Experts & CEOs Transcribed

PDAC President Jon Baird on Resource Intelligence TV

President Jon Baird Discusses PDAC2010, Mining Industry

The Prospectors and Developers Association of Canada (PDAC) is more than the world’s most attended mining convention. The PDAC represents the interests of the Canadian mineral exploration and development industry as a whole. The association was established in 1932 in response to a proposed government regulation that threatened the livelihood of Ontario prospectors. Today, 77 years after its founding, the association is a national organization with 6,000 individual members and 950 corporate members. President of the PDAC Jon Baird, joined us in our Vancouver studio.

Resource Intelligence: Jon, why was the PDAC formed?

Jon Baird: The PDAC was formed back in 1937 by a group of prospectors who had some issues in common. In fact, it’s not unlike the issue with the qualified persons that we’ve tackled in Canada in the last few years because the government of Ontario wanted the prospectors to have to use engineers to speak for them and the prospectors felt that wasn’t necessary, so they started to defend their interests and it all started from there.

RI: Is your membership exclusively Canadian?

JB: No. Our membership is really global. They may be Canadians who live and work in Canada, Canadians who work outside of Canada, or foreigners who simply want to benefit from the convention that we run and all of the various activities that the PDAC undertakes. There are 10,000 Canadian exploration and mining projects in the world; only half of those are located in Canada. So Canadians are all over the world prospecting, exploring and involved in other mining activities. Most people from abroad know that Canadians are leaders in mining activity, so they want to be part of the PDAC as members and come to our convention as well.

RI: As a non-profit organization, what are the goals and the vision of the PDAC?

JB: The goal of the PDAC is to promote the exploration and development industry, both in Canada and around the world. We serve our members as any good association does, wherever they are. So while it has an important mandate within Canada, it also has an international aspect to it as well.

RI: There are many problems facing the resource industry. One of them is the public perception. Could you talk briefly on that subject?

JB: It’s a shame that the public doesn’t understand as much about this wonderful industry as it should. On the other hand, those of us in the industry sometimes think that the public likes us less than they actually do. A few months ago the PDAC commissioned a professionally carried out survey on this subjet. 2,500 Canadians were asked their opinions about the industry. Ninety-six percent said that the industry was either important or very important to the Canadian economy. On that basis, while they don’t understand a lot of the details of the industry, Canadians do understand the importance of the industry economically.

RI: What percentage of Canadian GDP does the mining industry represent?

JB: The whole mining industry is rated at about 4.5% of GDP. Within that there are some of the best jobs in terms of wages, benefits and security. The 4.5% doesn’t capture everything: About 60% of railway revenue comes from the mining industry and a huge percentage of our port revenues come from mining. Also, what is not captured in the supply side of the mining industry is that all of the companies that provide services and equipment and so on, to the mining industry. There are a huge variety of services and products used by the mining industry, going all the way from exploration right through to production and then reclamation of the mines. The economic impact of the mining industry in Canada is far greater than what the statistics show.

RI: To lead this organization, you need staff and people. Approximately how many volunteers and staff does the PDAC count on?

JB: There is a board with 48 members from all over Canada. Some of them are lawyers and some of them are tax experts as well as geologists. And I happen to be the current chief. The position of President of the PDAC has a two year term.

Then we also have a permanent staff that runs the convention. There are about 20 people who work for the PDAC full-time. Around half of those work on the convention full-time, year round. We also have a subsidiary called Mining Matters that teaches students in school about the mining industry and encourages them to seek a career in this industry. There are senior program managers that handle environmental issues, aboriginal issues and land access issues, all of these things we have been talking about. So the PDAC works year round for its members in advocating the industry to government. The PDAC is more than just a convention. The convention is a big part of it and is our most important source of revenue. Members pay dues as well and so in addition to the full-time staff, we often hire consultants and specialists in legislation or tax matters to beef up our ability to advocate.

RI: By comparison to the US congress, we are not talking about that type of a lobbying budget?

JB: It is important, I think, that the industry have proper spokespeople to approach senior politicians, ministers and senior bureaucrats to tell them about the industry because most politicians really know very little about the industry. We have to have a means of informing them and to some degree persuading them of what is required to keep this industry competitive in a world that is changing us all the time.

RI: Indeed, the industry is changing rapidly as we run out of resources and countries seek to find and hold those precious resources.

JB: The term “run out” I don’t quite agree with. I think that there is huge potential in the crust of the earth that is becoming more and more difficult and more expensive to find, because the outcropping rocks of the world have been pretty well looked at by now. For example, just 10% of Canada is rock outcrop—the rest is covered. So we need geophysical methods and geological thinking which will allow us to find resources deeper. Whether we’re running out of resources is a question of some debate. I think it’s there to be found.

RI: It’s there, it just may be more expensive.

JB: The prices of commodities will go up and that will fuel the exploration industry to go out and spend all this extra money to find what still remains.

Catherine Virga on Resource Intelligence TV

Molybdenum Expert Catherine Virga Sees Strength in Supply, Demand Fundamentals

Commodities market research, consulting, asset management, and investment banking are all in high demand. And what all these have in common is that to be successful in each requires a person with a specific skillset. To consult some of the wealthiest people and institutions in the world on commodities and investing requires a profound understanding of economics, politics, world issues and perhaps most importantly, people. Our next guest is an expert in each of these arenas. Catherine Virga is a senior analyst at CPM Group and is involved in client consulting services for major mining companies, a full range of institutional investors, and commodities consuming companies. Read more

Jeffrey Christian on Resource Intelligence TV

Founder of CPM Group sees Strong Precious Metals Prices Beyond 2010

In 2006, Barron’s magazine reviewed Jeffrey Christian’s best selling book Commodities Rising with the quote, “One of the brightest and independent-minded analysts.” Jeffrey founded and is the Managing Director of the CPM Group, which publishes advisories, annuals on gold, silver and precious metals, and which resourceINTELLIGENCE recommends to any serious investor. Jeffrey and the CPM Group are are also advisors to numerous central banks and the metals industry. Read more

Analyst Ray Goldie Makes the Case for Uranium and Resources

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Salman Partners Analyst Puzzled by Decoupling of Copper Prices and Inventories

Our next guest wrote the definitive account of the birth of the Voisey’s Bay mine. A best seller called Inco Comes to Labrador. He was also a part of the team of prospectors that spearheaded exploration for copper and nickel in Labrador in the 1970s. Today, Ray Goldie is a senior analyst and Vice President with Salman Partners and regularly speaks to the investors and the media on subjects ranging from uranium investing to the Goldie Principle.

