Ahead of the Herd
Richard (Rick) Mills
Ahead of the Herd
As a general rule, the most successful man in life is the man who has the best information
When looking for an investment, the approach I take involves looking at the overriding global - big picture - conditions. I study trends, read the news, basically watch and listen to what’s going on in the world. Then I study the different sectors in order to select the one that I think is going to match up well with, what I think is, the soon to be overriding theme. This is top down investing.
The second part of my search for the dominant investment is a bottom up approach. This is where I find individual companies in the specific sector I have chosen to invest in. I pick the company I want to invest my money in based on the quality of its management team.
Everything about a company flows from management - the ability to find a project or have projects or joint ventures (JV) offered to the company, development of the project in a timely efficient manner, financings done at a higher and higher share price, control over the share structure along with management interests aligned with shareholder interest.
If you’ve done your homework all the necessary ingredients for a potentially successful investment - the right place/time and a high quality management team with projects that need to be worked - should be in place.
Access to raw materials has become essential to the functioning of all industrialized economies. Threats to access and distribution of these commodities could include:
- Political instability of supplier countries
- The manipulation of supplies
- The competition over supplies
- Attacks on supply infrastructure
- Accidents and natural disasters
- Climate change
Every country imports and exports raw materials to one degree or another. As raw materials are the essential’s for a country’s survival, development and progress, everyone is looking for permanent, secure suppliers. A very worrying, and growing trend, is that countries rich in resources are limiting the availability of raw materials - commodities that are the building blocks of modern societies - in order to support their own industries. Such export restrictions could start confrontations over scarce resources.
Countries can restrict the export, or subsidize the import of, raw materials by means of:
- Export taxes
- Export licenses and or quotas
- Operating dual pricing schemes
- Subsidizing the import or local purchase of raw materials
Inflation is also a factor and is already infecting commodity prices.
We’re heading to a very inflationary environment. US President Obama is promising trillion dollar deficits for years to come and the US dollar is still the world’s reserve currency. With all exporting countries trying to keep their currencies weaker then the US dollar - to make their exports competitive - the inflation rate is going to rise much higher.
Whenever governments are creating money and spending to excess, inflation rears its ugly head and investors move into hard assets. The best hard assets to buy during these periods are commodities.
Our reality is we’re living on a relatively small planet with a finite amount of resources, climate change is increasingly playing a role and we have a growing human population. Accessing a sustainable, and secure, supply of raw materials is going to become the number one priority for all countries.
There’s no doubt in this author’s mind we are going to see much tighter supplies of, and higher prices for, commodities.
It’s a fact in the mining world that most discoveries are made by a) junior mining companies and b) old time individual prospectors.
If I was looking for superior investment vehicles to take advantage of what I think I know regarding the future for commodities I’d be looking at junior resource companies involved in the search for, and development of, the worlds future sources of commodity supply. Junior resource companies own, and find, what the world’s major mining companies need to replace reserves and grow their asset base.
Junior resource company’s serve an important role in the commodities markets – they feed the supply chain – and in this author’s opinion, junior resource companies offer the greatest leverage to increased demand and rising prices for commodities.
Altair Ventures Inc. TSX.V – AVX
AVX on AOTH
Altair is anticipating the results of its December 2010 drill program on the Northeast Extension Zone of its Prospect Valley project to be available soon.
Once the results of the drill program are received management will decide the next phase of activity.
Caza Gold Corp. TSX.V - CZY
CZY on AOTH
Caza Gold raised $2.8 million in its initial public offering (IPO) and started trading on November 22nd 2010.
In December, work on CZY’s Santiago project produced very encouraging results. A previously unidentified gold bearing vein occurrence was discovered which extended the Cliff Zone veins 400 meters to the northeast. The overall mineralized structure and high-grade veins have now been identified in discontinuous surface sampling over 1.2 kilometers of strike length. A first phase drill program is scheduled to start February 15.
At Caza’s Moris Property, the recent rock sampling program on the Balleza gold target - located twenty kilometers west of Gammon Gold’s Ocampo gold mine - effectively doubled the size of the Balleza gold target area. The gold target area is now over 1200 meters long and up to 400 meters wide.
Just before the December holidays, a letter agreement was signed with Inversiones Ecologica S.A. for an option to purchase a 100% interest in the Los Andes Gold Property in Nicaragua. The property is strategically located within the Central Nicaragua Gold Belt between the El Limon and La Libertad Mines of B2 Gold.
The Los Andes is a high sulfidation gold system exposed on surface as an extensive alteration zone. The alteration zone covers a 45 square kilometer area and measures 12 kilometers long by up to 6 kilometers wide. Los Andes is similar in size, nature, intensity, and trace element geochemistry to world class gold deposits such as Yanacocha and Pierina in Peru.
