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-- Posted Thursday, 6 February 2003 | Digg This Article
Resource Stock Report - - V9 # 2.0 - - January, 29, 2002
4-1565, 16th St. E. Suite #221 Owen Sound, Ontario, Canada N4K 6X8
resource@bmts.com Yearly subscription $169 cdn/year $119 US
Web Site "http://www.playstocks.net" Phone-519-374-9332
The Iraq Gold Trade
The gold market is trading a little strange. Gold has marched steadily
higher but the gold stocks have lagged. This type of action is a
signal that the market sees gold's rise as temporary. The only thing
you seem to hear from the talking heads and the main stream is gold is
up because of Iraq war fears, the markets are down because of Iraq
uncertainty, oil is up because of Iraq. The media has brain washed
most market players into thinking the Iraq situation is the cause of
every recent market move.
The market is convinced of this and is trading on this belief. The
consensus is that once the war starts, gold could have a quick pop and
the markets probably a quick plunge. The U.S. would dominate the war
and it would end very quickly, the number I hear batted around is
between 5 and 10 days.
Many gold traders, in particular hedge funds are trading on this
basis. They have been buying and intend to sell gold as the Iraq
invasion begins. Since the belief is a short war and gold will plunge,
so will gold shares. I have heard that many market traders and hedge
funds have also shorted gold stocks and checking some of these, the
short positions have moved higher. This has also helped depress the
gold stocks.
There is one thing that I have learned in my many years experience in
the markets. When ever there is a consensus on how events will unfold
and how the market will react, those that trade on such consensus
usually get a surprise and it does not work out. I don't believe the
consensus will be correct this time either.
First off, the main driver of higher oil prices has been the supply
problem out of Venezuela. As I have said numerous times before, gold
is moving higher because of the change in fundamentals, lower interest
rates, weak economy and paper assets, growing investment demand,
falling gold production, producers closing hedges, central banks no
longer selling and a large short position. It does not matter what
happens in Iraq, none of the under lying fundamentals will change.
Sure, I agree that there is probably some Iraq premium in gold and we
could see a sell off, gold is due for a correction anyway and the
futures have traded as high as $375, my target of the mid $370s. We
could take a rest here and go higher, but even if gold corrects
downward, the gold shares are already pricing this in. Then there is
the larger short position in the gold stocks which will mean buying
pressure when they are covered.
The other factor to consider is there has not been much public
money, weak money or traders move into gold stocks. There may not
be enough selling in gold stocks for the shorts to cover.
Since the belief is a fall back in gold, there is probably money on
the side lines waiting to buy the pull back. As I speculated earlier,
I expect a big in flow of money into precious metals funds and this
will be more buying pressure. In fact, as promised I calculated the
money flow into the largest Canadian precious metal funds in December
and it was a positive $36 million. This is the largest number since
May and reverses a small out flow through the year. I expect a lot of
money to come in during January and February, the RRSP season and this
will be new money to buy gold shares.
War is always unpredictable and there will likely be volatility in the
gold price when war begins. It could drag on, maybe there will be no
invasion for a while and the war fears will continue to loom and there
could be surprises. Regardless, I expect and correction in gold stocks
to be short term, maybe lasting only 2 or 3 days at the longest. This
has been the case for months and could continue.
Of course if gold shares start reflecting the gold price we could see
a strong move higher. No matter what happens in Iraq, after it
subsides the strong under lying fundamentals for gold are still there
and the bull market will continue.
Conclusion - the Iraq gold trade will not work as planned
At this time I see current cheap valuations and any weakness or pull
backs as buying opportunities. This is very early stage in this bull
market and it has a lot longer to go. I plan to stick with my strategy
of accumulating junior golds and now gold exploration stocks. These
can move a lot higher anyway, regardless of some volatility in the
gold price.
There are many excellent junior gold exploration companies out there
with excellent advanced stage gold properties and strong management. I
am talking about companies with astute management that picked up these
properties when nobody else wanted them and now everyone is clamoring
for a gold project. All the junior mining companies that went tech are
now flocking back to mining and trying to find a gold property.
