Why nickel may continue to outperform gold

Gold has bounced off the $1180 level twice in the last year, most recently in late December. Since then, it’s had a fantastic run and, at the time of writing, was trading at $1380. That’s nearly a 17% gain in less than 3 months.

Gold Price

(Infomine)

Nickel’s up nearly 20% off its 52-week low of $5.97 with a majority of those gains also experienced in the last 3 months.

Nickel

(Infomine)

As nickel doesn’t have quite the fan following that gold does, these price climbs have gone unnoticed by many. When I notice a 20% price gain in any commodity in such a short period of time, I ask myself if there’s something happening here; has there been a fundamental change that will continue to drive price upwards or, alternatively, is it time to initiate a short position and fade the rally.

Before we can get a feel for where nickel may be going, we have to take a quick look at where it has been.

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Lowell Copper to take a pass at new New Mexico exploration project

Lowell

J. David Lowell (Photo: Adam Humphreys)

Dave Lowell’s Lowell Copper announced an option to earn up to 70% in the TC property in the Hillsboro – Bisbee mineral trend in New Mexico from Rose Petroleum PLC and a subsidiary.

The deal appears to have been structured in a way that allows Lowell Copper to back out if results aren’t promising. The company can earn 25% by spending US $250,000 in exploration, an additional 26% by spending another US $2.5 million, and an additional 19% by spending another $3.5 million, for a total of 70% for $6.25 million.

Mr. Lowell, Chairman and CEO of Lowell Copper remarked, “The size of the covered area is such that one to two drill holes could very quickly reveal whether there is the potential for buried mineralization.”

Mr. Lowell is credited with the discovery of 18 ore bodies, including Escondida, the world’s largest copper mine. He was the subject of a January, 2013 CEO.CA video interview.

Read: Lowell Copper Enters Into Option Agreement, Related: Rose Petroleum PLC Joint venture agreement with Lowell Copper Ltd.

Disclosure: We own a few shares and warrants in Lowell Copper as a speculation. This is certainly not investment advice. Do your own due diligence.

Mining tycoon Ross Beaty is back and he’s funding gold exploration in Brazil

Ross Beaty

Ross Beaty

Canadian mining legend Ross Beaty, who founded Pan American Silver and the Lumina Copper Franchise, and made fortunes during the last decade’s resource bull market, is quietly making moves in the junior mining sector again.

Earlier today Magellan Minerals announced a deal to sell to Ross its Pocone gold belt exploration projects in Western Brazil for $1.25 million. Magellan’s partner in the Pocone belt, a private group called ECI Exploration and Mining (ECI), will also sell their interest to Ross under the same terms. Magellan and ECI will retain 20% each in NewCo, which Ross will seed with $5 million, and own 60%. No other details were provided on NewCo, such as whether it will be a private or a public company.

According to Magellan’s press release, “The Pocone gold belt extends for at least 90km and is located in the southern part of the state of Mato Grosso. It is characterized by a series of highly deformed schists that are cut by gold-bearing vein swarms. Approximately 50 small open pit gold mines are currently in operation throughout the belt which has an estimated historic production of 6-12Moz of gold.”

We called Ross for comment this morning and he told us that this is an interesting early stage gold play, however he said it was not a significant investment for him and he doesn’t want to make a big deal about it.

So this is us not making a big deal about it… But we are pretty excited to see Ross making moves in the junior resource sector again.

Let the bull run!

Related: Tommy and the Titans, Ross Beaty: You say impossible, I say possible

Augusta shareholders at risk in ‘essentially insolvent’ company: HudBay

By Peter Koven, Financial Post

Hudbay

David Garofalo, chief executive officer of HudBay Minerals Inc.
(Norm Betts/Bloomberg)

TORONTO • Augusta Resource Corp. is “essentially insolvent” and facing severe financial risks in the coming months, according to the company that wants to take it over.

David Garofalo, the chief executive of HudBay Minerals Inc., tore into Augusta’s management in an interview on Thursday as the $428-million hostile takeover battle continues to heat up. His key message was that Augusta shareholders could be in deep trouble if the company does not wrap up permitting for its Arizona-based Rosemont copper project in short order.

The permitting question is at the heart of this takeover battle. This week, Augusta said it expects to receive its final required permit in the first half of this year. After that, it is set to begin construction.

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DSR – Desert Star Begins Permitting and Exploration Work on Their Portfolio of US Prospects

Desert Star has a number of assets located within a 15km radius of major mining projects held by Rio Tinto and BHP (Photo: Cronkite Newswatch)

Desert Star has a number of assets located within a 15km radius of major mining projects held by Rio Tinto and BHP (Photo: Cronkite Newswatch)

Today, Desert Star Resources (DSR:TSXV) quietly announced that they had begun the first steps in exploration on their recently acquired southwest US assets.  The company completed geological mapping and sampling at its Copper King project located in the prolific Laramide belt of Arizona.  The mapping and sampling have identified diorite porphyry dikes which intrude Apache Group statigraphy and diabase sills which looks similar to that seen at Rio Tinto and BHP’s large and high-grade Resolution copper-molybdenum project.

