-- Posted Friday, 25 August 2006 | Digg This Article
August 14, 2006
D. Stewart Armstrong
Recommendations in alphabetical order:
Buffalo Gold (BYBUF and BUF.U)
Geocom Resources (GOCM)
Golden Phoenix (GPXM)
Journey Resources (JNY-V)
Madison Minerals (MMRSF and MMR-V))
Nevada Pacific (NPG-V)
Oromin Explorations (OLE-V and OLEPF)
Trio Gold (TGK-V)
Prelude
If you are familiar with all facets of the junior mining sector and need no further elucidation as to their intricacies, please go directly to Part II
On approximately August 1, 2006 GoldSeek.com posted The Summer of 2006, Parts I and II, A Treatise on Imbalances. Once again, I endeavored to offer a few ideas as to why the precious metals complex was the place to be investing during the last half of this year. I am still anticipating a jump start to the gold and precious metals sector when September 2006 arrives. A best, it has been a difficult summer for the sector.
Against that background, I’d like to once again recommend and in many cases re-recommend a few companies that I believe will do well in the current precious metals environment. However, remember that these are Junior Mining Companies and as such are primarily involved with exploration; that is to say that most of them are not producers. The good news is that almost all of these companies are not “Grass Roots” meaning that they’ve already completed a good deal of work on their projects. This could encompass anything from geophysics, to mapping to trenching to drilling. As the supply demand fundamentals for the PM markets come more into focus, the Senior Mining Companies will definitely be on the lookout for the next one to five million ounce deposit. I do believe we have several of them on our list.
Long Term Options
Junior mining companies are high risk—high reward scenarios and I want everyone to recognize as much. When you are dealing with these types of companies you are in actuality placing a bet on what could be likened to a long term option on gold, silver, molybdenum or whatever the underlying commodity might be. The one big difference is that there is no time decay on the position and therefore it becomes a much more effective “call”.
We are dealing with leverage and as you well know leverage can work for you or bite you in the butt so you do have to be careful. I am not fond of traditional options and futures for neophytes although in the hands of professionals, they can serve a purpose. By the same token, professionals can just as easily lose money. Here is the one key difference in derivatives between the big boys and the smaller investor. “Da big boyz” have much deeper pockets and as such are able to wait longer and manipulate their positions (black box or automated trading) to a more efficient degree in order to create a profitable situation. Think of it like this. If you keep doubling down on your blackjack bets, sooner or later, you are going to win. The question is—can you sustain an extended losing streak without going broke? Regardless, I wouldn’t recommend it.
Yes, Alice, there really is Manipulation!
We need not act like children any longer and pretend to see the world as it ought to be: a pristine universe of truth and justice. The financial world in particular is filled with sharks just waiting to feed on those aforementioned neophytes at the first sign of blood. Yes, Alice, there really is manipulation in all the US and London markets and it manifests itself in a thousand different ways. If you play in this sandbox you’d better be looking over your shoulder because the power elite doesn’t give a hoot about a fair market. They are motivated to take your money as fast as they possibly can; especially in the derivatives markets. Do I sound jaded or realistic? Good, because if you don’t understand this basic concept you’re going to have a bucket or two of sand kicked in your face.
However, if you play your cards right and allow the “trend to be your friend” while exercising patience and choosing well managed (junior mining) companies, that leverage will indeed be your friend. In other words, you’ll make some money. If you jump around like a cat on a hot tin roof, ignore the principals of investing in these kinds of companies; principals such as knowledge, patience, and discipline, you might as well not even begin the exercise of investing in the sector at all. Are there sharks in these waters? Does a wild bear waltz in the woods? But there are also well run companies with ethical managers controlling excellent projects and those are the ones with which we want to be involved.
Liquidity
We also really need to comprehend the issue of liquidity in the junior sector. Junior Mining Companies by their very nature are illiquid! There are times they are racing around the track like a greyhound chasing a mechanical rabbit (racing both upwards and downwards!) and there are other times when they trade as actively as a hound dog in the August Mississippi Delta noon day sun. This is when exercising patience will benefit us immensely. I firmly believe that fortunes will be made in this current resource market but it will be a maddeningly slow process. I believe we’ve all witnessed that type of environment over the past three months.
