    Disclosure: Long Rubicon Minerals via call options at varying expirations and strikes


    May 31 9:19 AM | Link | Comment!
  • Minera Andes (MNEAF) moves to a profit
    Minera Andes, with operations and exploration properties in Argentina, just reported a $.02 per share net income ($5.2 million total) on 11/16/2009.  This income mostly derived from Minera Andes 49% share of Minera Santa Cruz' operations of the San Jose gold/silver mine in southern Argentina.  Hoschild owns the other 51% of Minera Santa Cruz.

    This move to profitability comes on top of Minera Andes strong position for the future in its Los Azules project (copper) now that Xstrata is out of the way and Minera Andes is in a 100% ownership position of Los Azules.

    Los Azules is a relatively straight-forward play.  It has a little over 11 billion pounds of copper in 922+ million tons of .55% copper ore.  It's going to cost a little bit less than $3 billion dollars to develop the mine.  Do the math.  With copper at approximately $3 per pound, there is huge potential here.  The project was analyzed with a copper price of $1.90 per pound and found to be justifiable in a preliminary assessment, a synopsis of which can be seen at http://www.minandes.com/s/NewsReleases.asp?ReportID=337344&_Type=News-Releases&_Title=Minera-Andes-Announces-Results-Of-Preliminary-Assessment-At-Los-Azules-Copp....  At higher prices for copper, the project becomes a potential profit whale for Minera Andes.

    There are a couple of negatives.  Minera Andes has a lot of shares outstanding.  Over 220 million. And, while Argentina is no Democratic Republic of the Congo or Indonesia or Venezuela in terms of political risk, it's not the top rated jurisdiction in terms of political risk either.

    Still, all in all, there is tremendous upside potential here with the solid income stream over the next 3 years at San Jose (and resource expansion at San Jose seems likely to me), the Los Azules copper project, and the other promising gold/silver exploration properties in Argentina.

    I'm long MNEAF and accumulating more.
    Tags: MNEAF
    Nov 17 8:24 AM | Link | 1 Comment
  • Where to now with Rubicon Minerals - RBY ?
    I've been following Rubicon Minerals since it was at $.89 a few months back.  It's taken a huge run to approximately $4.00 at present.  Is it time to take the money and run?  What to do with Rubicon from here? To answer that question, I need to have some idea of what RBY may be worth so I'm going to attempt a baseline evaluation of Rubicon. In an article on Mineweb about Exeter Resources (http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=89192&sn=Detail) it was stated that the top 10 miners, reflected in their market capitilization divided by their gold ounces in the ground), shows a value of $143 an ounce for their compliant resources. Well, Rubicon is right next door to GoldCorp which the same article says is valued at about $440 for their ounces in the ground. GoldCorp also acquired the Bruce Channel Deposit (BCD) via the Gold Eagle acquisition for something around $240 an ounce and the BCD is next door too and the largest stockholder of Rubicon is the guy that started and built GoldCorp into the powerhouse it is.

    So, I'm asserting that it's reasonable to assume Rubicon's ounces in the ground are worth the $143 in the ground ounce average. That may sound like too much for a junior exploration company but I think that's conservative given the tenor of the assays, lack of political risk, quality of management, cash position, no debt, etc.

    This leaves one to determine how many ounces they have. In the absence of a full blown 43-101 being available, one is left to less rigourous devices. On the Rubicon site, in a presentation, they say their ore body, so far, is of the dimensions of 1100 Meters by 300 meters by 1100 meters. They also show the distribution of assay results. The lowest result they report is 3 grams a ton. The following is an attempt to convert that info into some useful approximation of what Rubicon has based on what we currently know and what it would be worth per share if valued at $143 per ounce. The critical assumption that I'm making here, in an attempt to come up with some baseline value in light of Rubicon's strong run up already, is that only 10% of the orebody is of 3 gram per ton tenor. As we all know, they have hundreds of assays of 15 grams per ton and even much, much higher. One of there recent assays in from drilling southwest of the original F2 zone was for north of 12 grams per ton over 140+ feet.  So, assuming 10% of the ore body to be of a 3 gram per ton tenor seems defensible to me. Here's the result.

    Width   300
    Length   1100
    Depth   1100
    Cubic Meters   363,000,000
    Tons per Cubic Meter   2.35
    Total Tons   853,050,000
    % at 3 grams   0.1
    Tons @ 3 grams   85,305,000.00
    Grams Contained   255,915,000.00
    Grams Per Tr. Oz   31.1
    Ounces Contained   8,228,778.14
    In Ground Value Per Oz.   $143.00
    Value of Deposit   $1,176,715,273.31
    No. Shares   192,300,000.00
    In Ground Value Per Share   $6.12

    In other words, it would appear that Rubicon is currently trading for about $2 a share less than it's arguably worth on a conservative assessment of what they have at a reasonable value for in the ground ounces. It is also not so silly to think it could be worth $30 a share by the time they finish this current drill program if they extend the orebody and keep hitting bonanza grades.

    Yes, Rubicon has moved a long, long way from the $.90 a share I first bought at but I'm still a big buyer at the current price of appox. $4.00 per share.


    I'm long RBY, short the Rubicon March 2010 7.50 call options, long the March 2010 $2.50 RBY calls.
    Tags: RBY
    Sep 25 8:25 AM | Link | 1 Comment
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