We spoke with Desert Star’s Daniel MacNeil (Project Acquisition and Development) by phone this afternoon and he tells us, “there are two main takeaways from the release today, one, we have begun the exploration permitting process on our projects which is a significant milestone and, two, we have initiated the first steps in defining drill targets on the projects.”

The company has undergone a significant change in focus over the past year with large-potential prospect acquisitions, name change, board and management changes and financings.  Recently they closed a ~$1 million raise at $0.18.

Mr. MacNeil told us that “the plan is to complete geophysical and geological mapping and surveys on the projects including Oro which should take us into the fall at which point we should have our permits and targets defined for drilling.”

Desert Star announced in the release that they expect to conduct an additional mapping campaign at Copper King and Red Top in March, 2014.

With the prospects that they have, the company is likely to find a joint venture partner for one, all or some of their assets.  This could happen prior to gaining exploration permits, but it would seem rational for it to be after.  The company is also more than capable of drill testing these targets themselves.

Also at their Oro project in New Mexico, Mr. MacNeil and Dr. Alan Wainwright (Desert Star’s Chief Geologist) reexamined historic core data and believe they have identified a large copper porphyry target below intense porphyry-style alteration exposed at surface.  They shared their excitement about this potential during our last interview and again, Mr. MacNeil reiterated that by phone today.

Shares are up over 175% from their summer lows:

DSR Chart

DSR data by YCharts

Read: Desert Star Conducts Sampling Program and Commences Process for Drill Permitting at Red Top, Copper King & Copper Springs Projects

Disclaimer: Author has a financial interest in Desert Star Resources and the company is an advertiser, therefore the article is not to be considered unbiased and fully independent. Please read Desert Star Resources Ltd.’s Cautionary Statement Regarding Forward-Looking Statements’s carefully.

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Warwick Smith leaves Western Pacific Resources on stronger footing

Warwick, Smith, Western, Pacific, Resources, Vancouver, Mining

Warwick Smith / CEO.CA file photo

Warwick Smith resigned as CEO and director of Western Pacific Resources (TSXV:WRP) yesterday after a banner year of accomplishments with the company in 2013.

Mr. Smith co-founded Western Pacific in 2009, not long before junior mining markets took a turn for the worse in 2011.

Smith was resolved to make something out of Western Pacific in the dark years of the commodities downturn. He went looking for a project that was financeable, with near term production potential and low startup costs.

On February 26, 2013, Western Pacific announced intentions to acquire the past producing Deer Trail gold, silver, lead and zinc mine in Piute County, Utah.

Deer Trail had extensive underground development and a modern mill facility, and Smith tied it up for $7.5 million out of bankruptcy proceedings.

Smith then recruited a management team with extensive mine building and shareholder wealth creation experience.

Michael Callahan

Michael Callahan

Arthur Brown, who was Chairman and CEO of Hecla, the largest silver producer in the US, became Chairman of Western Pacific. Michael Callahan, a former vice president with Hecla and President of Silvermex Resources until it was acquired by First Majestic Silver, also joined as President.

Smith then found financing for his company via the Quintana Capital Group of Houston, Texas. Quintana are a private equity investor in coal, oil, shipping and other sectors. They were introduced to Western Pacific by Lawrence Roulston, publisher of Resource Opportunities, who now sits on Western Pacific’s board.

Back in December, Roulston told us Quintana sees Western Pacific as a vehicle to build a multi asset production company to take advantage of the current weakness in the mining markets, starting with the Deer Trail project.

Yesterday Western Pacific announced the closing of the Deer Trail Mine acquisition, and the closing of the first $3.5 million in convertible notes sold to Quintana. Quintana have agreed to provide up to $10 million via convertible notes and $8.5 million via metals streaming to Western Pacific, subject to certain milestones.

The news release also announced a few management and board changes, with the notable replacement of Warwick Smith as CEO by the veteran miner Michael Callahan. Callahan congratulated Smith for his “outstanding contribution” to the company over the years in helping to secure its people, projects and capital.

Smith says he will now take a couple of months off to get married and looks forward to future endeavours.

You can follow Warwick Smith on Linkedin -> 

WRP Chart

WRP data by YCharts

Western Pacific Resources Corp. is a client of Pacific Website Co., which owns CEO.CA.

NexGen’s Potential Discovery Opens Up The Western Athabasca Basin, CEO Leigh Curyer Explains

Leigh, Curyer, Mining, CEO, Uranium

NexGen CEO Leigh Curyer

NexGen Energy (TSXV:NXE) announced a potential uranium discovery in the SW Athabasca Basin region of Northern Saskatchewan yesterday. Visible uranium was seen in the first hole drilled into the Arrow target at the Western side of NexGen’s Rook 1 project, which caused shares in the junior explorer to rise over 90% Wednesday.