Americans hate slow. We want action—we want it now! We don’t want “no slow”. We want fast—we want it yesterday! Investing in Junior Mining Companies can be like watching paint dry and it is always easier to “get in” (buy) than “get out” (sell). Think of them as windows of opportunity. There are specific times to sow (buy) and there are times to reap (sell). If we get it backwards, we are going to be upside down—not a good thing. This is not an easy “game” but if we learn to abide by the “rules”, we can do quite well. The nature of liquidity in these markets is one of the rules we need to understand. Newcomers often make the expensive mistake of believing that there is always sufficient liquidity to enter and exit positions and in certain seasons your five thousand share order will “move the market” and those sharks will be licking their chops. Do sharks have chops?
Speculation versus Investing
Furthermore, I think we really have to understand that there is a difference between speculation and investing and many times that line can be paper thin. In essence, speculation entails more risk and investing supposedly entails less risk. But let’s not kid ourselves, many times what passes for an investment can turn out to be quite a dud and speculations can turn out to be spectacular investments. Success revolves around how well we know our companies, how solid the management, and the potential of the properties.
Remember this one thing about the Summer of 2006!
Over the summer, the prices of the Junior Mining Companies have been declining due to a lack of buyers, not due to a deluge of selling. That is a very good sign. Prices have been dropping on low volumes. That tells you that there are some excellent bargains to be had and we should be taking advantage of them. Remember, the bull is always trying to buck you off whether he is sleepy or on steroids. The winners in this “game” are the ones who have the patience to stay with the bull and not let him buck you, discourage you, or put you to sleep only to start bucking again when you least expect it. Under those stop-go stop-go scenarios the trend is truly your friend. So treat the bull kindly and he will reciprocate. Go “head to head” with him and you’ll have a cracked “noggin”. We expect that the prices of these JMC’s will begin to once again appreciate in earnest during August of 2006 and then build a head of steam going into late September and early October. This could be the year where gold breaks the rules of the game and “forgets” that it is supposed to operate in certain cycles within specific models. Once this bull gets moving again, it could go well into the Spring before it takes a breather.
The Deferred Gratification Pattern
Why is it that in today’s world, the deferred gratification pattern has gone the way of the Edsel? Well, it is partially because the concept has not been inculcated into the youth of the country; it is because the adults need everything now, it is because we’ve become lazy as a nation (although there are certainly many exceptions) and it is because Mom and Pop are just too damn deeply in debt, not to mentioned tired!
There is often a necessity for quick profits for a myriad of reasons—take your pick. The (Hedge) funds are extremely competitive and often times these moves you witness in the gold and precious metals markets, even the base metals markets are due the funds fighting each other for every penny. They are quick on the trigger and black box (mechanically oriented-automated trading) programs react faster than the human mind. Deferred gratification is for long term investors who don’t have the tools to compete with the funds. You need to find your niche, discover the well-run companies that have a sporting chance for success and stick with them. Being an independent thinker doesn’t hurt your chances for success!
Your Personal keys to success are knowledge, timing, and patience.
Remember that in this Junior Mining Business, more than any other asset, solid management is the key. Why? It’s because seasoned management understands the complexities of the bulls and the bears in their particular sector and they also understand how to run with the bull or get out of the way of the bear. They also know the components of a promising project. That knowledge comes with experience.
Remember that we are looking for ethical, experienced management with solid properties; with the ability to fund and the knowledge that proper promotion are all parts of the equation for success.
Knowledge, timing, patience, and discipline are your tickets to the JMC investor’s ballet. It is also about understanding which sectors are “hot” and which ones are not. Again, the precious metals sector and the energy sectors are currently red “hot” (even though they may be in a lull) and I do believe as the dollar softens and the western societies run short on the physical gold with which to manipulate the markets, there is only one direction for the sector to go and that would be up.
Patience comes into play because we want to be buying when everyone is looking the other way. In our world of immediate gratification, where sometimes a day is considered a long term investment, that can be in and of itself a scarce commodity to corral. Now is the time to be buying!
Precious metals have doubled over the last five years and yet they are still on sale. That is what a 20 year bear market and a lot of horse malarkey (gold is a barbaric relic, etc.) will give you.