I have kept track of many good gold properties and where they have now
landed
Most of you know Idaho Consolidated that traded as IDO and was once
known for its Gold in Idaho. In the gold bear market, IDO changed
focused to PGEs and in particular has a dominate land position around
the Stillwater Mine. Idaho is now called Beartooth Platinum (BTP) and
is still on the RSR list. Idaho had an excellent portfolio of advanced
stage gold projects, but with its focus changed to PGEs and not much
interest for gold it dealt off its gold portfolio for what now looks
like a very cheap price. These properties are now with Canden Capital
Corp. and it looks like this stock is about to take off for the
reasons outlined below. Please have a close look at
Canden Capital Corp CAD.P on TSXV
52 week trading range $0.07 to $0.35 Recent Price C$0.22
(the .P after the symbol is a designation that the exchange
classifies the company as a capital pool)
Shares outstanding 3.35 million approx.
Fully Diluted 10.25 million approx.
On March 7, 2002, Canden Capital entered into an agreement with Idaho
Consolidated Metals Corporation to acquire certain properties
prospective for gold in the state of Idaho. Consideration for the
transaction was 2.4 million common shares of the company. This
proposed qualifying transaction was approved by the shareholders of
the company at the annual and special meeting of the company held on
June 17, 2002.
As part of the approval process, the company commissioned a technical
study of the prospective gold properties in accordance with National
Instrument 45-101. This study was completed by Micon International
Limited of Toronto, Ont.
The Micon report describes the gold mineralization of the Idaho
properties and classifies three of these properties as advanced
properties. These include the Friday-Petsite property on which earlier
drill programs identified a mineral resource on the property of 17
million tonnes averaging 1.1 grams per tonne gold at a cutoff grade of
0.51 gram per tonne. At a cutoff grade of 0.86 gram per tonne, the
inferred resource (including indicated resources) is 7.9 million
tonnes averaging 1.58 grams per tonne. This mineral resource had been
established by about 18,288 metres of drilling in 182 drill holes.
The property has a gold resource of about 500,000 ozs., mostly drill
indicated. High grade intercepts of 52 grams/tonne over 5 feet and 75
grams/tonne over 5 feet that appear to be the feeders to the low grade
mineralization. This high grade zone has had very limited
exploration and further exploration and high grade drill intercepts
could be a driver, pushing the stock up.
Management
Arthur T. Fisher, P.Eng. is Director and President with over 40 years
experience. President since 2000 and Director since 1999 of Olympus
Pacific Minerals Inc. President and Director of Black Swan Resources
Ltd. until 1998; and Director and Chairman of that company until 1999;
President and Director of Lysander Minerals Corporation since 1997.
Previous extensive experience in mine management and consultancy
(includes David S. Robertson, mining consultants and Anglo-American/De
Beers).
Bryce M. A. Porter is a Director and Chief Financial Officer. He is a
Chartered Accountant with over 40 years experience in the Industry,
including a Director of Lysander Minerals Corporation since 1997. He
was Chairman and Director until 2001 and previously President from
1998 until 1999, of Black Swan Resources Ltd; prior thereto Chief
Financial Officer and Director of that company. Previously with AMAX
Inc. and affiliates and prior thereto with Alcan group.
James G.G. Watt, Director, has been a Director since 1993 and
President since 1998 of Clan Resources Ltd., Director and President of
El Nino Ventures Inc. (since November 1998), Director and President of
Verena Minerals Corporation (until 1997). Previously a commercial
banker.
Jørgen Jensen, Engineer, Director. He has been a Managing Director of
JJ Industry Ltd. since, 1984; Managing Director of Turboleach
International Ltd. since 1994. Previously involved in engineering
management and research & development in Denmark and elsewhere in
Europe.
Properties
There are 5 properties (Friday/Petsite, Buffalo Gulch, Deadwood, Dixie
and Gallaugher) located along the Orogrande Shear Zone near Elk City,
central Idaho. Friday/Petsite , Buffalo Gulch and Deadwood are
advanced properties with over 500,000 ounces of gold contained within
the mineral resources established to date. Previous drill programs
have identified a mineral resource on the Friday/Petsite property of
16.73 million tons averaging 0.0318 oz/ton (1.09 g/tonne of gold) at a
cut-off grade of 0.015 oz/ton.