Caza geologists have identified additional gold systems on the project. A more general reconnaissance mapping and sampling program in 2011 will attempt to outline the overall extent of the epithermal gold and silver mineralization.
Cariboo Rose Resources TSX.V – CRB
CRB on AOTH
Major programs are expected from Gold Fields on both Woodjam North and South in 2011 - Gold Fields is currently finalizing their 2011 program. In 2010, total expenditures by Gold Fields for both properties was $4 million dollars.
Total drilling at Woodjam North for 2010 was 14,613 meters in 55 holes. Drilling is scheduled to commence on the Deerhorn Zone and the Megabuck East Area in February.
During 2010, Gold Fields completed 7,290 meters in twenty holes on the Woodjam South copper-gold-molybdenum property. The Southeast Zone currently has an 800 meter by 630 meter footprint and is open to expansion in all directions, including depth. Drilling is expected to resume in January.
Cariboo Rose’s Woodjam (North and South) project had approximately 21,908 meters of drilling in 2010 - making it the third largest drill program in BC for last year.
Canadian Creeks north boundary is the south boundary of Kaminak ‘s Coffee project ($15 million budget for initial 2011 program starting in April) and Canadian Creeks east boundary is the west boundary of Western Coppers Casino project. Canadian Creek had no exploration in 2010. With the property option reassigned there will be a 2011 program.
Canadian International Minerals TSX.V – CIN
CIN on AOTH
CIN continues to wait for the delayed assays from nine drill holes at what management believes to be a significant rare earth elements (REE) discovery on the Company’s Carbo property north of Prince George, BC.
Drilling was completed before freeze-up and cores are at the lab – assay results are pending. The high level of visible bastnasite crystals in the core is unusual and considered encouraging.
Drilling was conducted near the property border with Spectrum Mining (a private company) who announced, at a recent mining show in Spokane, they currently have an estimated 12,000,000 tonnes of 2.3% TREO on their Wicheeda Lake property.
Great Panther Silver TSX – GPR
GPR on AOTH
Great Panther Silver Ltd. had record 2010 production of 2,255,802 silver equivalent (Ag Eq) ounces, a two percent increase over 2009. New records were established for the output of all metals - 1,534,957 ounces silver, 7,216 ounces gold, 1,092 tonnes lead, and 1,358 tonnes zinc.
Great Panther's three year strategy to accelerate production to 3.8 million Ag eq oz by 2012 is now commencing its second year. Due to the success of the program’s first year - in delineating new resources and making new discoveries - the drilling budget for 2011 has been more than doubled to approximately 60,000 meters.
The combined production target for 2011 has been set at 2.87 million Ag eq oz - consisting of 1.94 million oz silver, 11,200 oz gold, 1,170 tonnes lead and 1,430 tonnes zinc.
No production from the new discoveries at the San Ignacio property is included in the 2011 target. However, as resources are estimated and mine plans are developed, it is anticipated that this project will positively impact plans for 2012. Due to the proximity of San Ignacio to the Company's main operations at Guanajuato, any ore extracted during the development phase can be trucked to the Guanajuato plant for processing.
Mukuba Resources Limited TSX.V - MKU
MKU on AOTH
Mukuba ended 2010 by releasing drill results from its 10,000 meter drill program on its flagship property the Northcore Project.
"With just about every drill hole intersecting copper mineralization, we are very encouraged by the results from the 2010 drilling program. As the drilling program progressed on Targets 17 and 18, the results continually improved suggesting we are getting closer to the source of copper mineralization. The last few holes, which contain significant sulphide mineralization, were completed just before the start of the rainy season which marks the end of the exploration season. Over the next couple of months our team will be interpreting the data in order to plan the 2011 drilling program and prioritize follow up targets that have been delineated by the soil sampling program.” Trevor Richardson, President and CEO of Mukuba Resources
During the latter part of 2010 Mukuba also undertook a drill program on the Chipirinyuma prospect within the Nyimba Project area - results are pending. The Chipirinyuma prospect was identified via a soil sampling and drilling program that defined a target of massive sulphide mineralization (zinc, with copper, lead, molybdenum, silver and gold) at shallow depths over a surface expression measuring 3.5 km by 1.2 km.
"The Chipirinyuma Prospect within the Nyimba Project Area is a near-surface, massive sulphide deposit with excellent results from historical drilling. We are confident that we can confirm these historical results and upon completion of this program and assessment of the results, Mukuba will look towards a resource delineation drill program on the Chipirinyuma area in 2011." Trevor Richardson
As the Company progresses into 2011, the main focus remains the exploration and development of the Northcore Project. The Company plans to mobilize additional drill rigs following the completion of the rainy season in the first quarter. Results of the Nyimba Project will also help to create an outline for further drilling on the Nyimba Project. In 2011 four other distinct areas of mineralization will be investigated on the Nyimba Project.