Visit the Web Sites First
I am now going to offer you a list of Junior Mining Companies that I’ve been covering and consider to be excellent prospects. Consider each and every one of them to be Speculations first, and then by all means treat them as Investments. These are high risk high reward plays but we believe that most of them are going to perform quite nicely over the next six months. Nothing happens overnight; however, so I want you to exercise patience and discipline. I don’t believe any of these companies are going to go “bust”. As importantly, the rewards could be quite spectacular if you believe as I do that a possible 100% return on your money within six or eight months is quite attractive. I’m also trying to be conservative in my assessments so as to keep the hyperbole to a minimum.
Some of these companies are going to perform better than “a double”.
The first thing you want to do with these companies is to visit each of their web sites and acquire some basic understanding of where the properties are located, a general idea about the management team, whether they have the ability to fund, whether they are willing to promote their companies, and most importantly, whether or not these companies operate with integrity.
I’ve had the opportunity of talking extensively with the principals of all of these companies on our list and I believe that each one has the potential for double from these levels.
I believe that writers and analysts are so important that I’m constructing a list of some of the best in the business and calling it the “Top Ten Lists”. It will be posted exclusively on Goldseek.com within the next several weeks, even if those lists are not complete! They will be works in Progress.
Until then,
D. Stewart Armstrong
Consultant to the Junior Mining Sector
Junior Mining Company Updates
Part II
August 23, 2006
Let’s begin with Madison Minerals because it is the company I’ve been tracking for the longest period of time.
Madison Minerals (MMRSF-OTC and MMR-V)
www.madisonminerals.com
Suite 2000, 1055 W. Hastings St.
Vancouver, BC, Canada
V6E 2E9
Contact: David Scott
1-877-529-8475
Highlights:
Attractive Share Structure
Very Experienced Management with a proven track record: “Been around the Block”
Two Excellent Properties: The Lewis Property (joint ventured) and the JV with Buffalo Gold on Mt. Kare in Papua New Guinea.
Elevated talent level and past successes of Chet Idziszek, David Mallo, and Jim Stewart.
Knocks:
Investors do not understand the JV between Madison and Buffalo Gold—hint: it’s a good deal for both companies
Investors have lost patience because they don’t understand the magnitude of what is currently at stake and they have not had the patience of said Monastery Monks mentioned below!
News:
News Flash: Buffalo Gold Posted a Press Release on August 16, 2006. The numbers were excellent and this latest press release speaks for itself. Terrific Results just posted on Mt. Kare by Buffalo Gold. (See PR dated August 16, 2006)
Vancouver, B.C., August 16th, 2006 - Buffalo Gold Ltd. (TSX-V: BUF.U) is pleased to announce additional assay results from the diamond drilling program at the Mt. Kare Gold Project in Papua New Guinea. Highlights of the drill results include:
- 33.4 metres of 15.7 g/t gold in hole MK06-09A, including:
19.3 metres of 24.32 g/t gold - 86.0 metres of 4.2 g/t gold in hole MK06-43, including:
58.3 metres of 5.83 g/t gold - 122.0 metres of 2.4 g/t gold in hole MK06-49, including:
69.0 metres of 3.13 g/t gold
Madison has begun its drill program on the Lewis property which is contiguous to Newmont’s Phoenix Fortitude complex
The Lewis Property in Lander County Nevada
When I wrote Madison Minerals and the Monastery Monk which can be found in my archives on GoldSeek.com (posted around February 1, 2006) I thought surely the company would be drilling in Nevada on the Lewis Project by late spring. However, a problem arose and that problem turned out to be that just about half the “Juniors” in existence thought that late Spring would be a good time to initiate drilling programs. Of course, the gold market was catching fire and everyone who had been involved with gold over the last decade was catching gold fever. Consequently, all the RC (Reverse Circulation) rigs were spoken for and Core Rigs were really not economically viable for the Lewis Property.
But by all means, review the last several articles on Madison and especially the one to which I just referred.
I believe that once the rigs get to drilling we will be looking at a 25,000 foot program. There will be about 40 holes in the range of 600 to 700 feet deep.
