Quarterly Report: April 2011
The market has spoken!!! We have one more leg up! Even Mr. Elliot Wave who went bearish again a few weeks ago admits that the market could grind higher over the short term. I am certainly very wary of an extended correction come May and the dog days of summer, but until then... it is one more leg up! I am betting that precious metals will also participate in this rally with targets of $1480 to $1500 gold going forward. With the way gold is trading, it is having a hard time breaking out, but at the same time, the floor for gold keeps rising and at some point the buyers are just going to overwhelm sellers at the tough resistance channel of $1430 - $1440.
Gold Canyon Resources GCU-V
Share Price… $3.38
Shares Out… 89M
Market Cap… $294 million
Initial Coverage Aug 2010 @ $0.41 +$2.97 / 724%
Gold Canyon’s infill program is full of pleasant surprises as results are pointing to an impressive high grade zone at the core of Portage.
Gold Canyon’s winter infill drilling program continues to impress as shallow vertical holes released in March show a high grade component to Springpole’s Portage Zone. In 3 vertical holes along 200 meters of strike Gold Canyon assayed…
- 28.5m @ 19.75g/t au within
- 100.5m @ 7.23g/t au
- 4.5m @ 36.21 g/t au within
- 111m @ 2.03g/t au
- 30m @ 5.69g/t au within
- 150m @ 2.56g/t au
This indicates that there is a significant near surface high grade section which can be the focus of a pit for a prefeasibility study. This will increase the project economics in the early years as well as greatly reduce the payback period being able to mine shallow high grade in the early years.
High Grade Open at Depth
The results are also pointing to this high grade zone being open at depth. At the south end… holes 22 and 24 hitting 47 meters @ 3.47g/t au and 27 meters at 4.64g/t au respectively with hole 42 (drilled 100 meter above) only hitting 1 meter at 17.83g/t au. This indicates that the high grade zone opens up at depth and gives excellent potential for Gold Canyon to hit long high grade intervals at depth when they begin testing Portage at depth in early April.
Bonanza Grades at Portage
Before hitting a meter of 126.51 g/t in hole SP10-033, the highest grade intercepts were between 10 g/t to 15 g/t gold. So hitting 1.5 meters at 167.66 g/t gold, 1.5 meters at 92.57g/t au, and a meter at 53g/t au along a 200 meter strike is very good news showing that the Portage Zone has potential for typical Red Lake bonanza grade mineralization in an atypical Red Lake geological setting.
Bonanza grades at Springpole make Gold Canyon that much more lucrative as an investment and now puts GCU’s Portage Zone on par with Rainy River. In my opinion, GCU is much more attractive a project than Trelawney’s Cote Lake Being much more continuous and having consistently higher grades.
Gold Canyon’s current results increase the overall grade of the project and start to add up the ounces at GCU which is currently estimated to be a 5 million plus ounce deposit which is the current size of Rainy River and 20 - 25% larger than TRR’s Cote Lake. With typical gold deposits in the Canadian Shield persisting to depths in excess of 1km, it is very easy to see GCU attaining 10M ounce status quickly if the Portage Zone continues to depth. Geology is also in favor of Portage persisting at depth because gold porphyry’s are known to be massive intrusive bodies that can extend to depths of over 2km.
Gold Canyon is as cheap as it gets when comparing it to similar projects like TRR and RR. Add that to the fact that GCU is now coming up with very impressive shallow bonanza grade intercepts, it makes the early years of this project very attractive indeed. GCU is a very big buy and is still rated my top buy in my featured company list based on current momentum and sentiment indicators. Gold Canyon’s high grade intercepts will make the economics very attractive and make GCU one of the premiere development stories in Canada.
Technically GCU is making a push to $5 and beyond over the short term and would not be surprised to see GCU trading above $10 by this time next year as Springpole so far looks like she is not done yielding her treasures. $3.30 is a very big mark for a penny stock to attain and since GCU has now closed it a second time, I expect this area to become a solid area of support and a floor for the SP. Gold Canyon is also going to start to attract a new investment crowd. As the market cap grows, it enables institutions that play larger cap development stories to join the party at GCU.
GCU continues to be my top stock and is priced much better than Trelawney with 4.2M ounces at $600M market cap and a much lower grade. GCU has more ounces than TRR, is higher grade and is HALF THE MARKET CAP OF TRR!!! Even after this impressive recent RUN-UP… GCU is still cheap!!!
