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jock
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doctorate in communications; international business development for Sprint, DHL, SBC now ATT in the eighties; founded two successful int'l telecoms startups in the nineties; student of gold juniors throughout the "naughties"
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  • Paramount Gold - up 15% on news

    Thursday morning, PZG announced discovery on its 466,000 acre San Miguel property in Chihuahua's Palmarejo District of an extension of the vein which motivated Coeur D'Alene's $1.1B purchase, and gave the district its name. Now, CDE, GG and several other producers have operating mines there. PZG had established 3M AU-equivalent ounce inferred resource, and plans to issue a new 43-101 in early 2011.

    Recently, PZG acquired Nevada's "Sleeper Mine" which produced 1.7M oz.of gold from 1986 to 1996 when gold was under $500/oz. Many resources not economic then should prove so today. The company is studying above-ground heaps and tailings comprising 714K oz. inferred. Their current $3M drill program also aims to enlarge underground resources now at 750K oz. indicated and 390K oz inferred, as well as to probe several additional new targets on the 30 sq. mi. property.

    PZG's largest shareholder is Albert Friedberg, a major backer of Seabridge Gold, which over 10 years was the biggest gainer in Morningstar's database of US listed gold stocks. With favorable experience in one company which made its way by proving up ever more ounces, Friedberg will likely be a "strong hand" as Paramount moves ahead. Like Seabridge, PZG has the advantage of trading much higher volume on AMEX than in Toronto. (Toronto offers 10 times as many listed gold stocks to a population about 1/10 of the US').

    PZG shares are up 50% since August 31 -- more than much-followed Fronteer Gold. Yet, looking back 18 months PZG has been confined to a trading range between 1.15 and 1.95. Today, PZG has broken out of this trading range, and now bears watching. With momentum, PZG could do some serious "catching up" vis-a-vis other juniors which have been on fire for much longer.

    At this point in the rally, there just aren't many juniors still within a technical buying range. Ultimately, of course, PZG's fortunes will depend upon sustained progress in proving up resources and economical reserves on their two major properties in 2 mining-friendly jurisdictions.

    Disclosure: small position, no financial relationship; PZG did pay (modest) travel costs to visit Sleeper last summer.

    Dec 10 10:30 AM | Link | Comment!
  • Anfield Nickel - a disciplined "project development" junior - in context
     Anfield Nickel – meeting with a highly disciplined “junior”
    Submitted by jock (620 comments) on Fri, 11/05/2010 - 11:44 #73590 
     
    David Strang talks less like the Chairman of a typical geo-driven exploration “junior” than like a developer or deal-maker, who happens to work in mining exploration.  He only looks to acquire properties where past exploration allows for clear quantitative definition and evaluation of risk and reward.
     
    Strang and his colleague Ross Beaty created Anfield Nickel to acquire a major Guatemalan deposit from BHP, on which BHP had already spent $40M and drilled 1850 holes. In the process of exiting most of its nickel properties, BHP sold “Mayaniquel” to Anfield for  $2.5M plus a 1.5% NSR in May, 2009. Already, Anfield (ANF.V) has a market cap of $160M.
     
    Strang emphasizes not only the due diligence undertaken to ensure the entry price was a bargain, but also assessment of  the drilling and study costs of expanding the resource and taking it through feasibility. He aims to initiate the sales process in April, ’11 and to finish by end 2011. Anfield is a polar opposite to the geo-driven, front-end, blue-sky explorers .
     
    He maintains that the “sweet spot” for juniors  is a sale somewhere between $300M and $600M.  ($1B deals are just too infrequent to serve as a benchmark or even a realistic target). To qualify, a project must offer return of 5 to 10 times capital invested. This, in simple terms, is their risk/reward  calculation. Anfield stock could be a 3X from here.
     
    Strang was the first employee of Lumina Copper, which has so far spun out 4 companies, all of which were sold, one (Northern Peru Copper ) to the Chinese. His presentation states that Lumina spent $16M on acquisitions, and returned $1B to shareholders. Quite a track record!  
     
    So, why switch to nickel? – it’s needed for most types of stainless steel. 20% of nickel production is used in construction, 28% in petro-chemicals. and 35% in flatware/household appliances. etc.  China – while orchestrating the largest urbanization in human history – produces only a fraction of its growing nickel requirements. Regarding China, Strang had a dramatic perspective: it’s a command economy.  This allows the gov’t to “force-feed” urbanization, and to orchestrate the meeting of its requirements. For example, the gov’t offers negative-interest LIBOR loans to Chinese companies which can conclude deals for majority control of foreign resource companies.
     
    He really made me think: the normal rules of economics don’t apply. You don’t believe China’s statistics? They don’t matter! New luxury housing units in coastal cities may sit vacant for a few years? It doesn’t matter. Bad loans increase in Chinese banks? It doesn’t matter. US, Europe and Japan “double dip”? It doesn’t matter. They’ll sell to Brazil, Russia, India, etc.
     