If the assays come back “looking good”, I would not be surprised at all to see the program extended. My sensing is that we’ll start to see some positive assays coming back just around the time that the gold market is really heating up in the fall of 2006.
The Lewis Property in Nevada sits directly next to Newmont’s Phoenix Fortitude Complex. They have drilled several spectacular holes: MAD-05 gave up ½ an ounce of gold over 105 feet. That should give you cause for encouragement. However, this is not a one hole wonder at Lewis—historically, this is an excellent project and please review some of the past press releases to see just how good they were!
The JV Project at Mt. Kare in PNG
Remember that Madison has entered into a joint venture arrangement with Buffalo Gold relating to their Mt. Kare Property in PNG (Papua New Guinea). August 15, 2006, Buffalo offered up some drill assays on Mt. Kare which reinforced what we’ve been saying for five years. This is a property that has “the goods”—has world class potential—and has excellent exploration teams working on both sides of the fence.
This is one of those deals where patience has been warranted and yes, I know it has been difficult to be patient. However, my totally biased opinion as can be seen from the last four years via my archives on Goldseek.com is that this company is sitting on a world class deposit.
Furthermore, it would appear that the Chet Idziszek’s group and Damien Reynold’s Group are working together seamlessly on Mt. Kare. It has taken a while for things to get moving (jelling) but that is absolutely normal in this business and in this current environment. These are two companies to consider for your portfolio. Both Madison and Buffalo are on the move and I’m looking for good things from both companies this fall.
Madison currently sits at around $.35 US and MMRSF is definitely a buy at these levels. I fully anticipate that we’ll see this stock close to $1.00 just on the gold price being near $750 US; let alone what will happen if some eye-popping assays start arriving.
It would also appear that Madison has just begun the drills turning at Lewis in Nevada. This is the one two punch that for which shareholders have been waiting !! Both Madison and Buffalo had positive moves up today, (August 16, 2006) based upon all the activity to which we’ve been referring.
If you didn’t invest at the absolute bottom despair not. Madison should never have been trading at the low level it was today. Buy Madison up to a dollar US and you’ll be in fine shape. Between Mt. Kare and Lewis, there is enormous upside potential. Programs on both projects are just getting started. http://www.madisonminerals.com/html/archive/Madison_August_16_2006.pdf (paste in your browser)
Madison is a Buy and at these price levels it is very affordable! Again, it is my opinion that $1.25 US is not that far away. This company, in my very biased opinion, is a steal at these levels!
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Buffalo Gold (BYBUF.OTC and BUF.U):
www.buffalogold.ca
1055 West Hastings, Suite 300
Vancouver, BC V6E 2E9
Canada
Contact: Julie Hajduk
1.888.685.5492
Highlights: Aggressive, committed leadership under the direction of Damien Reynolds
Excellent organization being developed
Terrific IR Team headed up by Julie Hajduk and assisted by Steve Ellis
New drill results just posted that are exceptional; Madison and Buffalo working together seamlessly
Knocks: Australasia is a region not well understood by US investors; nor is Uranium
Organization is just getting legs under it and new people just getting up to speed. (Imagine what happens when everyone hits their stride!)
News: Exceptional Drill Results just posted:
Vancouver, B.C., August 16th, 2006 - Buffalo Gold Ltd. (TSX-V: BUF.U) is pleased to announce additional assay results from the diamond drilling program at the Mt. Kare Gold Project in Papua New Guinea. Highlights of the drill results include:
- 33.4 metres of 15.7 g/t gold in hole MK06-09A, including:
19.3 metres of 24.32 g/t gold - 86.0 metres of 4.2 g/t gold in hole MK06-43, including:
58.3 metres of 5.83 g/t gold - 122.0 metres of 2.4 g/t gold in hole MK06-49, including:
69.0 metres of 3.13 g/t gold
For the sake of continuity, let’s take a quick look at Buffalo Gold. (BYBUF-OTC and BUF.U-V) They have a joint venture with Madison Minerals and just released some excellent results from their ongoing drill program at Mt. Kare.
