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Metal Augmentor is an investment research and consulting service focused primarily on the commodities markets.
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  • Mining News Review: Week of December 13th 0 comments
    Jan 4, 2011 1:10 PM | about stocks: WLRMF, RCVTF, GWYRF, MNRZF, MYMNF, GMO, NGD

    We update all Mining News Review posts on a daily basis at Click here to join our mailing list or to subscribe to our service.

    Belo Sun Mining
    (TSX-V: BSX; Pink Sheets: VNNHF)
    Belo Sun Continues to Extend Gold Mineralization at Volta Grande – December 14, 2010

    Construction challenges aside, we like this Brazilian project and consider the prospects for a future gold mine at Volta Grande to be good. The mineralization contains higher grade sections that should help with economics and the project could support an operation of above-normal size (200,000+ ounces of gold per year). We’d like to see the capital costs come down with one possibility being to develop the project in stages or perhaps to increase cutoff grades. Although we have not fully validated the project in our model, it does look leveraged to higher gold prices and becomes particularly-attractive above $1,250 per ounce (a level we suspect mining companies may consider baseline in the coming two years). [Silverax]

    Wolverine Minerals (TSX-V: WLV; Pink Sheets: WLRMF)
    Wolverine Announces Acquisition Of Option To Acquire 21 Yukon Gold Properties, Closing Of Private Placement And Filing Of Technical Reports – December 14, 2010

    Decent win so far for private placement participants who are sporting 200% paper gains upon closing excluding the warrant or flow through tax benefits. The “acquisition of option to acquire” the extensive Yukon land package from Strategic Metals (TSX-V: SMD; Pink Sheets: SMDZF) provides lots of exploration opportunity and it may be worthwhile to watch the company closely in the latter stages of next year especially if the shares come down toward the private placement level in the last Spring or early Summer. [Silverax]

    Richfield Ventures (TSX-V: RVC; Pink Sheets: RVCTF)
    Richfield Extends Blackwater Southward with BW 97 – December 14, 2010

    Over the past year, we have watched with great fascination Richfield’s adroit drilling of a property that had previously hosted what was generally assumed to be a smallish gold deposit clustered in several mineralized pipes of limited size. A methodical approach of grid-based drilling, however, has now disabused the market of such thinking, revealing Blackwater to be a bulk-tonnage gold deposit with surface dimensions of approximately 300 by 800 meters for the 100+ gram-meter envelope. That’s perhaps a 2+ million ounce gold deposit grading around 1 gram per tonne gold with decent initial metallurgical results and near surface as well. Arguably ahead of itself at C$5, we feel that a good trading opportunity could present itself on a pullback toward C$3 or perhaps a bit lower. That said, a huge amount of work lies ahead to move the project through the development plan and it wouldn’t be uncharacteristic for the market to get bored in the meantime. Release of the NI43-101 resource report next Spring followed by pre-feasibility later in the year may provide some excitement but possibly of a temporary nature. In any case, the latest drilling is starting to define the edges of the deposit although there is a small chance the gold system could open back up to the South under cover. [Silverax]

    Galway Resources (TSX-V: GWY; Pink Sheets: GWYRF)
    Galway Intercepts 24.0 Meters of 8.4 G/T Gold and 96.0 Meters of 1.6 G/T Gold, and Reiterates its Fractional Land Position – December 15, 2010

    The impressive-looking assays come from the Pie de Gallo and Northeast areas which have not been expanded meaningfully by this latest drilling, although they do confirm good continuity within these two moderate-sized zones. What Galway needs to do now is bravely step out a bit to see if their property has a meaningful amount of gold. Buyers responsible for spiking the shares on the basis of these results haven’t looked at the drill map carefully. As for fractional land positions internal to Ventana’s (TSX; VEN; Pink Sheets; VENGF) claim, we don’t feel Galway would get substantial payment for them. Mining will more-than-likely be underground, rendering these several-meters-wide slivers irrelevant (for example, the mine engineers could plan to locate the pillars there). That said, Galway may still have speculative value at current prices especially if its neighbors keep moving toward mine development. [Silverax]

    Mantra Resources (ASX: MRU; TSX: MRL; Pink Sheets: MNRZF)

    It appears M&A in U3O8 is picking up and the price being paid here, over $10 per pound of resource (including inferred) is quite encouraging. On a separate note, the three main players in Peru’s Macusani Plateau (on a combined basis) should have a 100 million pound resource under their belts next year, which should go a long way in helping to overcome the geographical and logistics challenges of the remote location. With 3 active uranium explorers plus Bear Creek’s (TSX-V: BCM; Pink Sheets: BCEKF) huge Corani silver deposit, I like the eventual odds of Macusani becoming a future uranium and silver mining district. As if giving a positive nod of approval to the odd pairing of uranium and silver, a certain other junior explorer has been on a roll recently. [Silverax]