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Terry Salman of Salman Partners on Resource Intelligence TV

Founder of Salman Partners Sees Positive Outlook for Commodities

Few people know what it takes to run a successful multi-billion dollar investment company. Salman Partners’ founder Terry Salman makes the job seem easy. The mild-mannered Chairman, President and CEO last year steered his company to $7.7 billion in fund-raising activity, mostly for resource explorers and miners. Read more

American Manganese on Resource Intelligence TV

American Manganese Developing a Strategic Product for U.S. Steel Mills

With its recent name change from Roche Deboule Minerals, American Manganese Inc. now clearly states the business in which it expects to truly make its name. Manganese is another one of those metals that most people may have heard about but probably couldn’t distinguish from magnesium, much less care about what it’s used for. Without manganese, however, not much could be built or made in the modern world, and that’s the opportunity which makes American Manganese (AMY) such an interesting investment story. Read more

Rare Earth Interview with Analyst John Kaiser

Episode 4, Part 1
By Doug Hadfield, resourceINTELLIGENCE TV

Of the many aspects of a rare earth deposit vital to its success, John Kaiser of Kaiser Bottom Fish Online argues that there are three deal breakers. These three things, when assessing the quality of potential resource investments in the smoking hot rare earth sector, should be meticulously scrutinized. In the order that John told them to me on our latest episode of resourceINTELLIGENCE TV, these essential attributes are rock value, tonnage footprint and distribution of metals.

John is known as a mining maven with 25 years experience in the resource investment sector. His investments calls have over the years netted him a broad following of investors. As a result, John speaks regularly on the conference circuit, from San Fransisco to Zurich. Between now and next September, John is scheduled to speak at more than 25 conferences.

Part 1:

Part 2:

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Quest Uranium’s Strange Lake “B” Zone Potentially 4x Larger than “A” Zone

Interview and feature article: Peter Cashin and Quest Uranium
By Doug Hadfield, resourceINTELLIGENCE TV

Of the many aspects of a rare earth deposit vital to its success, John Kaiser of Kaiser Bottom Fish Online argues that there are three deal breakers. These three things, when assessing the quality of potential resource investments in the smoking hot rare earth sector, should be meticulously scrutinized. In the order that John told them to me on our latest episode of resourceINTELLIGENCE TV, these essential attributes are rock value, tonnage footprint and distribution of metals.

Click the play button to watch the Resource Intelligence TV interview with Peter Cashin. Read more

GWG Executive Chairman Billingsley discusses Mine-to-Market Strategy on RITV

Interview and feature article on Great Western Minerals and Executive Chairman Gary Billingsley
By Doug Hadfield, resourceINTELLIGENCE TV

In the realm of rare earth elements (REEs), the way the market has gone in the last year there are a couple must-have attributes in choosing a prospective investment. There is a danger with these stocks that they could be overbought in an environment where investors are suddenly trampling over one another to hold shares in the next big thing.

Click to play the RITV interview with GWG Executive Chairman Gary Billingsley Read more

Eureka Resources has “found it”

By Zig Lambo, resourceINTELLIGENCE TV Contributing Editor

“Eureka” is a famous word related to gold and gold mining. It’s the exclamation, in Greek, attributed to Archimedes, who is said to have cried out “Eureka! Eureka!” (I’ve found it! I’ve found it!), when he suddenly discovered a method for measuring the volume of an irregular solid thereby making it possible to determine the purity of a gold object. This was all prompted by his attempt to determine the actual gold content in King Hiero’s crown. In more recent times the term has been adopted by gold miners as a favorite name for locations related to the discovery and mining of the yellow metal.

So it’s quite appropriate that a company with nearly 614,000 measured and indicated ounces of gold and over 1,225,000 inferred ounces of gold in the ground be called Eureka Resources Inc. Our shareKNOW Global Resource Reference analysis shows that Eureka’s 100% interest in the Frasergold property carries a gold value in the ground (before mining costs) of some $2 billion at the current gold price of $1,140. In our view that means that Eureka definitely deserves a closer look by investors interested in a situation with significant appreciation potential, which is greatly undervalued at current price levels.

Continued below the Chart.

We spoke with Jack O’Neill, chairman and president of Eureka Resources Inc. several days ago to get his current thoughts on what the future holds for his favorite resource investment. By way of background, Mr. John J. O’Neill has been involved with the company since he founded it. He tells us that he did so because his experiences with investing in other people’s resource stock deals hadn’t been as successful as the other businesses he had started and operated on his own. So he decided that he could do a better job with a company where he could call the shots.

Over the years Mr. O’Neill had launched a number of other ventures including a boat-chartering firm, several real estate development projects, a logging venture, a signage company and a number of catering companies including O’Neill Railway Catering Ltd. and especially, National Caterers Ltd. The latter, provided a key building block to put him into position to invest in his first love, hotels, harkening back to the time in his early career when he was the general manager of the landmark Prince Edward Hotel in Brandon, Manitoba. The company that he then founded, called Coast Hotels, became Canada’s fastest-growing hotel chain in the 1980s and is now noteworthy part of B.C. business history. Mr. O’Neill sold National Caterers in the mid-1990s and has since directed much of his attention Eureka.