“There’s an element of luck,” CEO Leigh Curyer said by phone from Toronto at 10AM PST this morning. “This hole was really to get a sense as to what was happening with the geology in the area, and we nailed it.”

The sheer zone, or potentially mineralized area, appears to be large, Curyer says. The first hole began hitting radioactive anomalies at 49 meters depth, and yesterday’s announcement reported visible uranium in the core at 321 meters.  That hole continues drilling, and is now past 500 meters.

“We would stop the hole if the area of interest had stopped. We’re still in the right type of rock setting and the drilling continues.”

Following completion of the hole and assays to confirm the presence and grade of uranium mineralization, the company will drill two holes 50 meters out on either side of the discovery hole. These are quite wide stepouts, Curyer says.

“We’re sticking to our disciplined approach to get a sense of what the geology is in this particular target area and then we will vector in.”

The discovery is in its very early days, Curyer warned, saying it’s too early to answer most questions yet.

Andrew, Browne, NexGen, Energy

NexGen VP of Exploration Andy Browne

“There’s more holes to drill and there will be some that don’t come up, but from this one hole and applying [VP Exploration] Andy Browne’s 40 years of experience and the experience of the two guys that were on the Roughrider discovery, the grade is going to be there, and they have yet to define the area of interest.”

Curyer made a point of saying the discovery was independent from PLS, Fission Uranium’s 100% owned shallow, high grade uranium deposit on the adjacent South East property to Rook 1.

“It’s got nothing to do with PLS. It’s on the trend, but the rocks are slightly different, and it’s in a different type of zone.”

According to Curyer, this suggests that the Western Side of the Athabasca Basin could be a prolific uranium district, and is quick to remind me that NexGen has the most dominant land position in that section of the Basin. Others in the area include Skyharbour Resources and Aldrin Resource Corp.

“We’ve got nine other target areas just on that Western section of our Rook property that are based on the same principles of Arrow that haven’t yet been drilled.”

“The three of the twelve targets that we’ve drilled, we’ve hit mineralization in each of them. Arrow being the most significant to date.”

NexGen has $7.5 million in the bank currently, Curyer says, but they’ll have $5.5 million left at the end of March or in early April, when the Winter drill program concludes. That number could be slightly lower if they are able to bring in a third rig, which the company is working to procure before the end of the season. For now it’s just two rigs.

Curyer will be presenting the NexGen story at the PDAC convention in Toronto in early March, as well as at a Dundee Capital Markets uranium conference the Friday leading up to the PDAC.

“We’ve had finance offers and all sorts of things. I’m in Toronto at this moment and absolutely jammed for meetings.”

I let Leigh get back to it and told him I look forward to following more news from the company.

NexGen Energy shares trade on the TSX-Venture Exchange under the symbol NXE.

Yesterday Dundee Capital Markets analyst David Talbot re-stated his buy recommendation on NexGen’s shares with no price target.

We have been covering the company since before it became public and own a small share position which does make us somewhat biased.

Comments made by Mr. Curyer were off the cuff and are forward looking. Please read NexGen’s Cautionary Note Regarding Forward Looking Statements. All facts are to be verified by the reader. This is not investment or professional advice of any kind. Always do your own due diligence. Thank you.

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On an African dog and pony show with mining mogul Robert Friedland

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Robert, Friedland, Ivanhoe, Mines, Kamoa, DRC, Copper

Ivanhoe Mines executive chairman Robert Friedland at the site of the initial Kamoa copper discovery in the Katanga province, D.R. Congo – Feb 11, 2014. Photo: Govind Friedland

The reality distortion field, made famous by Steve Jobs’ biographer Walter Isaacson, is a personal intensity and vision so powerful it bends people to your will, convincing them of a project’s higher purpose. Isaacson describes this capacity for influence as a notorious trait of Steve Jobs, who, as founder and CEO of Apple, managed to ship mountainous innovation that consistently redefined the relationship between art and technology.

An interesting footnote here is the fact that Robert Friedland, one of the world’s most successful global resource developers, taught Jobs about the reality distortion field when Jobs was a college student in 1972. And he’s used it to promote a ton of successful mining ventures over the past 35 years—he’s found and developed them on nearly every corner of the globe. And became a multi-billionaire in the process.

I was actually on a trip with Friedland last week, touring three of his latest mining projects in South Africa and the Democratic Republic of Congo (DRC). I didn’t realize how privileged I was to be included in the crew, which consisted of members of Friedland’s family and a few investors, until on his Gulfstream jet on the way there, his 39-year-old geologist son Govind looked at me puzzled, then joked to his dad, “What is a blogger doing here?”

A good question. Friedland has for decades been reclusive—even combative toward the media.