    Eagle Hill Exploration (TSX-V: EAG; Pink Sheets: EHECF)
    Eagle Hill Intersects Near Surface, High Grade Gold at Windfall Lake Including 18.82 g/t Over 9.90 Meters and 53.64 g/t Over 4.55 Meters – December 15, 2010

    The essential substance of these holes was a very high-grade one meter intercept and that is what should be mentioned first. Secondary importance is the wider mineralized envelope grading 2-4 grams per tonne. Windfall lake is known for extremely high-grade intercepts of gold. It is also known for random grade distribution and no apparent continuity, something that 25 and 40 meter stepouts aren’t going to change. [Silverax]

    Bayfield Ventures (TSX-V: BYV; Pink Sheets: BYVVF)
    Bayfield Drills 89.96 g/t Gold Over 1.1m Within 46.6m of 2.28 g/t Gold in Rainy River, NW Ontario – December 14, 2010

    This is a preferable way to report a narrow high-grade intercept that is contained within a wider mineralized envelope. As Otto points out, there is a lot of grade “smearing” going on with Bayfield’s longer interval but as long as it is placed into proper perspective there is little reason to get upset about it. There are many companies abusing investors’ credulity by showcasing narrow high grade intercepts as bulk gold discoveries. That’s not the problem here but rather the overstatement of the importance and relevance of Bayfield’s claim blocks in respect of the Rainy River gold deposit. The fact is Bayfield’s land is not critical to the mine plan at Rainy River and the most prospective target for Bayfield isn’t a bulk open pit deposit but rather high grade gold at depth in narrow but long ore shoots. The individual shoots at Rainy River have very little if any lateral continuity but they can extend for many hundreds, if not several thousands, of meters downdip. This may be visualized as a stack of straws although on Bayfield’s land so far it seems to be just a single straw. [Silverax]

    Supatcha Resources (OTCBB: SAEI)
    SEC Suspends Trading in Supatcha Resources – December 17, 2010

    Not much more than a week after we commented on Supatcha’s unusual trading activity it get suspended by the SEC. Not that we expected it to get suspended, but we certainly aren’t surprised. Here’s a quick excerpt:

    Moscow-based Onexim, controlled by billionaire investor Mikhail Prokhorov, said in a statement that it “categorically denies any involvement with Supatcha Resources Inc. A news release by that company indicating that Mr. Prokhorov is involved in an unsolicited bid to purchase shares is completely false.”
    Probably the most humorous part of the whole episode (at least for those who don’t own any shares in the company) is that the company is claiming its website has been brought down by hackers. But not just any hackers, we’re talking about cybervigilante Janice Shell and her motley crew. I hadn’t heard of her before this, so for those similarly unschooled here’s an introduction from a Fortune article written way back in 1998:

    The unofficial queen of the cybervigilantes is Janice Shell, a 50-year-old art historian who lives in Milan and got hooked on busting online con men after she was burned in an Internet investment scheme two years ago. A tireless–even obsessive–pursuer of online malefactors, Shell says she spends 12 hours a day trolling the Internet, looking for crooks. Thanks to this single-minded dedication, she has become a celebrity–at least to those who hang out on Silicon Investor. There are two threads devoted just to her: “Janice Shell for President” and “Janice Shell–A Retrospective.”In the past two years, Shell says she has exposed an investor relations director with a murder rap, a so-called biotech company that really sold kitty litter, and a CEO who claimed to have run the largest corporation in Nevada but who was really the head of a two-man air-conditioning repair shop. “God help us if [Shell] ever goes to work for the hypester pump-and-dump gang,” one admirer gushed in an August posting. “Being an international sex symbol is hard work, but someone has to do it.”

    In June, Shell took note of a mining company called Mountain Energy. What caught her eye, she says, were postings announcing that the stock, then trading for pennies, would soon hit $5. Shell started digging, and here is what she says she found out: An “informant” told her that Mountain Energy’s management team had once been charged with fraud. She also heard that the firm’s main asset–a tract of land Mountain Energy claimed was worth $200 million–was worth little more than $100,000.

    Between June and August, Shell posted her findings on Silicon Investor, warning investors to stay away. During that time the stock, which had earlier climbed 200%, fell from $1.70 to 22 cents. That’s when trouble began. Investors who had already bought Mountain Energy stock were furious. “These Bulletin Board Stock Guardian Angels…why don’t they want us honest investors to make money?” complained one. Finally, in late July the SEC halted trading in the stock. So far it hasn’t taken any further action, but it still has its eye on the company. Meanwhile, the company’s management has resigned and dismissed all its employees. “A lot of people were really hard on her; they didn’t believe her, but she was right all along,” says Bill Liang, a medical researcher at Harvard who invested $3,000 in Mountain Energy. “We should have listened.”

    What’s Mountain Energy’s side of the story? FORTUNE tried calling company headquarters. The phone was disconnected.