The Frasergold Property

The 2,866-hectare Frasergold property is situated in the historic and mineral-rich Cariboo Mining Division of British Columbia, about 100 kilometres east of Williams Lake, and is easily accessible by gravel road. The area has been a centre of concerted gold exploration and production since the great Cariboo Gold Rush of 1858-’65. Between three and four million ounces of gold have been recovered by placer miners working the fast-flowing streams and rivers of east-central British Columbia. The basis of the Frasergold property goes back to the late 1970s, when a BC prospector named Clifford E. Gunn panned some gold in Frasergold Creek in the heart of the old Gold Rush territory. Convinced that he had found something significant, he decided to stake the original claims in the area, to cover the panned gold anomaly in Frasergold Creek.

Jack O’Neill learned of what Gunn had discovered and decided that, with further exploration, this had the potential for becoming a significant gold producing property and decided to have Eureka acquire it. That was 1982, and since then, under Eureka Resources’ stewardship, Frasergold has been the site of about $8 million worth of exploratory work, including major programs carried out by ASARCO and AMOCO. The exploration has revealed mineralization that extends along a strike length of approximately 10 kilometres.

In November 2006, Eureka entered into an arms-length option agreement with Hawthorne Gold Corp. of Vancouver to explore and develop the Frasergold property under a joint venture arrangement. Hawthorne can earn a 51% interest in the property by spending $3.5 million on exploration, making payments totaling $175,000 to Eureka, and completing a feasibility study on or before April 30, 2010. Hawthorne can earn an additional 9 percent interest in the property by arranging production financing on completion of a feasibility study.

In September 2007, Hawthorne commenced a 5,000-metre drill program, as part of a 30,000-meter diamond drill commitment. Hawthorne’s 2007-’08 exploration and development program also included surface trenching, underground channel and bulk sample, and property-wide aerial surveys, including photogrammetry and geophysics (magnetic, EM and radiometric) as well as initiating a baseline environmental study. Total drilling on the property now exceeds 50,000 metres, including work from 2007/2008 as well as that done in the 1980s and 1990s.

As a result of this work, an independent mineral resource estimate on the property was completed in October 2009 which was published in a National Instrument (“NI”) 43-101 Technical Report and Mineral Resource Estimate released on November 17, 2009. The resource estimate has been made on only about 1.5 km (15%) of a mineralized system which has been traced for 10 kilometres. It shows 614,000 measured and indicated ounces of gold, plus 1,225,000 inferred ounces of gold, at a 0.30 g/t Au cutoff. There appears to be good reason to believe that the rest of the mineralized system should continue to carry similar values, but that remains to be determined through further exploration and development work leading to feasibility studies.

Our Value Analysis

Eureka is a relatively uncomplicated stock to analyze using the GRR calculators at http://shareknow.net/companies/1390, since we really only need to include the Frasergold property in our calculations. As noted above, it’s important to remember that only about 15% of the mineralized system has been tested and included in the Mineral Resource Estimate we are using as the basis of our calculations. If it ultimately turns out that the resource potential is six or seven times as great as the current numbers, that would make a huge difference in the project valuation numbers. Also, we will not attribute any value to the Company’s Lottie Lake property at this time since it is still in very early stages of evaluation.

So, first we come up with a gross value of metals in the ground for Eureka’s 100% interest. At the current gold price of $1,140, this is $2 billion. To be conservative, we’ll only include 50% of the inferred tonnage of 75,310,000 tonnes in our valuation. That brings Eureka’s interest value in the ground down to $1.3 billion.

Please bear in mind that what we are doing here is our own analysis using the basic information provided in the latest NI 43-101 report. Any assumptions we make and the results we obtain from using them in our GRR calculators, are our own, and are not provided or endorsed by Eureka’s management or its consultants. We are simply attempting to evaluate the relative value of this stock compared to other similar resource stocks, which GRR users can analyze on their own.

We don’t yet know what sort of percentage recovery of the gold in the ground would be achieved in an actual mining operation, but at this point, based upon our experience, 85% would seem reasonable. So that reduces the value to about $1.1 billion.

Since this project has not yet come to a point where any prefeasibility estimates have been developed by professional mining consultants, we will have to make some assumptions on our own. These will be in a reasonable range for the size of deposit and the type of operation which are looking at here.

Using our own estimated capital cost of $50 million to install an open pit heap leaching operation (probably the only type which could make economic sense here), and operating costs of $8.00 per tonne over the project life, (which may or may not be in the ballpark when an actual operation begins here), we arrive at an undiscounted value for Eureka’s 100% interest at just under $200 million. With about 15.42 million shares outstanding, this produces a value of US$14.11 per share (C$14.96). Compared to the current price of $0.15, it certainly appears that Eureka has some excellent upside appreciation potential from current levels.

With a market cap of less than C$2.5 million, a relatively thin float and rising gold prices, Eureka could prove to be a real “sleeper” for investors seeking an undervalued gold play with much more potential mineralization to develop and prove up on its existing holdings.

Disclosure: No positions

Episode 3, Part 2, BMO Commodities Analyst Bart Melek

With the global economy slowly finding its footing again and gold bugs profiting nevertheless from ongoing uncertainty in the markets, we sought carefully for just the right analyst for our latest segment of resourceINTELLIGENCE TV, Interview with an Expert.

Gold is the opium of many investors now. While we’re not among those who envision a likely scenario where gold trades at $5,000 per ounce and the sky is falling, we do see upside for gold. However, we felt the horse had been flogged enough; the better question was to inquire about the performance of another yellow metal, the one with a PhD in economics, which is really what all the fuss has been about anyways.

So this week we spoke with BMO Capital Markets Global Strategist Bart Melek to find out where Dr. Copper is at, and to guide commodities and equities investors in the best direction possible today.  Melek told us that copper remains BMO Research’s preferred commodity today.