“I’ve been emailing your dad every two weeks for two years telling him that I look forward to joining him on a site visit in the near future, and that it’s going to be great!” I quipped.

“Aha,” said Govind, “The reality distortion field.”

The truth was that Friedland was headed to Africa to keynote the 2014 Mining Indaba in Cape Town—considered the biggest mining investment convention in the world—and had, finally, let me tag along.

In Cape Town, Friedland told an audience of over a thousand high-level investors and government bureaucrats that Ivanhoe Mines’ has three world-scale mineral discoveries coming soon, “to a theatre near you.”

We flew from the conference to Limpopo province in northern South Africa, where Friedland’s company spent nearly 20 years looking for platinum before finding arguably the best platinum ore body ever discovered: the Platreef project.

Ivanhoe, Mines, South, Africa, Platreef

Ivanhoe Mines CEO Lars-Eric Johannson (middle), Executive Chairman Robert Friedland (right). Near Platreef, Limpopo, South Africa. Photo: Tommy Humphreys, CEO.CA

A Japanese consortium gave Ivanhoe Mines $290 million for 10% of Platreef in 2010 and 2011. The first shaft is set to be sunk any day now, and once built, Platreef will be unlike all other platinum mines in South Africa.

Platinum production is a mess in South Africa. Sure, 73% of the world’s platinum originates there, but the average mine is a kilometer deep, where underground workers mine ore bodies just a meter thick, in blazing hot temperatures upwards of 122ºF (50ºC).

Conversely, the Platreef ore body is 24 meters thick on average—a freak of nature by platinum standards—which will allow for air-conditioned, mechanized labor. In fact, Friedland bets that most of the project’s underground workforce will be women; they are proven to be better at operating large mining machinery, he says.

While Platreef waits on its Mining Right, which is expected in the next few months, the company plans to publish a Preliminary Economic Assessment by summer. Financing for the proposed mine will likely continue to come from Japan, which needs the metal for catalytic converters and other new technologies. Social license is the project’s biggest risk, but the company has devoted substantial resources on the communication, training and jobs creation fronts. Ultimately, Friedland is hopeful the project will get built for a 2018 startup. Mining operations could last 100+ years, as the 28.5-million-plus-ounce platinum, palladium, gold and rhodium deposit remains open to the West and South.

This valley shows the Platreef project site. 800 meters below lies the orebody.

This valley shows the Platreef project site. 800 meters below lies the flat, thick PGM orebody. Click for more photos.

After touring Platreef, we flew to Lubumbashi in the DRC’s Katanga province (AKA the land of copper). Katanga is lush green country with reddish brown soil. Shacks, French signage, and smiling children lined the unpaved roads on which our motorcade barrelled forward—Friedland, of course, was in VIP car #1. Not far from Lubumbashi is Ivanhoe’s Kipushi Mine, and when we finally arrived there, we were greeted by a full percussion band.

“Promoting a stock is like making a movie,” Friedland once said. “You’ve got to have stars, props, and a good script.”

The Kipushi Project is a sight to behold. With copper grades as rich as 35%, and zinc around 40%, it was the world’s richest copper and zinc mining operation for the better part of the last century. If you don’t know mining, understand: these are absurdly rich grades. Kipushi was abandoned in 1993, and flooded in 2011. During the same year, Ivanhoe bought it for $150 million from controversial Israeli businessman Dan Gertler, who was under pressure from the Congolese government to do something with it. Ivanhoe’s been dewatering the mine since; drilling is set to commence any day now from 1200 meters below surface, targeting the Big Zinc orebody, a potentially huge zinc deposit that is open at depth. It may also contain copper and precious metals.

“This is a real zinc mine,” Friedland told investors at a Kipushi technical presentation, “and if we find high-grade copper down there as well, everything is paid for.”

Ivanhoe Mines, Kipushi

Andre Zeelie, Govind Friedland, and Robert Friedland at the Kipushi Mine, D.R. Congo

Five shafts are already built at Kipushi. #5 is still in excellent condition. “The heart of a mine is its main shaft,” said Andre Zeelie, Kipushi’s project manager and former Deputy Director of Mining at Oyu Tolgoi LLC.

“This shaft would cost us a billion dollars today,” remarked Friedland.

Kipushi, Mine, Ivanhoe, Robert, Friedland

Standing atop the 17 story shaft #5 at Kamoa overlooking Shafts #1-4 in the D.R. Congo’s Katanga province.

Early the next morning, we flew an hour west to Kolwezi, where Friedland’s crew had discovered Kamoa, the world’s largest undeveloped high-grade copper deposit. During the flight over, I quizzed Ivanhoe EVP of Exploration David Broughton, who, along with David Edwards, is credited with making the Kamoa discovery. Broughton explained Kamoa’s origin story: in 2004, an Ivanhoe contractor had surveyed the project, conducting soil samples and geochemistry tests that returned 500 parts per million copper. The figures weren’t nearly enough to get most explorers excited, but it was enough for Friedland to finance a drill program.

