February 16, 2010.
Lately I've been writing up stocks I've followed for years but haven't yet mentioned: This week I'm looking at Pediment Gold Corp., trading as PEZ on Canada's TSX exchange.
I generally follow mining start-ups for a number of years before taking them seriously. Call me a gruff old traditionalist, but I like the idea of exploration and development, as opposed to just plain spinning off properties. I have nothing against explorers who prefer to leave the actual mining to others, but I like to see a company endure a few ups and downs - and put some real money into the ground - before parking my hard-earned shekels with them.
Pediment was brought to my attention in early 2005 by a colleague of mine, and while I liked their property (now properties) in northern Mexico, chiefly San Antonio in the lower Baja, I really didn't know if they were prepared to ride this market all the way. But apparently they are. Pediment now has an aggregate NI 43-101 compliant gold resource of some 1.54 million ounces at San Antonio, and it ain't over yet. The company has a near-term plan to drill another 11,000 meters within the project area, their third major drilling offensive to date, including an intermediate area where the two known mineralized zones, Las Colinas and Los Planes, are predicted to intersect.
I'm more than just a teeny bit curious to see how that turns out. Los Planes and Las Colinas are broadly associated with a 20 kilometer long shear zone which also hosts Vista Gold's 5.5 million tonne (grade +1 g/tn) deposit to the south, and is structurally similar to the 5 million ounce Herradura deposit in Northern Mexico. At the very least I think we can count on a significant upgrade of the measured and indicated resources at San Antonio, given that the drilling plan includes testing the various extensions of the Colinas mineralized trend, and the parallel zones to the east. Moreover, there is some evidence that the neighbouring Los Planes trend may continue to the south.
Pediment also plans to drill an untested gold-silver district within the so-called El Triunfo trend which converges toward San Antonio, near the company's existing gold resources. Triunfo was held by the Mexican government as a National Mineral Reserve for over 30 years, and acquired by sealed bid in 2008, so drilling that one is a bit like unwrapping a late Christmas gift. Exciting!
The missing pieceI suppose is cash flow. I've known companies in this market to forgo the cost and delays of complying with the National Instrument policy altogether and simply begin mining their discoveries, which makes sense with gold prices at historic highs. Pediment's activities so far have been by the book. But I'm also a teensy bit curious (again!) to see what the company does with the La Colorada past producing heap leach mine over at Hermosillo, in Sonora, where they've mapped over 600,000 ounces. I attended the opening of that project with the previous owners in 1994 and came away with the thought that it had been rushed. So now I'm wondering what its true potential will turn out to be 15 years later.
As an aside, I really like northern Mexico for gold. I don't think even a fraction of what lies below the ground has been mined or discovered there. The potential is endless and the impediments are few.
I also caution gold investors to be patient in this market. Some of my subscribers have expressed frustration with the fact that the share prices of juniors with good projects have not kept up with the value of their assets. I think it's true that the major producers have been generously rewarded by investors while the explorers have not. However, I'm certain that our day will come. The general rule of investing is this: The longer you wait, the great the returns. It's something to ponder.
Pediment has $13 million in the till, with approx 47 million shares issued, and trades relatively close to its 52-wk hi of $1.98 per share, so I'd say this one is ready to go.
Be careful out there.
Disclosure: no position