Read more

The Secret to Success at SilverCrest Mines: Dedication to Details

By Doug Hadfield, resourceINTELLIGENCE TV

Eric Fier is a compulsive list maker. Each meeting he chairs is carefully orchestrated with an agenda listing who is attending, what will be discussed, when and by whom. Each detail is carefully scrutinized – breaks, meals, introductions and handouts. Even time slots for comments and questions are judiciously peppered throughout. Read more

Adex Mining Inc. is the Indium Major

by Zig Lambo, contributing writer

Despite the current economic downturn, Adex Mining has managed to advance a project that could see tin, zinc and indium products being shipped from its New Brunswick mine site within a few years. On the basis of information provided in its most recent NI 43-101 report (available on Sedar), it appears that Adex presents a truly undervalued investment opportunity. Read more

Palladon Ventures Advances to $744M Net Present Value: PEA

By Doug Hadfield, Managing Editor, resourceINTELLIGENCE TV

I wrote about Palladon Ventures (TSX.V: PLL) a few weeks ago, prior to the release of the company’s Preliminary Economic Assessment. I said that I saw promise in the new management team, headed by a capable and thorough John Cutler as interim President and CEO. The PEA shows a clear way forward for a brownfield expansion company that has managed to pick itself up and dust itself off from an economic aneurysm that nearly stopped the global economy in its tracks.

The upshot of the PEA is that based on numerous variables the company’s Comstock Mountain Lion (CML) iron deposit is a clear winner: The project has a Net Present Value of US$766 million and an IRR of 24%. On one hand that’s very good; on the other it’s just the beginning for Palladon; the existing high-grade 40 million ton deposit represents just a fraction of the total resources that could be at Iron Mountain.

Then there are other factors: The market fundamentals for iron ore has taken a hit since its historic highs of 2008 (compare with the steel index below). Nevertheless, indications suggest that once the recession is behind us, domestic and international demand will pick up from where they left off.

The signals from the steel industry (steel is a combination of iron with a small amount of carbon)  suggest that Chinese growth merely hiccuped during the global recession. As a result, analysts are now lining up to give a thumbs up to steel (and by extension, iron). Macquarie raised its global steel price outlook for 2009 and iron ore contract prices for next year, citing a strong recovery in China and ensuing tightening in global supply of the steelmaking ingredient.

Citigroup research has said these price escalations will provide record profits for mining groups. Brazilian giant Vale is expected to double earnings from iron ore by 2009.

BHP Billiton Ltd. and Rio Tinto Group, the biggest and third-largest mining companies globally, had their profit estimates raised by as much as 40 percent by JPMorgan Chase & Co. because of rising iron ore prices.

In the long-term BMI, which provides intelligence on global markets, has said it expects the steel and iron industries to expand, driven by the increasing demand on steel from growing economies of Asia’s developing countries.

Interestingly, some have noted that Chinese steel prices have fallen 20-25% since an August post-recovery peak, with the suggestion that this could be an early sign of a Chinese slow-down. I can’t think of anything more absurd. China is growing like gangbusters, and that’s not going to stop soon.

Mining Journal recently reported that China – the world’s biggest consumer of iron ore – may buy 20% more than forecast of the material next year because of its CNY 4 trillion stimulus package.

The Australian Bureau of Agricultural and Resource Economics said, “China is expected to continue to underpin demand for iron ore. Globally demand for steel, and therefore steelmaking raw materials is expected to increase in response to an assumed economic recovery beginning in the H2 of 2009.”

Whether you attribute this long-term demand to stimulus packages or the Chinese growth/real estate bubble, most economists believe China’s growth curve has a long way to go before it slows down. Corrections are expected along the way, but a Chinese slow-down is not likely. Heck there are still 100s of millions of countryfolk moving into the cities in a country with little a debt and a huge monetary reserve. This in itself will drive infrastructure projects for the next decade.

Palladon hasn’t yet decided if its market will be US or Asia (or both) although the numbers in the PEA were based on a domestic market. The company’s CEO John Cutler points out that Palladon is still considering its options, but doubts that a run-of-mine (ROM) operation would be economic at recent iron prices.

Now with a new plan in place to build a modern facility to upgrade the ore, Palladon is seeking to answer some key questions: What type of facility to build? What kind of iron product is most profitable, given the type of deposit and ore contained within it?

The company has some options. The simplest and most economical is to mill the ore and upgrade it to a 67% iron concentrate. The end product would be less valuable than a high grade product like Direct-reduced iron (DRI), but would also require lower capital expenditures.

DRI is another option – and the one that SRK explored in the Preliminary Economic Assessment.
DRI is a widely manufactured and traded commodity involving the reduction of iron ore with a reducing agent (coal or natural gas) without the formation of molten metal, hence its name.

Whereas DRI is typically 91% Fe, another option is the Midrex ITmk3® process, which produces a more valuable iron nugget with 98% Fe, and with a fraction of the carbon emissions, according to numerous industry articles. The Midrex ITmk3® process requires a newer, less widely used technology that is expected to see commercial production later in 2009. Palladon will have to continue with metallurgical and other studies to determine which method is best suited to its deposit.

Market studies conducted for Palladon by Hatch Management Consulting indicate that present US domestic mini-mill demand could support the sale of up to 1 mtpa of DRI or nuggets, also known as Alternative Iron Units (AIU). The scrap-short Asian market could also be a good source of demand for AIU.

Within 1,200 miles of Palladon’s project location there are eight end users who purchase roughly 1.1Mst of AIU per year. In North America, there are 29 end users that use over 4.8Mst of AIU per year. Currently, the majority of this AIU requirement is met with either DRI or imported pig iron.

In other words, there appears to be both a domestic market and an international market for the product that Palladon will produce.

The Deposit

The deposit at Comstock Mountain Lion is presently comprised of 40 million tons (mT) of ore grading an average of 45% Fe. Three million tonnes of iron (9 mT ore grading 34% Fe) are sitting on the surface in stockpiles.  Consider that SRK Consulting, an independent consulting firm, in creating its 43-101 compliant Preliminary Economic Assessment for the CML Project used a price of $378/metric tonne. As such, the 9 mT of ore at surface is worth about a billion dollars, less costs, royalties, taxes, etc.

