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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.

Read more

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

Midway Gold on Resource Intelligence TV

Midway Gold Tops 4.5MM Oz Gold Under the Investor Radar

Milestones:
2010: Complete a financing
Q2 2010: Midway project drill results
Q3 2010: Spring Valley progress update
Q4 2010: Golden Eagle drill results
2011: Pan scoping study

Our next guest’s company has 4.5 million ounces gold in the measured, indicated and inferred categories, a JV with one of the largest mining companies in the world, and four advanced stage projects in Nevada and Washington. Read more

Evolving Gold on Resource Intelligence TV

Evolving Gold Anticipates First Resource Estimate on Rattlesnake by April

When we last spoke to Evolving Gold in February 2009, CEO Bob Barker told us what the company had planned for the year, a plan that included 15,000 meters of drilling to pave the way for a much anticipated resource estimate. Read more

Almaden Minerals on Resource Intelligence TV

Almaden Minerals on Resource Intelligence TV: Interview with President and COO Morgan Poliquin

Almaden Minerals Generates Low-Cost Results with Prospect Generation

Where many exploration companies stop at one or two projects and drill for anywhere from one to more than 10 years, Almaden Minerals has a different approach: prospect for projects with good potential, then option the project out to another experienced company and let them do the advanced exploration. In the meantime, the company can continue doing what it does best: Read more

Exploration Insights’ Brent Cook Discusses the Prospect Generator Model

In this time of turbulent, somewhat unpredictable markets, there is a huge demand for investing insight. Investors see markets rebounding and investment opportunities abound, but who to invest in? Today on Resource Intelligence TV we are joined by veteran geologist and mining analyst, Brent Cook, who founded the website Exploration Insights. Brent gives us the low-down on investing in one type of resource company that specializes in the first stage of exploration, Prospect Generators. We also discuss his cautious approach to investing during the turbulent post recession environment.

Franconia Minerals on Resource Intelligence NEWSMAKERS

Franconia Minerals Advances Minnesota Projects, Birch Lake Metallurgy

While many newer deposits and mines are found farther and farther afield — because all the close at hand ones have been mined out — our next guest is exploring on three large base and platinum group metals deposits just a stone’s throw from the ports of Lake Superior in the U.S. Franconia Minerals’  (FRA:TSX) Birch Lake project has three established deposits with resource estimates with hundreds of millions of tonnes of underground mining ore — all located near Birch Lake in the Duluth Mineral Complex of Minnesota. Read more

Interview with Ray Goldie of Salman Partners: From the PDAC to Avatar’s Unobtanium

Resource Intelligence Podcast Edition

 

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 partner with Salman Partners and regularly speaks to the media to illuminate subjects from Uranium to Bauxite for the investment industry. Ray discusses everything from the PDAC to James Cameron’s unobtainium analogy in the film Avatar.

RITV News Alert: Latest TSX Resource Estimate Updates

The following companies have filed resource estimate updates with the TSX.

RITV and shareKNOW.net calculate the value of these projects based on the latest metals prices. The tonnages, grades and recovery rates used are all 43-101 compliant unless otherwise stated, however the values stated are gross values and do not include cost data, which is often available at www.shareKNOW.net using the OPERATING CALCULATOR.

Go directly to the Resource Estimate tool at resourceINTELLIGENCE.net by clicking HERE.

Date	Name	Project	Metals	Prev. Insitu Value	Updated Insitu Value	% Change
1/19/2010	Underworld Resources Inc.	White Gold	Au	N/A	1,792,064,676	N/A
1/18/2010	Medusa Mining Limited.	Co-O Mine	Au	N/A	1,400,057,357	N/A
1/18/2010	Serengeti Resources Inc.	Kwanika	Cu, Mo, Au, Ag	6,483,614,485	10,397,533,875	60
1/18/2010	Copper Ridge Explorations Incorporated	Clear Lake	Pb, Zn, Ag	N/A	1,788,002,896	N/A

New Process Makes Titanium Mining Greener, adds Rare Earths to the Mix

By Doug Hadfield, resourceINTELLIGENCE TV| This article is an update. Read the original story here.

Investors keen on green stocks may soon be able to add titanium explorers and miners to their portfolios. Scientists from the University of Leeds last week announced that they had discovered a way to recover rare earths essential to green technologies from the by-product titanium processing. Read more

BMO Analyst Predicts Continued Upside to Commodities, Gold and Stocks in 2010

BMO Analyst Predicts Continued Upside to Commodities, Gold and Stocks in 2010
By Doug Hadfield, resourceINTELLIGENCE TV.

In its updated report on global commodity strategy, BMO Senior Commodities Analyst Bart Melek lauds stimulus packages around the world as stemming “possible depressing and massive deleveraging and panic selling”.

These international efforts led global commodities markets to perform far better than could have been predicted at the start of the year. Base and precious metals and energy commodities performed “extremely well”.

“Lead jumped some 180% from its low, copper is up 150%, zinc jumped 132%, nickel is up about 80% and oil is up just over 120%. Canadian metals stocks surged 440%, while energy equities and the broad market jumped about 60% from the bottom. Gold jumped about 70%, silver jumped 115% and platinum surged 95%.”