A technical study of the properties in accordance with National
Instrument 43-101 has been completed by Micon International Limited
("Micon") of Toronto, Ontario. I have provided the summaries from the
Micon report on these properties. Keep in mind this report was done in
May of 2002 when the gold price had just climbed to $300 so the
economics of these projects has taken on a whole new light. You can
visit Canden's web site for more detail and review the complete 44
page report.
FRIDAY-PETSITE PROPERTY
The property consists of 120 claims. It includes the past producing
Orogrande Mine and Frisco Pit. It is underlain by Proterozoic-age Belt
Group metamorphic rocks intruded by the Cretaceous-age Idaho Batholith
and a Tertiary-age stock. The mineralization is associated with a
major regional structure called the Orogrande Shear Zone, and occurs
within hydrothermally-altered zones within the sheared rocks. As well,
mineralization is associated with the Tertiary-age stock. Extensive
exploration from the mid-1980's to 1998, including reverse circulation
(RC) and core drilling (at least 180 holes), and estimated to have
cost about US$2.5 million, has resulted in the delineation of low
grade gold mineral resources, which, at a cutoff of 0.025 ounces per
ton of gold (oz/ton Au), total 7.8 million tons averaging 0.046 oz/ton
Au. This includes about 20 % oxide mineralization. Micon believes that
the bulk of the reported resources qualify for classification as
Indicated Mineral Resources.
Although the identified resources are of marginal grade and probably
not amenable to commercial exploitation under currently prevailing
economic conditions, there are higher grade zones within the
mineralized envelope that justify further investigation. One such zone
on the western edge of the delineated resources was intersected by
core drilling and returned gold values in excess of an ounce per ton.
Accordingly, Micon recommends that this area be further investigated
and a program of limited drilling, estimated to cost US$137,500
(approximately Cdn$217,000), is proposed.
In Micon's opinion, the Friday-Petsite property is an advanced
exploration property.
Canden has identified a higher-grade zone within the Friday/Petsite
property that holds promise. Micon has recommended an exploration
program to investigate this zone.
Friday-Petsite Property
Selected 2000 Drill Results
Drill Hole Intercept (m) Length of intercept Estimated true width Gold
Assays
From To (m) (m) g/tonne oz/ton
PC08 48.8 65.5 17.6 14.1 7.33 0.214
Including 51.8 54.9 3.2 2.6 29.02 0.846
Including 53.3 54.9 1.6 1.3 52.05 1.518
PC010 44.2 64.0 20.8 16.6 12.10 0.353
Including 57.9 64.0 9.6 7.7 26.91 0.785
Including 57.9 61.0 3.2 2.6 45.46 1.326
Including 59.4 61.0 1.6 1.3 75.09 2.190
BUFFALO GULCH
This property comprises 73 claims and one State Lease. The property is
located in a similar geologic setting to Friday-Petsite, that is,
Beltian metamorphic rocks intruded by the Idaho Batholith and
traversed by the Orogrande Shear Zone. Exploration from the early
1980's to the late 1990's, including 163 drill holes, resulted in the
estimation of oxide resources of about 5 million tons averaging 0.023
oz/ton Au, potentially amenable to open pit extraction and heap
leaching. Micon classifies this resources as an Indicated Mineral
Resource.
Micon concludes that the property is an advanced exploration property.
Inasmuch as the estimated resource does not appear to be economic at
present, Micon recommends that the property be re-evaluated as and
when economic conditions warrant it.
DEADWOOD
The Deadwood property is situated between the Friday-Petsite and
Buffalo Gulch properties and is underlain by similar geology, that is,
Beltian metamorphics intruded by Idaho Batholith rocks and cut by the
Orogrande Shear Zone. The property consists of 36 claims.
RC drilling in 1986-88 led to the delineation of two zones of oxide
mineralization from which resources were estimated. This material is
classified by Micon as comprising Indicated Resources of 1,774,300
tons and Inferred Resources of 843,500 tons, both at a grade of 0.022
oz/ton Au.
The property, in Micon's opinion, is an advanced exploration property.
The resources on the Deadwood property do not appear to be economic at
present. Micon recommends that the property be maintained in good
standing until such time as economic conditions are believed to
justify further action.
DIXIE
This property, comprising 17 claims, is located somewhat remotely, but
may be associated with a shear zone similar to the Orogrande Shear.