    Shell has been accused of being an underhanded broker, a short-seller…and a whole lot worse. (“Well, Miss Janice, protector of the small investor,” reads one typically creepy Silicon Investor posting, “you must be very tired of being the north end of a south bound donkey, a.k.a. horse’s a**.”) She’s even received death threats. But Shell isn’t fazed–she’s far too busy defending her fellow investors, whether they like it or not. “There are a bunch of psychos out there–I’m not exaggerating–each one weirder than the next,” she warns.

    How easy is it to con online investors? Shell wanted to find out. Last April Fools’ Day, she and seven other cybervigilantes set up a phony IPO for a firm that promised it could cure the year 2000 problem. They named the firm FBN (for Fly By Night) Associates, established a Website for it, and started a forum on Silicon Investor where they announced FBN’s public offering. The site was a doozy: It included information about FBN’s hot product, seductively named NeuralNet2000; a section on careers at FBN; and a slew of glowing press releases with headlines like “FBN Cures Y2K Bug.” They even created a very legitimate-looking issue of FORTUNE with a cover story about FBN. There was one small giveaway: a press release that noted, “FBN to receive papal blessing.” But even that did nothing to slow people’s interest in FBN’s IPO: Shell was inundated with E-mails requesting the prospectus and other information about the company. “Now that I know how people do these things, I’m thinking maybe I should do it myself,” says Shell with a laugh. “I could make a lot of money.”


    Has Janice turned evil since 1998 as Supatcha claims? Maybe, but more than likely Supatcha’s grasping at straws. Here’s a screenshot of their “hijacked” home page for posterity:

    And now the chart:

    The halt was only put on through December 31, 2010, so it will be interesting to see what happens on Monday, January 3, 2011. [Zurbo]

    Silver Predator (CNSX: SPD)
    Golden Predator (TSX: GPD)
    Silver Predator Signs Definitive Agreements – December 13, 2010

    An excellent deal for Golden Predator, a company recently profiled in our Royalty Company report. Silver Predator will issue its sister company a minimum of 15 million shares to exercise the property options associated with transaction, which are currently valued at about $18 million. [Zurbo]

    Molybdenum Market
    Molybdenum Expected to Hover around Lower End of $11-$14/lb Range in 2011 – December 15, 2010

    From the article:

    Mr Pablo Bascur MD of Chile based consulting firm MolyExp told BNamericas that “Current excesses in inventories, mostly in China and controlled by Asian companies, are not expected to be depleted in the near future, even if some stockholders cash in to pursue other investments.”

    According to Mr Bascur’s estimates, added to excess production of 53 million pounds from 2009, the molybdenum market will see a surplus of 100 million pounds in 2011. Molybdenum prices could only go higher than USD 14 per pound in 2011 if western economies show a much stronger pace of recovery, but peaks will not last more than a few weeks.

    With global consumption of under 500 million pounds, a 100 million pound surplus is huge. If Mr Pablo Bascur proves to be a trustworthy source of information then this certainly isn’t the best of news for the mega-moly projects looking for project funding. Fotunately for Moly Mines (ASX/TSX: MOL) and General Moly (AMEX/TSX: GMO) they’ve already secured theirs, but if these and projects come online then this will only further exasperate the supply/demand imbalance and put further downward pressure on prices. Be careful out there. [Zurbo]

    New Gold (AMEX/TSX: NGD)
    New Gold Announces Closing of $150 Million Undrawn Revolving Credit Facility
    – December 15, 2010

    On the prowl with nearly $600 million in readily available cash and credit. Time to start speculating on likely targets. [Zurbo]

    United Mines, Inc. (OTCBB: UNMN)
    United Mines, Inc. Signs Letter of Intent with a Major Chinese Investment Group
    – December 16, 2010

    When a CEO ends a press release paraphrasing Lao-Tzu, your eyebrows should be raised:

    Mr. Martin added his variation of Chinese philosopher Lao-Tzu, “A journey of 10,000 miles starts with the first step.” That first step has now taken place.

    Buyer beware. Need we say more? [Zurbo]

    Benton Resources (TSX-V: BTC; Pink Sheets: BNRJF)
    Benton Sells Bermuda Property to Stillwater Mining for $14 Million
    – December 16, 2010

    With this latest transaction we welcome our newest “Cash King”. Benton Resources is now trading slightly below the combined value of its cash and investments. [Zurbo]

    Starcore International Mines (TSX: SAM; Pink Sheets: SHVLF)
    Starcore Reports First Quarter of 2011
    – December 16, 2010

    The weight of Starcore’s poorly timed and ill conceived hedge at $731/oz is proving unbearable, with the company unable to post a profit even at record gold prices. The following chart says it all:

    Now things are so bad that the company’s outstanding hedge liability is 2x greater than the market cap of the company. Wake us up in 2013 when Starcore is scheduled to pay off the last of its hedges, and then maybe this will be something of interest. Until then, and without any major developments, it is hard to imagine getting too excited about this one. [Zurbo]

    Disclaimer:  We may 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.

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