In 2008, their drill cut through high grade copper. Incredibly, under the surface with a rail line over top it, lay the first major copperbelt discovery in the DRC since the early 1900s.

“The one thing our group does is drill,” Friedland said. “We’re famous for it.”

Ivanhoe Mines, Kamoa, Copper, Mine, Discovery, Deposit

Robert Friedland, David Broughton and David Edwards at the site of the Kamoa copper discovery in D.R. Congo

Today, the Kamoa camp is bustling, with some 300 local workers on site. The company aims for a 2018 start-up, but needs a financial partner, such as a sovereign or major miner, to come in with the cash.

“This is a miner’s resource,” said Sam Riggall, Ivanhoe Mines head of strategy and project development. Assets like Kamoa—which might produce copper for generations—are long-term plays for the majors, hitting their sweet spot years after the beginning of operations. “The cream is over time, in the expansions,” Riggall added. “You simply cannot apply conventional DCF analysis to projects like Kamoa and expect to get a sensible answer on value.”

Friedland expects to sell part of Kamoa to the Chinese or Koreans. Requiring a smelter in Phase 2, the project is a behemoth. But Friedland told me not to worry.

“World class ore bodies finance themselves,” he said. “In fact, people fight to finance them.”

“This is the world’s richest undeveloped copper resource. Come back in 10 years and it will happen. The world moves forward.”

At the Kamoa camp, a South African mining analyst and I started talking to Friedland about his share price, which at the moment, was nearing all-time lows.

“Why do you keep pressuring me to promote the stock?” Friedland gestured to me. He turned to the analyst, “It’s your job to find investors and if you don’t, it doesn’t change my life. This is getting built. Seven billion dollars for the Oyu Tolgoi mine in Mongolia and it was a thousand times tougher.”

Oyu, Tolgoi, Rio, Tinto, Turquoise Hill, Ivanhoe Mines, Mongolia

Robert Friedland’s 100 kilogram baby, the Oyu Tolgoi copper and gold mine in Mongolia, which started shipping concentrates in 2013.

Ivanhoe Mines’ shares are so cheap, in fact, that the $2.9-billion implied valuation the Japanese placed on the Platreef project is more than three times higher than the market valuation of the entire company today. In effect, this means Ivanhoe investors get Platreef at a huge discount, along with Friedland, the team, Kamoa, and Kipushi, for free.

On our final day of the trip, I sat at an analysts’ table during lunch and watched a heated debate over the company’s share price. One analyst was extremely negative. Others were more subdued. The consensus was that investors today are avoiding companies that will need more money and Ivanhoe undoubtedly will have to raise more cash to continue developing Platreef, Kamoa and Kipushi. This is why any investor considering the company should buy on a schedule, and be prepared to average down or participate in future financings by the company.

I’d already bought Ivanhoe Mines five times before touring the site. I’ve come to terms with the fact that I may have to do the same several more times in the coming years. But I’m reminded the sector is deeply out of favor, and I’m convinced it’s the right speculation for any investor wanting a call on Africa, platinum, copper, zinc, and a winning management.

IVN.TO, IVN, Ivanhoe Mines Stock Quote Chart

IVN has strong support near $1.50 with major upside resistance near the $2.00 level which was the price of the most recent private placement. Friday’s heavy volume ~8% rally was the most bullish trading session in IVN shares since September. (Stockcharts.com)

Since I returned from Africa, everybody’s been asking me what Robert Friedland’s like in person.

The 63 year old Chicago born, Singapore based financier radiates intensity. He thrives in front of an audience. It always seems like he’s in a hurry, and his staff know better than to make him wait. Despite his age and lean frame, he is intimidating physically, and has piercing blue eyes. He has been married to Darlene, who was with us in Africa, for 33 years.

At the same time, he’s funny, sometimes goofy. He wears his hat backwards, uttering, “Be cool, be cool.” He makes a Japanese-style bow as he leaves the room.

Robert, Friedland, Kipushi, Mine, Ivanhoe, Mines, IVN, Africa, DRC,

Friedland poses at a piece of equipment called Funkey at the Kipushi mine

On the long ride back to Vancouver from South Africa, I re-read Jacquie McNish’s book about Friedland, The Big Score. The first time I had read it, I was inspired to join the natural resources sector. But after spending time with Friedland, I realized the book fell short in its characterization of him. McNish paints a simple portrait of Friedland as a cunning stock promoter. I found him to be technically very astute on geology, and geopolitics, and more reluctant on the promotional front than I expected.

Friedland has attracted an impressive team at Ivanhoe. Manning the helm of every project seems to be a leader with a long track record in mine building and community relations. The Ivanhoe Mines organization is surprisingly flat, and although Friedland is likely to interrupt his employees’ when they’re giving important presentations, they’re not afraid to tell him when he’s wrong.