To better understand the value of this deposit, you’ll want to look at the resource calculations and data in the calculator here: http://shareknow.net/companies/1759. The project has a pre-cost value of $5.3 billion (the PEA makes it $5.4 billion). Now take off costs in the Operating Calculator and you’re left with about $2 billion or $14.02 per share. Those are good, solid numbers.

Take away a discount for the entire investment of 8%, as the consultants do in the economic assessment, and it still looks healthy, with a NPV of US$766 million and an IRR of 24%.

Of course there will be some future dilution due to fund raising for capex but $14.02/share is orders of magnitude from the company’s current $0.10/share.

Next Steps

Clearly a processing plant isn’t going to be build here overnight (though there is an existing mine), but with the report from SRK, I think Palladon is armed with the weaponry it needs to make big strides forward. There is some decision-making do be done, and to get there Palladon has to raise $5 million by October 15 to meet its debt obligations with Luxor and to complete a Feasibility Study.

While all this is happening, the company’s share price will fluctuate. But for those investors who see the long term potential in Palladon Ventures, there is clear upside. The stock price hasn’t really budged on any of this news. The company flies under the radar still.

I’m sure some investors who bought into this one last year have grown impatient. They were expecting a current producer out of Palladon. It’s not a current producer, but the team is clearly laying a strong foundation, with 43-101 reports, independent consultants, twinning historic drill holes and proposed drilling. And that’s infinitely better than the shaky legs this project was walking on a year ago.

******

You can contact Palladon Ventures here: 1-801-521-5252 (Salt Lake City)
Tell them you read it at resourceINTELLIGENCE TV.
~ Where Investors Come to Know.

Falling Spending and Debt Focuses Spotlight on Growing Juniors (Part 3)

St. Andrew Goldfields Moves Three (Gold!) Projects to Production

By resourceINTELLIGENCE TV

Gold Junior
St. Andrew Goldfields
TSX: SAS

Next to a lot of good luck, one of the most important managerial attributes required to bring a mine into production is having a plan of action and sticking to it.

I met with the President and CEO of St. Andrew Goldfields Ltd. (TSX: SAS) last week to discuss the merits of that company’s three very near-term projects near Timmins, On. The Toronto-based company will roll out three gold mines within the next year or so.

I called the company because of its technical report on its Hislop Project, located on the Gold Belt. The report proves up 6.6 million tonnes of ore with an insitu value of over $400 million at today’s gold prices. At close to 2 grams per tonne, the company is sitting on 425,000 ounces of gold here, in what will (by the end of the second quarter of 2010) become the company’s second producing gold mine.

All have names that begin with the letter “H”, lest you find this stuff confusing.

It is the Holloway Mine that will bring the company some quick cash and capital to fund ongoing exploration and other near-term costs.

In November 2006, SAS acquired the Holloway and Holt properties from Newmont. At year end 2005 the Holloway mine had produced 0.87 million ounces of gold from 4.8 Mt of ore with a recovered grade of 5.6 g/t Au. At the time, gold was ascending out of its long bearish trend and hiking upward between $400 and $500 per ounce.

With a three-year plus mine life and 142,000 ounces of gold reserves, this is going to be the bread and butter until the larger Holt mine comes on stream near the end of 2010.

And this is what I like about SAS. Rather than having a single near-term project, SAS has three, each with infrastructure, located near one another, each with reasonably high grades and excellent opportunities for growth.

As I mentioned, the company has just released a 43-101 report with an updated resource estimate on Hislop, located on the same gold trend in Timmins, On. as Holloway and Holt. A pre-feasbility study is pending shortly, and SAS hopes to start pre-production development later this year for a start of operations in the first quarter of 2010.

Then, in the third quarter of 2010, SAS plans to bring Holt into production. The Holt project was acquired along with Holloway, with a mill and larger base-reserve remaining. In fact, Holt brings another 486,000 ounces (0.97 million in resources) and five plus years of production to the table. Grades in all categories are greater than 5 g/t Au.

Potential additions to the resources and reserves come in several forms here. The company will explore the area adjacent to existing gold mineralization at both Holt and Holloway. Additional nearby targets, too, will be explored based on “past and recent theories” that predict the controls on the location of gold mineralization.

Exploration around existing mines will be ongoing, and includes areas immediately adjacent to the current ore bodies, or nearby on new developments.

All in then, SAS has close to 4 million ounces in resources with 700,000 ounces of production coming on-stream in the next 12 months or so.

Add to that three other advanced staged projects along the same trend — Clavos, Aquarius and Taylor — and you’ve got quite a to-do list. Already these deposits constitute over 1.5 million ounces of additional gold resources.

So far St. Andrew Goldfields’ team has managed to stick to an aggressive schedule of advancing multiple projects simultaneously in difficult times with no notable hitches. Mr. Perron pointed out to me that St. Andrew Goldfields is on schedule at Holloway, Holt and Hislop.

As of September 8, SAS closed at $0.41 per share.

Read Part 2 of Falling Spending and Debt Focuses Spotlight on Growing Juniors HERE.

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Falling Spending and Debt Focuses Spotlight on Growing Juniors (Part 2)

By Doug Hadfield, Managing Editor resourceINTELLIGENCE TV
Here’s the first in our series of Gold Junior reviews. Each of these has excellent merits for growth, as explained herein. Tune in Monday September 14 for our next mining investment review. Read Part 1 HERE.

Gold Junior:

Andean American Mining
TSX.V: AAG

The last two years have been incredibly difficult for this little company with an enormous potential to make it big. Investors had to sit patiently while Chairman John Huguet struggled through the recession with little funding and a pre-feasibility study that took some months longer than expected on its Invicta project.

Most investors would now say it was well worth the wait.