The underlying geology is that of igneous rocks intruding early
Precambrian metamorphic rocks.
Anomalous gold areas have been identified by stream sediment and soil
geochemical sampling, but little follow-up has been done. The property
is classified by Micon as an early-stage exploration property.
No work is recommended by Micon, but, given the mining history of the
Dixie district, activities in the area should be monitored in case
future action is warranted.
GALLAUGHER
This property comprises 3 placer and 3 lode claims. The property
covers past producing placer workings and adjacent small-scale
extraction of gold-bearing veins. There is little information on which
to judge the potential of this property. It is classified by Micon as
being of indeterminate exploration status. Micon makes no
recommendation for work on this property.
Financial
The last financial statements reveal cash and cash equivalents
totaled $259,288 at Sept. 30, 2002 and no debt. There has been a
financing announced that would bring in $300,000 immediately and
another $500,000 assuming all warrants are exercised at $0.25 within
two years.
There was also a previous financing of $600,000 announced but this has
expired and it is not certain if any of this will be done. It was with
Yorkton and I have asked my broker what the status is with this. I
will send an email update when I confirm any particulars
With the current management and this portfolio of advanced gold
properties, Canden should have little trouble raising additional
financing to advance the properties.
Summary
Assuming the financing and shares for the acquisition, shares
outstanding will be 8.25 million for a market cap of US$1,341,000 at
C$0.25 which values their 500,000 of gold resources at only
US$2.68/ounce. There is no telling how much more gold Canden could
prove up on these properties after spending the financings they have
arranged, but with a conservative outlook we could assume 600,000
ounces. These are advanced stage gold projects in an excellent
location with supporting infrastructure and there is no reason why the
market would not assign an in ground value of US$25/ounce or perhaps
higher if gold prices continue higher.
At $25/ounce this would value Canden at US$15 million and assuming
10.0 million shares out we have a stock price of US$1.50 or about
$2.30/share Canadian. It is easy to see that this stock is currently
priced very cheaply.
Another way to look at the valuation is what the market put on Idaho
Consolidated back in the mid 1990s when gold was at a similar price.
Idaho traded between $2 and $4 based on the above gold properties,
when gold was trading around $380 and the stocks reached a high of
about $4.40 in 1996 when gold went to $400/ounce. Idaho had about 10
million shares outstanding at that time, very similar to Canden's
fully diluted number of shares.
I have followed this stock for a while and do own about 15,000 shares.
The main reason I decided to feature this stock now, volume has picked
up and it looks like it is ready to mover higher. Most likely the
financing is about to close. The stock has only been trading about
25,000 shares a day around $0.20, but I noticed 107,000 shares traded
on Monday and then volume went even higher yesterday. I am not certain
how fast this stock will move up, there appears to be stock available
in the mid $0.20s
Based on reasonable valuations, buying this stock anywhere below $1
will prove to be a bargain.
C:CAD.P - CANDEN CAPITAL CORP
DATE Hi Low Close Change Volume
2003-01-28 V 0.25 0.20 0.22 -0.04 270500
2003-01-27 V 0.26 0.21 0.26 +0.05 107000
2003-01-24 V 0.21 0.18 0.21 0.00 6500
2003-01-23 V 0.21 0.21 0.21 +0.05 10000
2003-01-22 V 0.17 0.15 0.16 +0.01 24500
CANDEN CAPITAL CORP.
Suite 1760, 750 West Pender Street P.O. Box 49122
Vancouver, British Columbia Suite 2300
Canada, V6C 2T8
Tel: 604. 681-8069 Fax: 604. 681-0269 Canada
E-mail: info@canden.net
Website http://www.canden.net
<A HREF="http://chart.canada-stockwatch.com/sw/chart.dbm?symbol=cad.p">CAD
Chart</a>
Platinum Group Metals PTM on TSXV Recent Price C$0.72
Entry Price $0.40 Opinion - strong buy
I also see PTM as a strong buy at this time, as they announced Friday
that drilling commenced on the Elandsfontein property immediately
adjoining Anglo Platinum's Bafokeng Rasimone mine. Initial
drilling is targeted on the projected extension of the UG2 reef, which
was earlier mined up to the property boundary by Anglo American
Platinum. The PTM drill program will consist of several lines of
short drill holes ranging from 10 to 50 metres in depth. The
objective of the program is to outline a near-surface open pittable
resource. The program will consist of up to 35 holes totalling
approximately 1,050 metres. Further drilling is planned to target UG2
and Merensky reef potential at depth. The projected strike length
of the favourable stratigraphy on the property is
approximately 1,200 metres.