Robert Friedland made his fortune on quick flips, but has spent the past decade building mega-projects. My opinion is that he’s become more of a mine developer than a mining promoter. Building a mine is much more difficult than selling one undeveloped. I suspect he’s up for the task, for legacy reasons.

“Robert is a complicated man,” Riggall tells me. “His only vice is that he works very hard.”

At the Kamoa camp, as we are set to depart, Friedland shakes the hands of 300 workers and takes the mic to tell the men and women working there, “Build this great mine, and make your country great. Thank you and we love you.”

Robert, Friedland, Ivanhoe, Mines, Kamoa

Robert Friedland shakes the hands of workers at the Kamoa copper project, Feb 11, 2014. Photo: Humphreys, CEO.CA

The reality distortion field is back in action. Would you bet against him?

 

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Note: Travel from Vancouver to South Africa and all accommodations were paid for by the author, however flights to Limpopo and DRC and some meals were provided by the company. Statements made by representatives of Ivanhoe Mines were made in a Forward Looking context. Please read Ivanhoe’s Cautionary Note Regarding Forward Looking Statements carefully. Please note that any opinions, estimates or forecasts regarding Ivanhoe Mines’ performance does not represent opinions, forecasts or predictions of Ivanhoe Mines or its management.   All facts are to be verified by the reader. This is not an investment recommendation or advice of any kind. Please read our full disclaimer.

DSR – Desert Star has impressive exploration targets in Arizona and New Mexico

DSR

Desert Star Resources 1 Year Chart (Yahoo Finance)

Desert_Star_ResourcesDesert Star Resources (TSXV:DSR) is a junior exploration company being proactive in this market.

Last year they picked up six exploration projects in the U.S., each with big potential.

Of particular note are their Red Top, Copper King and Copper Springs projects in Arizona, as well as their Oro project in New Mexico.

A map of their Arizona projects shows scores of copper mines operating or soon to be operating in the area by majors like BHP Billiton, Rio Tinto, Capstone, and KGHM. This is among the most productive copper mining regions in the world and $5 million market cap Desert Star has a hold on some of its strongest exploration targets.

Here’s a Google Earth flyover video from the company:

Earlier today Desert Star closed a $1.051 million financing of $0.18 units with a full $0.25 warrant (exp. July 28, 2015) for general corporate purposes.

CEO Vince Sorace tells me the goal of the company is to find strategic investors, such as larger mining companies, to share the costs associated with advancing some of their projects.

Sorace and his team have the substance to pull it off. In 2011, Sorace was CEO of Providence Resources where he helped that company raise $4 million in exploration capital from Teck Resources at $4 per share. The exploration thesis for Providence didn’t pan out however Sorace learned what it takes to do a deal with a major miner.

Desert Star’s exploration team is also compelling. Sorace has been able to attract Dr. Al Wainwright, PhD PGeo, as chief geologist. Dr. Wainwright will be honoured at the AMEBC Roundup conference tomorrow night, sharing the H. H. “Spud” Huestis Award for excellence in prospecting and mineral exploration with his former colleagues at Kaminak Gold, for their role in the discovery of the 3.2 million ounce Coffee gold deposit in the Yukon. Vancouver geologist Dan McNeil is also extensively involved with Desert Star’s project acquisitions and exploration strategy. Both Wainwright and McNeil have several years experience working for multiple major mining companies.

Desert Star has 29,091,744 shares outstanding, plus another 21,559,182 warrants and 1,852,500 options at exercise prices ranging from $0.15 to $0.80. The company’s shares last traded at $0.18, giving DSR a market cap of approximately $5.24 million.

As the mining industry enters its fourth year of a downturn, very few companies are actually doing any exploration; Desert Star is vying to be one of them, and boasts an impressive portfolio of exploration targets which may just attract a major miner to roll the dice.

Read the company’s corporate presentation and keep an eye on DSR in 2014.

 

Disclaimer: Author has a financial interest in Desert Star Resources and the company is an advertiser, therefore the article is not to be considered unbiased and fully independent. Please read Desert Star Resources Ltd.’s Cautionary Statement Regarding Forward-Looking Statements’s carefully. Continue reading

BTO – B2Gold Releases Inferred Resource Estimate for Wolfshag Zone Which Should Provide High-Grade Feed to Otjikoto

B2Gold expects to spend $8 million in 2014 on exploration around Otjikoto (Photo: Mining News)

B2Gold expects to spend $8 million in 2014 on exploration around Otjikoto (Photo: Mining News)

This morning, Clive Johnson’s B2Gold (BTO:TSX) released an inferred resource estimate for the Wolfshag zone near the company’s Otjikoto gold project in Namibia.  The Wolfshag zone sits adjacent to the east and northeast portion of the pit for the Otjikoto deposit.  This initial resource estimate was comprised of 703,000 ounces of gold at an average grade of 3.2g/t gold.  The Otjikoto open pit has an average grade of 1.42g/t gold so this Wolfshag zone indicates a potential expansion zone, high-grade feed zone and/or an extension of the mine life at Otjikoto.  Construction at the mine is on budget and on schedule to start in the fourth quarter of this year.