The company’s two main interests, Invicta and Sinchao, now both have impressive resource estimates, if for entirely different reasons.

Invicta is near-term and small, with great possibilities for expansion. Located in northern Peru, this gold, copper, silver, lead and zinc project now has 7.9 million tonnes in the probable category and another 11.65 million tonnes in the inferred category.

According to the company’s feasibility study completed in June 2009, the total revenue over an initial 5-year mine life is $USD 600 million and net profits are $USD 185.3 million, with a gold price of $900/oz and copper price of $2.00/lb. Now that gold has smashed the $1,000/oz ceiling and copper is headed toward $3/lb… well it’s no wonder that every time I see John Huguet he’s wearing an indefatigable smile (check him out in this interview on resourceINTELLIGENCE TV).

With processing, the company will produce some 500,000 ounces of gold, 3,200,000 ounces of silver, 41,500,000 pounds of copper, 14,300,000 pounds of lead and 5,600,000 pounds of zinc will be recovered.

When in production, a drill programme will be initiated to upgrade the bulk of inferred resources to an indicated category in the Atenea, Pucamina and Dany mineralized structures. It is important to mention that in close proximity of the Atenea System, there are several other mineralized structures that have yet to be tested by drilling. These include Yurac Punta, Azulmina, Zone 8 and Flor de Loto.

Additionally, as Huguet told me last year, “It’s open to depth, and even iif it goes down only 100, 200 or 300 metres, that would mean potentially another 14 to 37 million tonnes.”

According to the data at www.shareknow.net, Andean’s Invicta project all in, with operating and capital costs accounted for , the project is already worth over $1 billion or $12.65 per share. (Using data from the 43-101 compliant feasibility study and recent metals prices. This does not account for any taxes, royalties, debt obligations or depreciation.)

Now, the real meat for this company is its 58%-owned Sinchao project. It’s enormous.

Depending on where you place the cutoff for copper and gold mineralization, this one tallies in at between 237 million (cut off 0.27% Cu, 0.24 g/t Au) and 416 million tonnes. In the former case, resource investors can count on $10 billion worth of metals (in the ground, before any costs). Visit Andean’s profile at shareKNOW.net to evaluate the projects at any metals prices you choose.

Plus, the thing has great big legs. “Sinchao is a remarkably large target,” Huguet told me. “We believe that the 416 million tonne resource that we have put out there is somewhere around 15% of its potential. It’s still early , but all of the geological indications that you can get from geophysical work, from mapping, sampling and outcroppings show that the area we are in can still grow by another 50% or so.”

Huguet once promised investors that, “We have people who are very, very interested in the Sinchao property.”

The immediate interest, however, appears to be with the Invicta project. Last month, the company announced that it had completed a financing agreement for a minimum of US$65 million and up to US$70 million with “a prominent New York-based Investment Bank”. Almost all of the debt financing funds will be used to bring the the wholly-owned Invicta Project into production.

Andean American’s share price has elevated in recent months, though only from a recession low of $0.08 to $0.27. These projects obviously have the potential to earn bids at many multiples of that price.

Next week: Aurizon Mines and St. Andrew Goldfields.

Palladon’s iron gets silver lining with new management team

By Doug Hadfield, Managing Editor, www.resourceintelligence.net

In the resource investment world, there’s a lot to consider before buying. Doug Casey calls it the “8 Ps”: People, Paper, Property, Phinancing, Politics, Promotion & Push, Price

This is a good approach to assessing potential resource investments. Maybe even a great approach. It is limited only in that it’s so broad as to say, “You need to know everything before you can know anything,” which isn’t necessarily a bad thing. After all, if you want to put a lot of money into a long-shot junior resource investment you want to know as much as possible about all aspects of the company.

Only one of the above “P”s is worth all the rest, however, and that is “People”. A solid CEO will hire a smart team. In a junior, the team will consist of a CFO, a COO or someone who knows geology, mining and engineering, a brilliant people person to run corporate development and some directors to steer the company through the phases of mine building. He’ll hire someone to answer phones that will make you feel like you’re calling home for Thanksgiving. Behind every mine is a team of intelligent, dedicated professionals.

At resourceINTELLIGENCE, we have a variation on Casey’s approach that we call the 4 M Theory. It’s  short and straightforward:

Management, Money, Minerals, Mines.

In a sentence, the theory goes like this: Management attracts money; money finds minerals; minerals build mines.

Sure, you can argue that geologists, not money, find minerals. But if I had a dime for every good geologist who couldn’t drill into a handsome outcrop because of lack of funding… you get the point.

We start unabashedly with Management because, regardless of the merits of the project, without the right team in place there’s simply no prospect for mine building. They won’t have the know how. They’ll manage people poorly. They won’t have the chops to raise the bucks. And the bucks they do have will be wasted on IR programs that don’t work.

Back in March of this year, Palladon Ventures (TSXV: PLL) had a project of substantial merit and a poor management team. On paper, the company’s iron ore project in south-western Utah showed great promise. When the company when into production in 2008, it had a market cap of $144 million. Then, with iron prices ratcheted up to cyclical highs, Palladon’s last CEO opted to leverage the company hugely, accumulating $65 million in debt to acquire 100% of its Iron Mountain project.

We all know what came next. With diminishing iron prices the company’s run-of-mine business model suddenly became unattractive. It was too expensive to ship ore to Asia that was as much as 50% waste. Likely unable to make the principal payments on its debt, the company next ran afoul of the exchange and was eventually handed a Cease Trade Order. That CTO continues to this day.

Fortunately for Palladon’s shareholders, two directors stepped up to take over on an interim basis, John Cutler as CEO and director Leonard Sojka. and Jeffrey Clark as CFO. Over the ensuing months the duo cleaned up the books, refiled several quarters, hired SRK consulting to help determine the viability of the project and reassess the business plan.

“The problem was that there was a bad business plan in place,” Cutler told resourceINTELLIGENCE TV. “We confirmed with SRK that the project was good, and now with the new resource estimate and a scoping study 45 days away, we’re even more confident.”