Insiders also think GCU is cheap with another 100,000 shares bought on Friday. Insiders continue to be on a major buying spree with GCU as literally millions of shares have been bought on the open market since Christmas by insiders. Mainly Sheldon Inwantesh and Pinetree.
GCU is my top gold stock and it has been for a reason…. Because SPRINGPOLE is a MONSTER!!!
Can you hear that? It’s last call!!!
Last call for before this train leaves.
Next stop… $5
Mineral Mountain Resources MMV-V
Share Price… $0.50
Shares Out… 48M
Market Cap… $24 million
Initial Coverage @ $0.41 +0.09 / 22%
Mineral Mountain continues to deliver results that point to an economical deposit at the Cook Porphyry Zone in Shining Tree. So far the drill program following up on Golden Harp’s initial program in 2009 that hit 32.9m @ 1.93g/t au, 21.2m @ 3.56g/t au and 3m @ 21.41g/t au has replicated the initial discovery and Mineral Mountain has increased the drill program to 10,000 meters.
Mineral Mountain’s better results include…
- 14 meters @ 4.66g/t gold
- 15 meters @ 3.17g/t gold
- 13.25 meters @ 3.46g/t gold
What is impressive about MMV’s Cook Porphyry Zone is that it is an alkaline intrusion much like GCU and the results of the latest 3 holes are within intervals that average 103.5 meters grading 0.483g/t au. If the Cook Porphyry comes together at depth, MMV could come up with a pretty good initial resource. 100 meter 0.5 g/t intercepts will give a substantial near surface deposit. If the Cook Zone is typical of porphyry’s, this should come together with higher grades at depth. The results are not market moving on their own, but I am impressed with the results to date in Shining Tree that Mineral Mountain is producing and expect MMV will continue to pull increasingly better results as they start to understand the geology better and find these feeder structures. Shining Tree is the cheapest place to drill in Canada and is the most advanced drill ready target so was the obvious place to start to add value to low risk value. So far the Cook Zone Porhpyry is coming out with results that help establish an initial resource.
Mineral Mountain is not putting all their hopes in the Shining Tree Projects as they continue to accumulate land in the Straw Lake Beach Mine area which they believe has Hemlo style mineralization. The Straw Lake Beach Mine may be another Rainy River type story in itself and the Mineral Mountain gang is just finishing up acquiring all the land the can before they start to explore and develop this highly prospective property.
The real exciting news for MMV is that they are going to drill their Kootenay Arc Project this summer with an initial 3,000 meter drill program on 4 high priority targets. The Kootenay Arc Project is the company maker in my opinion, is what attracted me to MMV in the first place, and is the best chance at another Carlin Style Mineralization type discovery this summer.
The targets they are drilling are absolutely massive including Black Warrior, 8km long and open, Pulley Creek, 9.5km long and open, Spine Mountain, 12km long and open, and Butte Bonanza which is a 950 meter long gold in soil anomaly with gold in soils up to 36g/t. Mineral Mountain’s Kootenay Arc Project is the company maker and will generate some excitement and news worthy results that will start to attract the mining community as they start to explore this highly prospective region in BC just outside of Revelstoke. Mineral Mountain will continue to add value for shareholders and I am expecting them to make a big grassroots discovery on the Kootenay Arc Project.
MMV is the best chance at a grassroots Carlin Style type discovery like ATAC and if MMV hits this summer in the same type of setting, they could see the same type of share price appreciation that ATAC saw. From the above mentioned targets, they are absolutely massive in scale, just as big as ATAC’s Rackla Belt and Mineral Mountain will be looking to make The Kootenay Arc another household name in exploration in the west. Carlin Style deposits attract a premium and 2 companies that have this type of mineralization are ATC and AVZ. Both command market caps that are well in excess of $100M and in ATAC’s case well over $500M.
At $0.50 MMV is a steal having already added value this winter in their successful drilling of the Cook Zone and is now aggressively exploring properties that have the potential to increase MMV’s value exponentially upon discovery. Mineral Mountain is significantly de-risked having successfully drilled a project this winter. With them exploring high leverage projects this summer, currently MMV is a very good deal at market.
MMV at $0.50 is a bargain and a great entry point for further share price appreciation in 2011 as the Baker’s try to make another Rainy River type story all over again with Mineral Mountain Resources. My bet is it comes out of the Kootenay Arc.