B2Gold engineers will now work to develop conceptual mine plans to determine when Wolfshag material could be fed to the Otjikoto mills.  The company is budgeting roughly $8 million to exploration around Otjikoto in 2014.  This will focus mainly on the northern portion of the Wolfshag zone to increase the density of drilling to 50m x 25m.  The company also intends to test the southern extension of the zone.  They expect to release an updated indicated resource estimate by the end of the year.

The Wolfshag zone remains open down plunge to the southwest but insufficient drilling has been completed to date to allow for classification within a resource.  The inferred estimate was based on 119 drill holes and over 33,015m.  The Wolfshag zone comprises a series of en-echelon stacked, shallow easterly dipping mineralized shoots which plunge at 10 to 15 degrees to the southwest. The shoots subcrop below calcrete cover to the north and have been traced to the south down plunge for 1,600 metres strike length.

Based on the positive drill results from the Wolfshag zone to date, B2Gold plans to expand the Otjikoto mine in 2015, increasing throughput from 2.5Mtpa to 3Mtpa.  They will spend $15 million on the expansion in order to buy a pebble crusher and additional mining equipment and tanks.  They believe the expansion will grow average annual gold production to 170,000 ounces per year from 141,000 ounces per year.

The company has successfully improved the economics of their Nicaraguan operations by finding nearby high-grade gold (Photo: B2Gold Corp.)

The company has successfully improved the economics of their Nicaraguan operations by finding nearby high-grade gold (Photo: B2Gold Corp.)

The Wolfshag zone allows B2Gold to continue their trend of acquiring or finding higher grade ore deposits near existing mines.  This allows the company to utilize the fix cost assets such as the mill and processing facilities with more and higher grade ore feed.  This reduces the overall cost of the mine, but increasing the average grade.  Grade dilution remains the largest cost increase mines around the world face.  B2Gold were successful in finding close by higher grade ore in their Nicaragua operations.

Given the company’s production profile (guiding 395,000-420,000 ounces in 2014) and existing reserve/resource base, this news will not have much of an impact on the share price, even though it should prove to significantly increase the economics of the Otjikoto mine in time.

Read: B2Gold Corp. Announces Initial Resource for Wolfshag Zone at Otjikoto Project in Namibia

RRI – Riverside Builds Foundation for Big 2014 Campaign

Riverside is actively exploring in BC and Mexico with majors Antofagasta and Hochschild (Source: The Courier-Mail)

Riverside is actively exploring in BC and Mexico with majors Antofagasta and Hochschild (Source: The Courier-Mail)

Riverside Resources (RRI:TSXV), the North American focused prospect generator, announced their plans for 2014 this morning.  The company highlights the strategic partnerships created in 2013 and how they intend to build on them in 2014 and beyond.  During 2013, the company secured two new strategic alliances with Antofagasta and Hochschild for gold and copper prospects in Mexico where the companies are intending to spend at least $4 million over the next three years.  Riverside is also focused in BC on the Flute and Lennac projects where Antofagasta and Riverside discovered a new massive sulphide zone.

In 2014, the company plans to follow-up on drilling of the high-grade Penoles silver project, located near the historic Jesus Maria mine in Mexico.  Riverside recently announced an update to their partnership on the Penoles project whereby they will get $750,000 spent on the project by March 31, 2014 and get $1.5 million in stock and $1.35 million cash by the end of June 2014 from Morro Bay Capital.  The company is targeting a maiden modern resource here in 2014.

Riverside is also intent on generating new gold targets in Mexico with Hochschild.  Riverside expects to receive results back from their target definition drilling at he Clemente silver-gold project under option with Hochschild in Mexico.

In Canada, Riverside will also drill the Swift Katie Copper Project with Antofagasta as well as continue exploration at the Flute and Lennac projects in BC.  The company hopes to generate a substantial new copper-porphyry discovery in BC.

John-Mark Staude, President and CEO, stated: “We now have three active strategic alliances with major metal producers and are confident that our team will deliver new high-quality projects into each alliance within the first half of 2014. We are in position to deliver discovery exposure through several partner-funded drill programs this year and look forward to strengthening Riverside’s core assets.”

The company continues to be diligent with their capital.  They are sitting on $5 million cash (roughly the same balance as they came into 2013 with) and they received roughly $6.5 million worth of work expenditures on their projects last year.  With the success of 2013, the company expects their partnerships to continue to fund existing projects and for project generation.  In an email this morning, the company said they are expecting greater than $6 million in funding in 2014.  The company strongly believes they will be able to deliver additional strategic alliances and find new prospects for option or joint venture.