Melek pins praise squarely on government stimulus packages in China, the US and Europe in particular, totaling some $2.2 trillion. Zero percent interest rates and central bank liquidity measures also helped to create a recovery environment — largely improved global demand for metals and energy.

Additionally, Melek says a weak US dollar and supply chain issues pushed investor interest in commodities to unexpected highs.

In an interview with Melek on Wednesday, he said his outlook for the year had changed surprisingly little since his last report in October 2009. “The numbers are basically the same,” he commented.

The weak dollar and strong recovery has not only sent investors to higher risk commodities, but also to gold, which should have continued upside. India’s 200 tonne gold purchase and Barrick’s closing of its hedgebook contributed to the bull market, and although strong employment numbers from the US have led to a drop in the price of gold recently, a possible gold price of over US$1,300/oz is BMO’s “bull case” scenario for 2010.

There is however some risk that gold may see further downside should premature Fed tightening occur. For example, any increase in the interest rate could rally the dollar and further hold back inflation, both of which are said to have contributed to gold’s rally.

The Best is Yet to Come

The strength of the demand rebound is a global phenomenon says Melek, but the real good news is yet to come: the full impact of the US government stimulus is still months away.

Of the US$787 billion allocated for the American stimulus program, “only 20–25% has been spent so far,” Melek says. “Much more is to come by the end of fiscal 2010… with maximum impact in Q4/09–Q2/10. BMO Research calculates an additional US$178 billion will go toward various expenditure programs and an additional US$100 billion will be spent on tax initiatives.”

The result is that the US may see a “massive 6.5% swing” in growth in the second half of 2009. The same sort of growth may be seen in China and Europe.

Melek advises investors to “look for signs of sustainable economic growth and positive developments in global export and steel markets as signals for better times to come for material based equities.” With so much stimulus having a positive effect around the world, low supplies of some metals and few signs of production growth, “prices could move higher into 2011.”

And if that fails, gold as a hedge is still a likely boon.

Resource Intelligence TV is web-based resource investor program with interviews and articles on some of the brightest minds in mining investment.

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Scientists Discover New Method of Rare Earth Extraction from Titanium Dioxide

By Doug Hadfield, Resource Intelligence TV

In what could radically alter the global rare earth industry, scientists at the University of Leeds in the UK have discovered a way to extract significant quantities of rare-earth oxides (REO), present in titanium dioxide minerals.

REOs, which are indispensable for the manufacture of wind turbines, energy-efficient lighting, and hybrid and electric cars, are reclaimed simply and inexpensively from the waste materials of another industrial process.

Recently, Resource Intelligence TV interviewed analyst John Kaiser on rare earth companies as investments. Kaiser noted that rare earth projects generally must be large tonnage deposits with high grades, because of the complexities and costs associated with separating the 15 elements in a rare earth deposit.

The discovery by researchers from Leeds’ Faculty of Engineering, if taken to industrial scale, the new process could eventually shift the balance of power in global supply, breaking China’s near monopoly on these scarce but crucial resources. China currently holds 95 per cent of the world’s reserves of rare earth metals in a multi-billion dollar global market in which demand is growing steadily.

Questions remain as to how long the technology could take to bring to market, who will hold the patent and how it will be made accessible to mining companies. Nevertheless, the news will bring some comfort to downstream buyers of rare earths, such as Toyota which manufactures the majority of hybrid vehicles globally. Such an extraction process, if viable, could dramatically reduce the cost of REEs, some of which have skyrocketed in since China effectively closed the door to export.

“These materials are also widely used in the engines of cars and electronics, defence and nuclear industries. In fact they cut across so many leading edge technologies, the additional demand for device related applications is set to outstrip supply,” said Professor Animesh Jha, who led the research at Leeds.

“There is a serious risk that technologies that can make a major environmental impact could be held back through lack of the necessary raw materials – but hopefully our new process, which is itself much ‘greener’ than current techniques, could make this less likely.”

Despite their name, the fifteen rare earth metals occur more commonly within the Earth’s crust than precious metals such as gold and platinum, but their oxides are rarely found in sufficient concentrations to allow for commercial mining and purification. They are, however, found relatively frequently alongside titanium dioxide – a versatile mineral used in everything from cosmetics and medicines to electronics and the aerospace industries, which Professor Jha has been researching for the last eight years.

The Leeds breakthrough came as Professor Jha and his team were fine-tuning a patented industrial process they have developed to extract higher yields of titanium dioxide and refine it to over 99 per cent purity. Not only does the technology eliminate hazardous wastes, cut costs and carbon dioxide emissions, the team also discovered they can extract significant quantities of rare earth metal oxides as co-products of the refining process.

“Our recovery rate varies between 60 and 80 per cent, although through better process engineering we will be able to recover more in the future,” says Professor Jha. “But already, the recovery of oxides of neodymium (Nd), cerium (Ce) and lanthanum (La), from the waste products – which are most commonly found with titanium dioxide minerals – is an impressive environmental double benefit.”

Resource Intelligence TV will have more on this new process interviews come in. We anticipate speaking with Professor Jha, rare earth analysts Jack Lifton and John Kaiser as soon as possible. Click here for the updated article.

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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:

Read more

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

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