    As long as low-cost Chinese exports generate massive foreign exchange, China’s gov’t can force-feed urbanization. In fact they MUST do so. China doesn’t have enough arable land to pursue a rural development strategy. (FT recently cited an estimate of total Chinese foreign reserves within a few years at US$5 to 6 TRILLION.)  Maybe it’s time for a basic re-think of how China’s role in the world economy is evolving,  and how the world will respond!
     
    China is not the only potential market. After conducting the largest stock offering in world history ($70B) Petrobras of Brazil – the world’s 2nd most valuable oil company by market cap -- is poised to invest $250B in developing the pre-salt and other offshore oil deposits. Recall that 28% of nickel production goes to the petro-chemical industry. Strang also pointed out that Russia has been doing massive infrastructure spending.
     
    Per Strang, large, viable new nickel deposits are scarce, and existing production is highly concentrated,  with producers experiencing higher  production costs. Norilsk Nickel produces 25% of global production from one increasingly high-cost mine. Sudbury, Ontario and Voise’s Bay, Newfoundland are other major sources. A bit of googling confirms that several major new “laterite ore” projects have experienced massive cost overruns. Anfield is only interested in “saprolite ore” which Strang maintains has proven much more economical to produce – (per wikipedia found below limonite laterites).
     
    So, what could go wrong? Strang and his colleagues have a stellar track record at turning a bargain acquisition into a proven deposit of great interest to producers. While this seems their first nickel project, I expect they are to be trusted in matters metallurgical.  
     
    If Strang is right about China, its urbanization is highly unlikely to be delayed or derailed by conventional economic concerns. Local political/regulatory issues also would not seem overly problematic. Pro-US Guatemala (where the Pentagon trains the local army) is not to be confused with Mexico. The three Guatemalan drug families which handle transit through Guatemala are said (unlike Mexico) to have arrived at a stable accommodation. Their leaders are said even to appear together in the same church for Mass. All in all, Anfield would seem,  based on this meeting, to be a tightly-controlled, low-risk venture.
     
    I asked Strang what he thought of the much-praised “prospect generator “ or “royalty generator” models. He felt they risked too much, and gave away way too much. Not surprising, I thought, coming from a man with Beaty’s access to capital and his own project development and deal-making skills and experience.
     
    By contrast, one-man prospect-generator Shawn Ryan – without capital or specialized expertise -- ignited what I call the “Yukon2 gold rush” through a decade of practicing and systematizing soil sampling in a non-glaciated geology where trace elements in soil reliably tell what’s beneath.  Also by contrast, Nevada Exploration’s Wade Hodges pioneered groundwater analysis to indentify prospects and to target drilling in the largely unexplored half of Nevada – its gravel-covered valleys and basins.
     
    My conclusion is that “juniors” are a many-splendored thing. A portfolio of them should diversify risk by including a range: from tightly-controlled, well-financed project development juniors like Anfield, to early-stage, boot-strapped prospect and royalty generators with a “better mousetrap” for their particular geology, and which aim to option out multiple properties even before any (costly) drilling.

    Disclosure: no position


    Disclosure: no position
    Nov 06 11:35 AM | Link | Comment!
  • Platinum Group Metals (PLG on AMEX; PTM on TSX) - an update
     In the year since I had last met PLG, the price of platinum has doubled. As a result, senior platinum producers are swinging from loss to profit. In the interim, PLG has updated the feasibility study on its 8M oz. flagship deposit, and is very near securing title transfers which position the company for sale, joint venture, or capital-raising for production.

    Per PLG's Kris Begic, his is one of only two remaining independent platinum juniors with large-scale, near-surface deposits in the compact Western Bushveld region of S. Africa -- home to 70% of the world's platinum. The 4 Bushveld senior platinum producers work aging, deep and therefore high-cost reserves. An acquiring senior could process PLG's ore in their existing facilities, thus increasing their profitability. (Begic pegs the global platinum market at 6M oz., meaning that PLG's deposit equates to roughly one year of global production.)

    Since last year, PLG has secured exploration deals with a Japanese company, and held discussions with other Asian interests. Thus, PLG has developed sale, JV, and hedging options beyond the 4 producers established in the Bushveld. Among possible outcomes is a sale of the flagship deposit, while taking back a net smelter royalty, and retaining the exploration properties.

    This could position PLG to become the first platinum royalty company. Given platinum by-product in Ontario and Russia (as well as Magma Metals' recent Ontario discovery) the time may be right for a platinum royalty play.

    Another consideration is PLG's status as the only pure-play platinum company listed in the US and thus easily accessible to US retail investors (avg AMEX volume 400K shares). Also, power problems could well return to S. Africa, once again causing platinum prices to spike.

    For all these reasons, I believe the company now bears very close watching.

    FD: I have a "chihuahua" position
    DYODD



    Disclosure: I hold a small position
    Mar 01 3:29 PM | Link | Comment!
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