NioGold Mining TSX.V – NOX
NOX on AOTH
NioGold continues to drill delineation holes at the Marban gold deposit (Indicated 598,000 oz gold, Inferred 361,000 oz gold) under the terms of the Aurizon option agreement. Aurizon is funding $20,000,000 for three years of drilling after which they must pay NioGold a cash payment estimated to be over $30,000,000 to earn half of the deposit.
Two drills have been operating since late August 2010 and a third drill will be added before the end of January. Each drill is producing roughly 2,000 meters of core per month. To date over 45 holes have been completed and assays for over 30 holes are pending.
The following is from a very recent Aurizon news release:
Initial results from drilling the Marban property in 2010 confirm the possibility of defining a large volume medium grade deposit above 200 metres. In 2011, Aurizon has planned an initial $4.0 million exploration program comprising 32,000 metres of drilling to continue testing the lateral and depth extensions of the existing mineral resources. Two to three drill rigs are expected to be active on the property…The Marban block covers 3 kilometres of a 1 kilometre wide favourable gold bearing deformation zone punctuated by historic production, current mineral resources and exploration potential. Underground potential can be projected by following down dip extensions, similar to other deposits in the Abitibi area.”
NioGold has recently completed a financing for $7,500,000 which will be used for a fourth drill to explore on NioGold’s 100% holdings, also in the Malartic region. Initial drilling will focus immediately to the north of Osisko’s 11,000,000 oz Canadian Malartic gold mine in the southern portion of NioGold’s property.
Riverstone Resources TSX.V - RVS
RVS on AOTH
RVS’s Karma project is the company’s main focus. The project has an extremely large, and prospective, land package of 887 square kilometers on Birimian Greenstone Belts in Burkina Faso. Less than 1% of the Karma property has been explored.
Currently Karma has an Indicated & Inferred NI 43-101 compliant resource of:
Indicated - 820,500 ounces gold
Inferred - 322,300 ounces gold
Total – 1,142,800 ounces gold
An updated resource calculation for the Karma project is to be released in Q1 2011 - the cutoff for the resource calculation was November 2010. Riverstone currently has a 20,000 meter Karma drill program underway - the drill program is expected to finish in late April or early March.
Riverstone has drill tested Yaramoko (results pending), and will drill test Solna and Bissa West in 2010. The optionee is committed to $1,000,000 of expenditures in the first year of the three property option agreement.
RVS has a total land package of 2,300 sq km on Birimian Greenstone Belts within Burkino Faso.
Roxgold Inc. TSX.V – ROG
ROG on AOTH
Roxgold has chosen to concentrate most of its efforts in Burkina Faso because the country:
- Is politically stable
- Has an excellent road and communications network
- Has a modern mining code
- Has low tax rates
- Has a government committed to developing a thriving mining industry
- Has excellent geological potential - the Greenstone Belts that host all of the major gold deposits in Ghana continue northward into Burkina Faso
- Has undergone less than 10 years of modern mineral exploration
Yaramoko is the first of three Burkino Faso properties Roxgold has under option to be investigated - thirteen reverse circulation (RC) drill holes have been completed and 650 samples were sent for assay.
The drilling targeted an area on the permit where the optionor (Riverstone Resources) encountered significant gold intercepts in a 2007 drill program. Drilling has resumed on this property and is now focused on soil and rock gold anomalies discovered during October 2010. An additional 12 holes will be drilled on Yaramoko before the drill crew moves on to the Bissa West and Solna permits to complete the first year work commitments on the three permit areas.
All three properties have had a considerable amount of work done before Roxgold optioned them - all three properties have structure and gold. Bissa West has recently seen an influx of artisan miners - always a good sign.
Spanish Mountain Ltd. TSX.V - SPA
SPA on AOTH
Spanish Mountain Ltd. recently completed the Preliminary Economic Assessment (PEA) on their flagship property - Spanish Mountain. The PEA is the initial scoping study that a company utilizes to develop, coordinate and plan the milestones towards production.
According to the current PEA, the average annual gold production during the first five years is expected to be 213,800 ozs at a total cash cost of US$ 570/oz. Mine life is expected to be 10 years and the initial capital costs are estimated at C$447 million including C$70 million in contingency.
The PEA has provided the company with clear drill targets that will potentially enhance the project’s mineral resources and project economics. SPA is finalizing plans for a significant spring drilling program which will focus on targeting mineralized material located below and outside of the base case PEA pit design to supplement the current Mineral Resource.
A further readymade exploration project is the adjoining Cedar Creek property which was acquired in 2010. SPA has identified this property as having excellent exploration potential and is in the process of identifying targets for a spring drilling program
A Memorandum of Understanding with First Nations is also in progress and expectations are that a signed agreement could be completed in the very near future.
