Madison Minerals Inc. is a gold and silver exploration company with two key assets in its portfolio.  Both projects are strategically located next to gold mining projects owned and operated by senior gold mining companies and both projects possess enormous potential. The Mt Kare project in Papua New Guinea (PNG) has a resource of approximately 2 million ounces of gold and 20 million ounces of silver. It lies contiguous to Placer Dome’s Porgera Deposit where over 800,000 ounces of gold were mined last year.  The second asset is the F.W. Lewis property in Nevada and it directly abuts Newmont Mining’s Phoenix-Fortitude complex that has over 6,000,000 ounces of gold in its resource base, millions of ounces of both gold and silver having been already produced.  Both of Madison’s properties have ongoing exploration programs in order to identify the precious metals components contained within them. Madison has been working on the Mt Kare property for close to ten years and has spent in excess of $33,000,000 Canadian to date. The appeal only grows when one considers the low market capitalization which is under $10 million (US).

From a historical perspective, we need to first realize that during the two-decade bear market in the gold sector (1980-2000), a decrease in capital investment from the senior precious metals companies led to a near collapse in their exploration programs. During that same period, only high-grade gold was mined in a process known as “high grading”.  Companies fought for their very survival by mining their high grade ore that was easily assessable when gold was at historically low prices.  Coincidentally, their major reserves and resources have been so severely depleted that they are constantly on the lookout for exciting discoveries to replenish their asset base. Madison Minerals' Mt. Kare project would certainly fit into that category of exciting discoveries.

It is always difficult to locate properties and or projects that contain two to five million ounces of gold and silver ore that is economical to mine. However, that is the goal of most senior mining companies (‘seniors’) and so it becomes the same goal for junior mining companies. The seniors desire these large deposits due to economies of scale that will be viable within their operation and organizational structures. The appeal of junior exploration companies from the investment side is that if they are well managed and are nimble, they can accomplish things that the large companies cannot, especially within a compressed time frame. They operate “lean and mean”. This is making the appeal of the junior exploration companies all the more attractive at this particular point in time.  

This is one of the compelling reasons behind Madison’s success in addition to the fact that they have a management team that is proven and successful. This is a team that has made a practice of finding quality properties close to or contiguous to those successful projects operated by senior mining companies. An old mining axiom is that when looking for gold; go where the gold has already been discovered. This is often referred to as an “area play”. It is similar in fact, to the real estate axiom of location, location, location.

As gold fights to get through the significant $430 resistance level, there is still a terrific opportunity to bring some leveraged exposure to your portfolio by adding several high quality junior gold exploration companies.  Many of them are still trading at significant discounts to their early 2004 highs!  These investments should become ever more valuable over the next several quarters; perhaps even years as gold appreciates and demand for the exploration companies with quality projects keeps on growing.  Mergers and acquisitions will continue to dominate the industry as the senior mining companies seek to increase their depleted resource base.

Therefore, it is an opportune time to consider adding several junior exploration companies to one’s portfolio in order to gain the benefit of the upside potential many of these companies will provide.   Although we referring to a high-risk segment of the precious metals sector, tremendous rewards are very possible if gold continues its ascent higher within the parameters of the current supply-demand scenario described above. 

And one of the companies to consider is Madison Minerals. The two properties in its portfolio each provide the potential for a large deposit discovery. There have already been two-million ounces of gold and nearly 20-million ounces of silver identified as resources at their Mt. Kare project.  What makes the story even more compelling is the particular and well positioned location of each property. Mt. Kare is contiguous to Placer Dome’s (PDG) Porgera Mine, while their Lewis Property is adjacent to Newmont Mining’s [NEM] Phoenix-Fortitude open-pit gold mine, which (Newmont’s property) contains some 6-million ounces of gold reserves!

With a 90% interest in Mt. Kare, Madison Minerals has tremendous exposure to precious metals in PNG, a proven region for gold exploration with exceptional potential.

After the acquisition of this property in 1996, over $33 million Canadian has been spent to date on exploration resulting in approximately 37,000 meters of diamond drilling from 235 drill holes.   The enormous geographical dimensions of the property cover close to 220 square kilometers. More importantly, Mt Kare possesses the same type of geological features that has made Placer Dome’s Porgera property so successful.  The Porgera deposit has over 28 million ounces of gold resources and has been averaging a production schedule of over 800,000 ounces of gold per year during the past decade. 

Again, the potential for an even larger discovery at Madison’s Mt Kare property is truly possible. With a resource base of approximately 2 million ounces of gold and close to 20 million ounces of silver, and with recent drill programs discovering new gold zones, the company is well positioned.  

Please keep in mind that the property is being further tested and additional drilling will commence in November of 2004 following a financing that is expected to surpass $3,000,000 Canadian. The drill targets have already been identified and it is only a matter of time before the crews are once again hard at work.

Madison’s second holding is the Lewis Property located in Lander County, Nevada and it is adjacent to Newmont Mining’s (NEM) Phoenix-Fortitude pit which enjoys a resource of close to 6 million ounces of gold, 2 million which have already been mined. The Lewis property covers a total of 5,500 acres and much like the PNG property, directly abuts a senior mining company property that has enjoyed great success over the years. Currently, Newmont has a planned expansion on their property which will cost in excess of 200 million dollars and will include the construction of a New Mill which in actuality will be relatively close to Madison’s Lewis property.

The Lewis property is located within the world renown Battle Mountain Mineral Belt. A map of it can be seen on the right hand side of your screen.  Currently Newmont is planning to resume mining operations in 2006 and their complex is estimated to contain a 15-year mine life.

Madison now holds a 51% interest in the Lewis Property with an option to increase it to a 75% interest.  The company plans to establish a preliminary resource estimate from the drilling they have already completed on the Virgin Structural zone adjacent to Newmont’s Phoenix Fortitude boundary near the south side of the property. 

Madison is in the midst of restructuring its outstanding shares on a fully diluted basis, with a reverse split scheduled to occur within weeks (a one for five share reverse split).  This will reduce their total outstanding shares to approximately 20-25 million when accounting for both the reverse split and the subsequent financing that is to immediately follow.  This reverse split and immediate financing will allow the company to be well positioned to continue exploration programs and enhance shareholder value.

With a market cap of under $10 million (US) and while trading at a fraction of its recent highs witnessed in early 2004, it would appear that Madison Minerals is a strong buy at these levels.

 

During the first half of 2004, the gold exploration sector was severely depressed after the gold price dropped from $430 to $370 an ounce. Companies such as Madison were the unfortunate victims of significant share price reductions.  Although some junior mining companies have recently begun to benefit from a renewed buying interest from the retail public, many companies still remain relatively quiet. They will likely trade off their recent lows until gold breaks the $430 resistance barrier.  Once this price level in gold has been violated to the upside, I fully expect a major price move in gold that could take it well past $500.00 an ounce. Regardless, once that $430 level is broken to the upside, I think it safe to believe that both junior and senior mining companies will benefit. Madison Minerals will most assuredly be one of them.

 

Recommendation
Short-Term (0-3 months)
Strong Buy
(pre 5-1 reverse split data)
Long-Term (1 year+)
Strong Buy
Price Target:	$0.43+
Recommendation Price:	$0.11
High Risk / High Reward
Madison Minerals Inc.

 

  

Author: Peter Spina, GoldSeek.com

© Gold Seek LLC, 2004

 

 

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-- Posted Tuesday, 26 October 2004 | Digg This Article

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