Below is an interview Riverside’s President and CEO, John-Mark Staude did with Beacon Research:

Read: Riverside Resources Outlines Corporate Growth Plans for 2014

Related: Riverside Resources is Being Proactive, Even in This Market

Disclosure note: Riverside is a client. This is an opinion an not advice. Do your own due diligence and please read our full disclaimer.

MRZ – John Tognetti Adds 2.4 Million Shares to his Position in Prospect Generator Mirasol Resources

John Tognetti is the Chairman of Haywood Securities and a true value-add investor

John Tognetti is the Chairman of Haywood Securities and a true value-add investor

Haywood Securities’ Chairman, John Tognetti, has added 2.4 million shares to his position in Mirasol Resources (MRZ:TSXV) which brings his total position to over 7.9 million shares or roughly 25% of the company.  Mr. Tognetti has been a supporter of Mirasol for a number of years and clearly continues to have his conviction about the company.  Tognetti first disclosed his ownership in the company due to him breaching the 10% insider rule in December 2008.  This disclosure showed he controlled over 3 million shares at the time some of which had been purchased for $0.115 per share.  In 2012 he spent $2.4 million to participate in a $3.30 per share private placement.  By my estimation his average cost is above current prices (he has bought shares as high as $7.90 per share.

Mirasol is a prospect generator focused in Argentina, Patagonia and Chile.  Late in 2012 they did what very few prospect generators are able to do, and they successfully sold their Joaquin silver-gold project to Coeur d’Alene Mines for a total $30 million cash and 1.3 million Coeur shares (worth roughly $16 million by today’s share price).

They recently announced a joint venture on a copper-gold prospect called Rubi in Chile to First Quantum Minerals (FM:TSX) whereby FM is earning a 55% interest by spending $6.5 million over the next four years and another 10% by deliver a PEA.  Finally they can earn up to 75% by sourcing project financing for the project and paying MRZ back for the amount they fund to build the mine from 50% of cash flows.

The shares have been on steady decline with the market over the last 3 years, even though they have proven they are capable of delivering on the prospect generator model by successfully selling a project to Coeur.  These successful prospect generators appear to have been taken out with the tide.

Riverside has three joint venture agreements with Hochschild and Antofagasta (Image: Riverside Resources Inc.)

Riverside has three joint venture agreements with Hochschild and Antofagasta (Image: Riverside Resources Inc.)

Dr. John-Mark Staude’s Riverside Resources (RRI:TSXV) is another example of a successful prospect generator which is getting no love in the markets.  Riverside has three successful joint venture agreements with Hochschild and Antofagasta.  These stories should be perfect for a market like this because the risk profile of these quality prospect generators is low.  They are typically funded, they have little or no need for equity financing, they are optioning off projects and they are able to option into excellent prospects for cheap.

Some of the smartest money in the resource business invest in these companies.  Mirasol’s biggest investors include Tognetti, Sprott, US Global (Frank Holmes) and AGF.  Riverside investors include Sprott, Adrian Day Asset Management and the Rule Family Trust (Rick Rule).

Read: Mirasol investor Tognetti increases holding to 24.96%

Related: Riverside Resources is Being Proactive, Even in This Market

Riverside Resources is a client.  This is an opinion and not investment advice.  Due your own due diligence.

Ross McElroy Wins PDAC’s 2014 Bill Dennis Award for Patterson Lake South Discovery

Edward Thompson, PDAC Awards Committee Chair; Robert Quartermain, President & CEO, Pretivm Resources Inc., Bill Dennis Award Recipient (Image: Republic of Mining)

Edward Thompson, PDAC Awards Committee Chair; Robert Quartermain, President & CEO, Pretivm Resources Inc., Bill Dennis Award Recipient (Image: Republic of Mining)

Fission’s President, COO and Chief Geologist, Ross McElroy, has won the highest accolade for Canadian exploration success this year handed out by the Prospectors and Developers Association of Canada (PDAC).  The award known as the Bill Dennis Award traces its roots back to 1977 and is handed out to a person(s) who either make an important mineral discovery or contribute significantly to the prospecting and exploration industry.  Former winners include Charles Fipke and Walter N. Baker (the “godfather” of the Hemlo mining camp).

Mr. McElroy was given the award as a result of his leading the team that discovered the Patterson Lake South uranium deposit which is one of the most significant uranium discoveries made in recent memory.

McElroy commented: “It takes a team to make a discovery and I’m delighted to have won this award on behalf of Fission. 2013 was an incredible year for us and I’m thrilled that the industry has taken note of our accomplishments and chosen to single us out for the success at Patterson Lake South. I would like to thank my technical team for all their hard work and dedication and to thank PDAC for recognizing our efforts and success.”

Congratulations to Mr. McElroy and his team.

Read: Fission’s Ross McElroy, Wins PDAC Award for Canadian Discovery and Prospecting Success