PTM has an option agreement to purchase 100 per cent of the mineral
rights of portions of Elandsfontein under terms announced in
Stockwatch on Dec. 16, 2002.
The company has also successfully acquired an option to
purchase a 50-per-cent interest in two portions of Onderstepoort
98JQ property (131 hectares) and 100 per cent of one portion of
64 hectares for total consideration of 3,562,000 rands
(approximately $669,300 (Canadian)) payable over three years.
Prospecting fees of 62,000 rands ($11,700 (Canadian)) are due
over the three years of the agreement. The property interest may be
purchased by the company at any time within three years for one
million rands (about $188,000 (Canadian)) plus a second payment of 2.5
million rands (about $470,000 (Canadian)) due two years after the
exercise of the purchase right by the company. Onderstepoort
is located four kilometre northwest of Elandsfontein.
PTM now holds options to purchase mineral rights on three
properties, Elandsfontein, Onderstepoort and Ledig in the Western
Bushveld Complex area totalling 1,914 hectares (1,422 hectares for
Ledig, 297 hectares for Elandsfontein and 195 hectares for
Onderstepoort).
If there ever was a slam dunk in an exploration program this is it.
The Anglo pit went right to PTM's boundary and stopped, not because
the platinum stopped but because that was the property boundary. This
UG2 reef is very consistent for 120 kilometers and runs about 5
gram/tonne platinum. There is no doubt the same thing continues on to
PTM's property. The drill program involves shallow short holes so they
will be drilled quickly and reported quickly. When results start
coming back of 4 to 5 gpt platinum and we have a platinum price over
$600/ounce, this stock is going to move higher. There is
infrastructure (mills) nearby and PTM expects to put an open pit into
production very quickly, possibly by year end or in 2004.
http://www.platinumgroupmetals.net
IR, Drew at 604-734-1295
PTM Chart
(c) Copyright 2003, Struther's Resource Stock Report
All forecasts and recommendations are based on opinion. Markets change
direction with consensus beliefs, which may change at any time and
without notice. The author/publisher of this publication has taken
every precaution to provide the most accurate information possible.
The information & data were obtained from sources believed to be
reliable, but because the information & data source are beyond the
author's control, no representation or guarantee is made that it is
complete or accurate. The reader accepts information on the condition
that errors or omissions shall not be made the basis for any claim,
demand or cause for action. Because of the ever-changing nature of
information & statistics the author/publisher strongly encourages the
reader to communicate directly with the company and/or with their
personal investment advisor to obtain up to date information. Past
results are not necessarily indicative of future results. Any
statements non-factual in nature constitute only current opinions,
which are subject to change. The author/publisher may or may not have
a position in the securities and/or options relating thereto, & may
make purchases and/or sales of these securities relating thereto from
time to time in the open market or otherwise. The company featured in
this edition of the Struther's Resource Report may have reimbursed the
publisher for costs including overhead, of printing & distributing
this edition. Any overage will be retained by the publisher as
compensation. Authors of articles or special reports contained herein
may have been compensated for their services in preparing such
articles. Neither the information, nor opinions expressed, shall be
construed as a solicitation to buy or sell any stock, futures or
options contract mentioned herein. The author/publisher of this letter
is not a qualified financial advisor & is not acting as such in this
publication. Struther's Resource Stock Report is not a registered
financial advisory. Investors are advised to obtain the advice of a
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Resource Stocks Advisory & Struther's Future Tech Report
4-1565, 16th St E, Suite #221 Owen Sound, Ont. Canada N4K 6X8
519-374-9332 Fax 519-372-9621 Editor: Ron Struthers
Email resource@bmts.com Web "http://www.playstocks.net"
Investment Opportunities & Strategies in the Markets for Tomorrow
-- Posted Thursday, 6 February 2003 | Digg This Article
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