The drills are turning at Mt. Kare in Papua New Guinea and the best way to phrase it is: Go Buffalo! Seriously, they released an initial set of assays on the project which came back with solid numbers and are aggressively expanding their drill program due in large measure because the first several rounds of assays came back with such excellent numbers. I like the group, I know some of the directors personally, and I feel that they will have an exciting fourth quarter. Damien Reynolds, Chairman of the Board, heads up the group and has recently hired on Brian McEwen as COO. A very knowledgeable and gracious Julie Hajduk directs the IR department and she is the ultimate team player. She is one of the best IR people I know and I encourage you to call her with questions. Damien has a way of picking the right people for the job and Julie and Brian are helping move this project along.
I know Doug Turnbull and Jim Stewart, two directors of the company. Both are first rate professionals.
In this business there is a good deal of hyperbole. With some promotion comes said hyperbole. However, it is very evident that this company is about getting results and getting them in a timely fashion. If you want to keep up with Damien Reynolds and his team, you had better wear your roller skates. Hyperbole is unnecessary. After being around the business for a while, you get a feel for who is going to “produce” and who is going to “talk”. I honestly believe that Buffalo is going to continue to produce.
I have very big expectations for this company. Buffalo Gold in my opinion is a buy. Incidentally, I don’t use terminology like “strong buy” or “very strong buy”; it is either buy, hold or the alternative. Again, Buffalo Gold is a buy!
www.buffalogold.ca/s/Home.asp
With a third drill landing on the property in the near future, we can look for even more aggressive drill programs. The third rig will allow them to explore regions of the property undeveloped in the past. If a new mineralized zone is discovered on the Mt. Kare project, then all bets are off. My feeling is that a new zone is going to be aggressively sought based upon some of the mapping, trenching, and geophysical work that has already been completed.
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Journey Resources Corp. (JNY-V)
www.journeyresourcescorp.com
Box 12129
#1208, 808 Nelson Street
Vancouver, BC V6Z 2H2
Canada
Contact: Jack Bal
1.604.633.2442
Highlights: Experienced business leadership under Jack Bal
Three projects that could be advanced to production in a relatively short period of time
Drills Turning on Empire in conjunction with Trio Gold; and the 100 % controlled Musgrove Property
Anticipating Bankable Feasibility Study on the Empire Project to be completed by year’s end
Vianey Silver Project in Mexico to Commence work in September
Knocks: Journey is a bit behind on acquiring their US Symbol; should be up and running by the end of September 2006
News: Near Term Assays on two different Projects: The Empire and Musgrove
Work to Commence on the Vianey Project by early September
In this environment Gold, Silver, and Copper are excellent commodities for your portfolio. Journey is working on all three.
Journey has three projects with gold, silver, and copper that could be advanced to production in a relatively short period of time. There is the Empire Project in Idaho which is a JV with Trio Gold, there is the 100% controlled Musgrove Project in Idaho with a 400,000 ounce resource and there is the Vianey Project in Mexico which is a silver play. I like all of these projects but somehow the Idaho Musgrove Project seems to stand out in my mind. Currently they are involved with an 8-10 hole RC (Reverse Circulation) drilling program at the project, are on their fifth hole, and should have assays available sometime in early October. The average depth is about 700 feet.
I feel that Musgrove is worth the price of admission and the other companies are icing on the cake. By the same token, we might also think that Empire is the ticket and the others are icing on the cake. The point is you have a good deal of cake and icing with Journey.
This company has a bright management team. Jack Bal is a gentleman who continually impresses me with market expertise and is a product of the old school of hard work, due diligence, and experience. He has a real empathy for his shareholders and I personally believe you are in good hands with Jack. My comfort level increases by the day as far as the company is concerned. Want to know why? They have a knack for solving problems. They do what they say and say what they’ll do . That is what business; any business is all about—solving problems and promoting trust. Michelle, Andy, Jag, and Jack and the entire team all share the same mindset. It is a pleasure doing business with them.
We are hoping that they will soon have their OTC listing—sometime in mid-October of 2006 and then we should be off to the races. Once Journey is truly opened up to the US market, I think that the word will spread quickly that this is a first rate operation.
Finally, be sure to visit and assimilate the information on their website. It is exceptionally well put together and everything you need to elevate your confidence is right there in black and white. Incidentally, get a feel for the web site—well managed, well put together, informative, coherent and you’ll have an excellent sensing of the company.