Calibre Mining Corp CXB-V
Share Price… $0.16
Shares Out… 131M
Market Cap… $21 million
Initial Coverage at $0.125 +$0.035 / 28%
Calibre Mining is priced right for another good run come this spring. It has been a pretty quiet month in the news for Calibre and got hammered with the rest of the correction and is one of the few stocks not to have picked back up yet in share price. I am quite surprised that CXB is back trading under $0.20 as they announced 900,000 ounces of gold equivalent which gives them a value of $23 per ounce in the ground. The market is currently giving minimal value to Calibre’s high potential projects and 750,000 high grade ounces at La Luz should command a higher premium in itself. Not too mention that Riscos de Oro is already a 400,000 to 500,000 oz project that just hasn’t been reported. Add to the fact that Riscos is at least million once potential, there is a lot of hidden value in Calibre that will be unlocked this year as they move their projects forward. With 2,500 meters of drilling at Riscos and the exciting high grade discovery at Santa Maria, and over 900,000 ounces of equivalent gold ounces… the future looks bright for Calibre Mining.
B2 Gold released record profits recently from which a good portion can be attributed to their Nicaraguan operations which demonstrate that Nicaragua is full of high potential projects that are worthy to be fast tracked to production. Nicaragua’s projects are very enticing. They are on par with projects that were in production in the 70’s and 80’s so in my opinion, when put in production, should be that much more profitable than the lower grade projects that are being considered today. Calibre already has 2 potential mines with multimillion ounce potential right in their lap with La Luz and Riscos. Both are worthy of 50,000 to 100,000 ounce producers in one of the best underexplored land positions in one of the most prolific historical gold regions in the world. Calibre in my mind is an extreme opportunity and people just don’t understand the story at Calibre and are still afraid to invest in Nicaragua because of poor marketing of the country. Tiny Nicaragua was 15th on the list for gold producing nations in the mid 20th century. With projects that have literally been on ice for the last 30 years, Nicaragua is full of low hanging fruit ready for someone to pluck off the ripest ones and enjoy the this country that is literally overflowing with gold.
At $0.16 Calibre is a story that will prove up considerable resources in Nicaragua and hopefully bring a couple of these projects to production decisions over the next couple of years. Calibre has projects that should be fast tracked. This is another fire sale opportunity and a great second chance to ride CXB back up to the $0.20’s. Calibre is a company that has the best leverage of the bunch with projects that should have been producing 30 and 40 years ago. Technically CXB is changing trend and now testing that breakout. There is very strong support at $0.15. This stock is a must at current prices with very little downside risk.
NioGold Mining NOX-V
Share Price… $0.415
Shares Out… 72M
Market Cap… $30 million
Initial Coverage @ $0.30 +$0.115 / 38%
NioGold Mining is busy adding value at all spectrums of the company in 2011. Whether it be developing a gold mine in the Marban Block JV with Aurizon, discovery of a significant REE deposit in Quebec or drilling their 100% owned Malartic Project across the highway from Osisko. NOX is adding value at several angles this year. We haven’t heard any new drill results out of the Marban Block JV with Aurizon, but ARZ usually likes to release the results in batches so another batch of results should be due out soon. It does not mean that NOX hasn’t been busy as their share price has seen a consider jump the past month and even traded above $0.50 for a few days as there has been some excitement from a couple other projects.
In early March NOX announced that they are drilling the other end of their Malartic property which is 100% owned and directly adjacent to Osisko’s 10M oz Canadian Malartic Project. This area is highly prospective for possible Malartic extensions and represents an area that received little exploration in the past due to little outcropping. If NOX is successful in drilling this section of their property, then NioGold should start to appreciate at a much faster rate with exposure to another potential gold discovery. It may also increase interest from Osisko at that point who could buyout NOX and get good exposure to Aurizon’s Marban Block Project. If I was an Osisko exec, it is something I would be considering if NOX hits across the highway this spring and summer.
At this point it certainly looks like the Marban Block could host a 2 million ounce resource to depth. At the very least, current drilling will greatly expand the near million ounce project.
What has really got the market excited about NOX is their exposure to GeoMega Resources Montviel Project which is showing very large intervals of rare earth elements which has seen GMA’s share price go from $0.35 to the current $4.41 on the project which they optioned from NOX for a total 75% interest. GMA recently released the best interval on the project to date with 1.44% TREO over 485.45 meters. With GMA’s market cap at $80M, one can assume that NOX should have an implied value $25M for the Montviel REE project. Before the discovery NOX had market cap of $25 million which would give NOX an implied worth of close to $50M or $0.69 a share. NioGold has 3 high potential projects on the go with 2 quality partners in ARZ and GMA and a 100% project right across the highway from Osisko that could prove to be the next major discovery along the Golden Highway. NOX is in position to continue to unlock shareholder value over the next year with 3 major projects on the go.