With First Nations support, excellent nearby infrastructure, a successful PEA and potential for resource expansion, Spanish Mtn. seems too be well on its way down the development path towards production.
Texalta Petroleum Ltd. TSX.V – TEX.A
TEX.A on AOTH
A new horizontal development well - the Wordsworth E HZ 3D3-23-3A13-14-7-3W2 has been drilled to a depth of 1841 meters. Completion work will start on the recently drilled Queensdale W HZ 2D5-25-4B10-26-6-2 W2 well, depending on the availability of a service rig, after which the Wordsworth well will be completed. Both wells could be producing by the end of January.
Drilling of the farmed out Joarcam wildcat well, located near Camrose, Alberta, should start this month.
In Australia, interpretation of the recently completed seismic survey is ongoing. So far, results indicate the locations for at least two conventional wildcat wells to be drilled in 2010.
Tiex Inc. TSX.V - TIX
TIX on AOTH
Tiex is currently going through a metamorphous – the changes being contemplated today will define the future and immediate direction of the company. The goal of management is to build shareholder value by focusing geological attention on the properties, in their extensive portfolio, that have data streams conducive for indentifying drill targets. Compilation of this data is currently underway and being interpreted by TIX’s Qualified Person (Q.P.) Steve Wetherup of Caracle Creek International Consulting (CCIC).
The recently closed financing attracted a number of key investors that can help Tiex remain viable in the long term. This, coupled with the geological expertise of CCIC, and managements focus, will make Tiex Inc. a company to have on your radar screen for 2011 and beyond.
Uranerz Energy Corp. TSX – URZ, NYSE AMEX – URZ, Frankfurt – U9E
URZ on AOTH
Uranerz Energy Corporation is engaged in the acquisition, exploration and development of properties in the uranium sector with the goal of becoming a uranium producer. Uranerz has expertise in the in-situ recovery ("ISR") mining method.
Uranerz has just received the State of Wyoming Permit To Mine, which when combined with the Final NRC Materials License (expected shortly) will allow the company to develop its Nichols Ranch ISR Project.
"This is a very significant event for our company, and it is one of the first new commercial uranium Permits to Mine issued by the WDEQ in almost 20 years. It gives Uranerz the State's approval to construct and operate an ISR uranium mine and demonstrates, through no negative comments being submitted to the WDEQ during the public comment period, that the citizens of Wyoming support uranium mining as long as operations follow the State's comprehensive environmental laws and regulations." Uranerz President and CEO Glenn Catchpole
VMS Ventures Inc. TSX.V - VMS
VMS on AOTH
During the fourth quarter of 2010 diamond drilling and a surface Induced Polarization survey was completed on the Sails Lake project. Gold targets were outlined with the integration of soil geochemistry (Mobile Metal Ion), prospecting and geophysics. The drilling intersected significant gold mineralization in hole SA-10-007 attesting that the companies targeting methodology is sound and that follow-up work is warranted on this project.
VMS continued to monitor the Reed Lake Joint Venture with HudBay Minerals Inc. which successfully confirmed the continuity of the deposit at depth (RLD015). The exploration meeting, between HudBay and VMS in November, allowed the team to review all the targets for the up-coming winter exploration program of diamond drilling, geophysical and geochemical surveys.
In the first quarter of 2011 VMS will continue to follow-up on their success at Sail Lake with additional line cutting and a detailed 3D Induced Polarization survey. Results from this survey will be augmented with geological mapping, geochemical surveys, diamond drilling and trenching/sampling slated for Q3.
The remaining projects will see approximately twenty diamond drill holes testing base metal targets throughout the camp, Time – Domain Electromagnetic surveys (TDEM) over Morton Lake and Leak Lake area, as well as geochemical (Mobile Metal Ion – MMI) over geophysical anomalies on the Puella Bay project.
The bull market for junior resource companies started in 2002 and temporarily ceased in 2007/2008. This author believes that we are today, on the cusp, of a long term bull market run for junior resource companies.
Are there a few junior resource companies, with exceptional management teams, on your radar screen?
If not, maybe there should be.
Richard (Rick) Mills
If you're interested in learning more about the junior resource market please come and visit us at www.aheadoftheherd.com.
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Richard is host of www.aheadoftheherd.com and invests in the junior resource sector. His articles have been published on over 200 websites, including: Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Lewrockwell.com, Casey Research, 24hgold, Vancouver Sun, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald, Resource Investor and Financial Sense.
Legal Notice / Disclaimer
This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified; Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.
Richard Mills owns shares of the following company’s mentioned in this report:
Altair - AVX
Riverstone - RVS
Terraco - TEN
Tiex - TIX
All company’s mentioned in this report are advertisers on Richard’s website www.aheadoftheherd.com