Journey is a buy and at $.28 US is an opportunity knocking. It is my opinion that one could purchase it up to a $1.00 US and still be in the comfort zone. There are simply too many pluses and very few minuses affecting this company.
Oromin Explorations: (OLE.V)
www.oromin.com
Suite 2000
1055 West Hastings Street
Vancouver, BC
Canada, V6E 2E9
Phone: 604-331-8772
Fax: 604-331-8773
Toll Free at: 1-877-529-8475
Contact: David Scott
Highlights: Excellent Management and one of the best Projects in Africa: a truly exceptional combination
Extraordinary geological team
Excellent Web Site and Brochures will bring you up to speed quickly and efficiently
Reread the Press Release dated May 24, 2006.
Knocks: Currently, there is no US listing but that is soon to change. Management is working on having an OTC symbol in the near future.
News: The news has been continuous and positive. Look for assays to be posted from now until the holidays. Please review my two past articles on
Oromin in my archives on GoldSeek.com
Oromin Exploration continues on unabated beneath the radar screen of most investors. I personally believe that this is a big mistake because this company has all the elements for a grand slam. Many investors are up 500% or better since their entry point. However, I personally believe that Oromin, based upon their approximately 230 square kilometer project at Saboda, is just at the beginning of the race. Don’t be fooled by the big gains. Yes, the drill results have been spectacular and yes there are precedents to use as models (MDL “next door”) but this is an absolutely huge project by anyone’s definition and I can assure you that the majors are watching every move that is occurring at this project. Yes, you are going to pay a bit more to become involved but no, don’t look for the price to take a big move down. It just ain’t gonna happen. Now is the time so buck up and buy this company up to $3.00. Again, my opinion is that you won’t be sorry. And I said the same basic thing when the stock was trading at $.40.
Their main project is Sabodala project in Senegal, Africa. However, they also have an excellent gold project in Brazil http://www.oromin.com/download/August_02_2006.pdf) and a very highly regarded oil and gas project in Argentina (http://www.oromin.com/download/November_16_2005.pdf ) I’ve written about Oromin several times in the not too distant past and I plan on doing another report in the near future. All past articles are available in the archives on GoldSeek.com. Those write ups and the special report they’ve posted will give you the skinny on this deal. What you “feel” throughout this company is QUALITY which simply reflects the quality of the project, the managers, and the assisting staff of independents and consultants.
Listen, this project has grand slam potential and the numbers keep getting better and better. David Mallo, their chief geologist is a very special and talented guy and one who I happen to hold in very high regard. I think that’s about as much as I can get away with saying because he is very low key in terms of personal promotion. And of course, Chet Idziszek is no slouch himself having been named Canada’s Prospector of the Year a few years back. He is also as seasoned as they come. Jimmy Stewart is one of the directors and an attorney to boot—but I don’t hold that against him. He is a very bright talented person who has been in the business for a very long time. It’s a formidable team that has this extraordinary talent of landing highly desirable projects.
I’d be remiss if I didn’t mention Doug Turnbull who is an independent geologist and is on the board of directors of several of the companies I’ve mentioned including Oromin. Doug is another talented no nonsense type guy who is very good at what he does. All of this talent on this one project has to tell you something and I know you’re bright enough to figure out what that something is.
Incidentally, Maureen McPherson, an independent graphic designer, created the very user-friendly, beautiful web site. What a job she did. It just goes to show you the talent that Chet, Jim, and David have assembled on this Project. They also control Madison and Lund Resources. When this market blows off in stage four and five, you are going to be kicking yourself if you don’t have a position in this company. Yes, I’m totally biased as I am working on all of these companies, but this one just happens to be the cat’s meow. By the way, what is a cat’s meow. How come they don’t say, this one is the dog’s bark? Or this one is the fishes bubble or the shark’s bite. Just checking to see if you’re still awake!
In my very biased opinion, Oromin is a buy. I believe it is preparing to “blow through” the resistance of $2.25 Canadian in the next leg up in gold. During this current summer of 2006 phase, $2.75 is my comfort zone. However, drilling continues on almost unabated and when the next drill results are announced, I believe that $5.00 will be a near term target.
Nevada Pacific (NPG)