Niogold is another company that is loaded with value and high potential projects in the portfolio and is on track to unlock that value. $0.40 seems to be a new floor for NioGold and is a great entry point after all thy hype and momentum has died down. When I initially featured NioGold, I described it as a low risk steady climber that will let you sleep at night while still participating in a high leverage opportunity. So far NOX has played out to these expectations exactly.
Edgewater Exploration EDW-V
Share Price… $0.82
Shares Out… 50M
Market Cap… $41 million
Initial Coverage @ $1.10 -$0.28 / -29%
Now is the time to buy EDW. At $0.80 this story will not get any cheaper. They currently have 1.2M ounces at Corcoesto and the drill program at Corcoesto has been highly successful and expanded the zone along strike and at depth. EDW should easily upgrade the resource in size, grade and confidence with the recent drilling successes. EDW’s current valuation is receiving $34 an ounce for its in situ resource and doesn’t include the potential expansion to a 1.5M to 2M ounce resource where EDW becomes dirt cheap. Now look to Ghana and their Enchi Project with a 40km shear zone that is covered in anomalies which extend from one end of the property to the other and Edgewater is a beast that is about to be woken up very soon.
Recent results at Corcoesto which follow up 1.1m @ 148g/t au within 10.72 g/t over 17.0minclude…
- 13.3 meters at 2.66g/t au
- 8.5 meters at 2.7g/t au
Results like this continue to demonstrate significant potential for expansion and the potential for more bonanza grade intervals like the 1.1m at 148.5g/t au. The 2.66g/t intersection over 13.3 meters is a 150 meter down dip extension of the 10.72g/t au over 17 meter intersection. This intersection will help add a lot of ounces to depth. Corcoesto is open along strike as well and should very easily hit EDW’s 2M ounce target set out for Corcoesto over the next couple of years. EDW was also granted a 90 year mining license in the area so everything is in place to take this project to production when a decision is made.
Initial drill results coming in from Ghana include the highly prospective Boin Zone. Boin is a highly prospective 10km gold in soil anomaly with consistent mineralization across the entire length.
Results from Hole #2 in a 35 meter section from 32m to 67m hit 3 sub parallel zones of gold including…
- 9 meters at 2.74g/t au
- 4 meters at 1.9g/t au
- 5 meters at 0.85g/t au
With an aggregate rating of 36.5 grammeters, early indications are showing that the Boin Zone will certainly shape up to deliver a decent size resource. 717 meters have been completed at Boin in 8 holes covering 10% of the known strike length of the zone.
At Nyam EDW has had some decent results, but the grades are not as high as Boin which was to be expected from historical drilling. The best results to date for Nyamebekyere are in Hole #1 with 8 meters at 1.25 g/t au and 14 meters at 1.13 g/t au.
All holes have hit mineralization and 1879 meters of drilling in 21 holes have been completed at Nyam. Current drilling at Nyam has covered 35% of the 1600 meter known strike of the project within the 14 km long gold in soil anomaly that makes up Nyamebekyere.
Edgewater is in the process of aggressively drilling out 3 large gold structures in Ghana that will make the base of an initial resource for this world class gold property. At $0.82 Edgewater is priced right, is at a place of solid support and is the perfect opportunity to take a sizable position. Another buy hint is that they switched Featherstone guys and they granted options to the new director Douglas Forster so this looks like a bottom for EDW. If this switch was in the cards for awhile, it explains the prolonged bearish pattern over the first quarter.
With 35,000 meters of drilling planned at Enchi in 2011. I would expect a steady news stream coming out of Ghana for the rest of the year as EDW unlocks the value of Enchi.
Enchi was Red Back’s top exploration property before they found Chirano and got bought out by Kinross. Enchi is a project where the sum of the parts is greater than the whole as so far there doesn’t look to be any one single one huge deposit, but several small pittable targets that will feed a central mill and will easily add up to million plus ounces once included in a N43-101 calculation for a feasibility study.
Edgewater should change trend for Q2 2011 and make its way back up to $1.40 high it made in 2010.
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