Mr. Cutler, who does not have a mining background, and Jeffery Clark, who now occupies the role of interim CEO, have done surprisingly well in their interim roles. They have met all the exchange’s requirements for resumption of trading on the TSX Venture Exchange, renegotiated a payment extension with their creditors and have completed a 43-101 resource statement on the Comstock/Mountain Lion and stockpiles deposit.

“We’ll have a Preliminary Economic Assessment (Scoping Study) out within 45 days, but we know the indicated mineral resource estimate totals 40.35 million short tons, at a grade of 46.09% iron. We’re also working on the Rex deposit, which neighbors the Comstock/Mountain Lion deposit, where we expect another 136 million tons at about 41.7% iron, based on historic data.”

With its next payment due on October 15 this year, Palladon is hopeful that the BCSC will expedite resumption of trading for the company. Following that the company will have to raise $5 million to satisfy its Extension Agreement with Luxor Capital.

Resource investors should know that this company ceased trading at $0.09 per share. Go to www.shareknow.net to calculate the current insitu (in the ground, with no extraction costs associated) value of the company’s resources.

Disclosure: No positions

Midway Gold Hovers in Spite of Multiple Million Ounce Resources

The last time we wrote about Midway Gold (TSX.V: MDW), in 2007, President Alan Branham told us that the biggest news at Midway was their Spring Valley Project in Nevada, “where we’ve drilled into the neck of an old covered volcano on land just north of the largest silver producer in North America.”

A lot has changed since then, including a joint venture deal with Barrick Gold Exploration on the Spring Valley Project, Nevada, and another with Kinross for that company’s Thunder Mountain Project. The former deal in particular has added significantly to the merit and prospects of Midway, with a 40% stake in the advanced stage project. Gold investors seem to be giving Midway Gold a pass nevertheless.

To put it into perspective, the Barrick deal saw the company pretty much do a triple on the news–from $0.20 to $0.60–but in spite of all the results since then, the company hasn’t yet recovered much of its former glory as a $3 to $4 per share stud.

Branham tells me he too is surprised at the muted reaction from investors. “I certainly expected that the Barrick announcement would have had a more profound effect on our share price, but we announced it in October 2008, when the world was falling apart.”

At the time of our 2007 interview with Branham, the company boasted about 130,000 measured and indicated ounces at Spring Valley. There were another 195,375 ounces inferred for a total of just under 330,000 oz gold.

Nevertheless, the deep and widely disseminated resource had chops, and the company drew Barrick Gold Exploration into the fold by mid-2008. When the company announced the JV, Branham had this to say: “We believe that Barrick has the capability to develop Spring Valley into a producing mine. As evidenced by our recent results from 2008 drilling, the deposit continues to expand. Barrick has been an excellent partner by investing $12.3 million in equity placements in Midway since 2006 and by providing technical advice as we have expanded the discovery. They are currently Midway’s largest shareholder at 10.51 per cent…”

In March of 2009, the company announced new drill results that upped its Spring Valley resources up to a remarkable 1.8 million ounces. Still the market had little to say. “Barrick has done an excellent job so far this year. They’ve spent about $2.5 to $3 million of the required $4 million on the Spring Valley project. They’ve increased to resource to 1.8 million ounces of gold. And they’re now working on improving the resource category by twinning holes, doing column leach tests, gravity tests and so on. We’ve very happy about their progress.”

“Now we’ve added Golden Eagle, too,” says Branham. “At a 0.2 [gram per tonne gold] cut-off, it’s just about two million ounces. And it’s open depth, to the north and possibly to the west.”

Branham says Golden Eagle is a prospective open pit mine, exposed at surface and mineralized to 1,000 feet. “It coalesces into higher grade veins at depth, so there’s more potential there.

Midway acquired 75% of Golden Eagle from Kinross in 2008. Previously Santa Fe Gold had calculated a historic resource for the project of 32,191,280 tons grading 0.069 ounce per ton for 2,221,198 ounces in 1996. The Qualified Person has reviewed and updated the resource with 1.7 million ounces indicated and other 192K ounces inferred:

“The Indicated resource is 31.4 million tons grading 0.055 ounce per ton (opt) gold, containing 1.744 million ounces of gold using a 0.020 opt gold cut-off. There is an additional Inferred resource of 5.1 million tons grading 0.038 opt gold, containing 192,000 ounces of gold…Drill data indicates that there is additional growth potential to the west and north of Golden Eagle and at depth. Our next step will be drilling to test near-surface oxide zones and to test potential expansion to the west.”

Go to www.shareknow.net to calculate per share project and company evaluations at today’s or any other metal price.

White Tiger Mining Resurfaces Near Surface, with a Tighter, Leaner Machine

Like many investors, I like a good initial resource estimate to whet my investing antennae. Even better than a good initial resource estimate is good initial resource estimate from a company with just a handful of shares outstanding. There’s not much I like about a bloated public company, particularly in the early stages of exploration on a project. That shouldn’t surprise anyone: If you’ve got 100,000,000 shares out in the early stages of exploration, what are you going to have ten years later when you’re raising yet another 6 million for a feasibility study? It takes a helluva large resource to add share value to a hulking junior.

Or as Yoda would say, “Difficult it is, in a bloated public company, to create shareholder value.”

White Tiger Mining (WTC:TSX VENTURE) has a leg up on its Norton Lake project with just three million shares out and measured and indicated resources worth over $100 per share (insitu: before costs and at very early stage. Check that calculation at www.shareknow.net/companies/2591).

It’s a fact about smaller, leaner companies that they can take a smaller, leaner resource and go with it.

A comparable neighboring but more bloated competitor to White Tiger Mining is Richview Resources (TSX:RVR). Richview’s past producing Thierry Mine is located within a 1,100 metre long and 1,000 metre deep structure which hosts several sulphide lenses that were 5 to 30 metres thick. At the time of mine closure in 1982, the mine’s previous owner reported an ore reserve of about 7 million tonnes with an average grade of 1.88% Cu and 0.23% Ni. Recently Richview has confirmed a slightly larger resource than that, valued (insitu) at $1,209,284,084 (Copper, nickel, silver, gold, platinum, palladium – you can check out the insitu valuation here.)

Now compare that Richview has proven up $1.2 billion with 134 million shares out, while White Tiger has proven up $334 million with just 2.9 million shares out. (again, both of these are before any costs, years from production and at today’s prices) The difference?

White Tiger has proven $113/share while Richview has proven up about $9 per share. The difference is startling, really. It shows us that prospective mining projects are just like most other things in life: Relative.

Of course there are many factors at play here; and still more factors affecting share price. In this case, Richview has flat lined at $0.02 per share, so there’s not much to say there except that investors have totally lost confidence in this company in its present form.

In 2008, White Tiger consolidated its shares from a previous incarnation (BHR Buffalo Head Resources) on a 4 for 1 basis, effectively tightening up the company’s finances and preparing it for a more promising project… such as its Norton Project.

“This is really tight vehicle now,” Coombs told me in an interview on July 30. “We felt that with the economy the way it was at the time, you had to be able to add significant value to a project. I think most investors would agree that we chose the best way to do that.”

Coombs says that with recent drilling the company has probably added another million or so tonnes to the 2+ million tonne resource at Norton. It’s small, but based on the value of the poly-metallic deposit — open to depth — holds some promise to Coombs who is involved with several other exploration projects including Columbia Yukon, Orphan Boy and Black Panther Mining Corp.

“Right now we’re about 40 kilometres from the nearest road, which isn’t bad. But with KWG putting in one of the largest if not the largest chromite deposit in the world to the north of us, we should have rail and power nearby before long, too. Add to that the openpittable nature of the deposit in a proven geological setting, with grades that appear to be improving to depth… this is a great little project.”

Similarities with Thierry Mine (From the 2009 technical report)
“The geological setting and style of sulphide mineralization (i.e. sulphide breccia proximal to basal contact) is similar to the past-producing Thierry Mine near Pickle Lake, Ontario . In the late 1970s, the Thierry ore bodies were mined to depths of 75 metres (eastern pit) and 240 metres (western pit); a 500 metre shaft was developed in the early 1980s to access high-grade breccia and massive sulphide ores underground.”

tectonic setting: back arc environment
structure: folded about northeast-trending axes; faults parallel to high angle to fold axes
metamorphic grade: greenschist to amphibolite facies
host: mafic to ultramafic rocks and their sheared equivalents
sulphur source: local iron formation
mineralization type: semi-massive to massive sulphide (20-80%) in breccia; minor disseminated sulphide; remobilized sulphide as stringers
mineralization form: sulphide mineralization in lenses
mineralogy: pyrrhotite, chalcopyrite and pentlandite, palladium tellurides and violarite

Opawica Explorations Releases New Resource Estimates – Update

Dan Clark, President and CEO of Opawika Explorations (TSX.V: OPW), knows the depths of frustration in a bear market. His company just released two updates on mineral projects in Ontario that substantially increase his resources. One of the small gold deposits, called Atikwa, has about 20 million tonnes grading about 1g/t and 0.3 – 0.4% copper across a couple sections. The other is similar, but has a saleable limestone/granite overburden that can be sold locally. He’s even had calls from majors making enquiries about the combined 1 million plus ounces between Opawica’s Atikwa and Dingman projects. These aren’t huge projects, but they’re open pit and near surface. The insitu value of each is available at www.shareknow.net: The total insitu value of all Opawica’s early stage projects is $48/share at today’s gold, copper and zinc prices.

“I’ve never seen anything like it in all my years in the industry. Surely the market should be giving us more value than $0.06 per share,” Clark told resourceINTELLIGENCE.net.

In spite of the lag in share price, the company plans to move ahead with a scoping study as soon as it can raise the funds to do so.

“In terms of the quarrying, this is the second largest site in the GTA area. The primary area right now isn’t popular with people in the region. This neck of the woods is going to be the main player before long.”

Clark believes that mining this low cost overburden could provide some short term cash within the next two years. Other quarrying companies are selling the limestone and granite ores for between $6 and $10 per tonne. Once the overburden has been mined, the company plans to move on to the more valuable gold/copper deposit below that. (Evaluate the resource here using any commodity prices)

Opawica Explorations has updated resource for two of its exploration properties in Ontario, Canada, significantly upgrading the company’s share price potential value.

The projects are both located within range of infrastructure; Atikwa Lake is near Kenora, Ontario and the Dingman gold property located about 100km northeast of the Greater Toronto area.

At Atikwa Lake, the updated resources calculated using an additional 3,617 m of drilling, which is in addition to the 18,895m of drilling from 105 past holes used in resource estimates outlined in the March.

A total of 16 holes were drilled focusing on connecting the Maybrun Main Zone to the Maybrun Footwall Zone as well as testing portions of the 600m gap that separates the Maybrun Main zones from the Maybrun North Zone.

Compared to the March 2009 resource estimate, total contained gold has increased by 26% and contained copper has increased by 28%.

According to the data at www.shareknow.net, the total value of the metals on an in-situ basis at Atikwa Lake is US$717,450,542, or $25.12 per share

Grades are low, but near surface, at 0.6 – 1.15 g/t Au and 0.3 – 0.4% Cu.

The company envisions an open pit resource mine at Atikwa Lake, extending from surface to 200 metres vertical depth and using a 2:1 stripping ratio for the model. Mineralization remains primarily open to depth and to a lesser extent on strike. Opawica also plans to explore other targets also exist on the property separate from the Maybrun gold-copper zones.

Go to www.shareknow.net to see the company’s updated 43-101 data on all of its projects. Opawica currently has four projects, three with resources.

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