Graphite and Gold = Perfect Hedge?

 

Graphite and Gold = Perfect Hedge?

Share Price: 28 cents

Shares O/S: 30 Million 

Market Cap: 8.4 Million

Rating: Strong Buy 

Ticker Symbol: SRK 

On this week’s edition of Resource Corp I will be featuring a hot new company that has their hands in pretty much every basket. Strike Gold, a major player in the graphite industry, has recently acquired a game changing project from Canaco Resources.

 Canaco + Strike Gold 

In addition to the current Satterly Lake property in Ontario, Strike Gold announced yesterday that they will be entering into a joint venture with Canaco Resources. For those of you unfamiliar with Canaco, they are a key player in Tanzania. An updated resource estimate for Canaco is currently in the works, but based on my analysis, it can be estimated easily to the tune of 5 million ounces.

In addition, the Boma property in Tanzania is accessible by paved highway; always an unexpected delight to those familiar with African exploration.

The Boma property has never been drilled or mapped with modern geological technology which means this property has blue sky potential.  Multi-million ounce deposits are the norm in the surrounding region, making this property the quintessential property of elephant territory.

The geological landscape of Boma is very similar to the Handeni property, Canaco’s flagship project.  Based on preliminary assessments, Boma is expected to hold yields similar to those of Handeni  Property.

Property Overview Map

The Boma property is also along the same corridor that currently hosts two active gold mines. Scaling in at nearly 562 square kilometers, the Boma property is massive.  This property truly has the potential to be multi-million ounce project.  Naturally, with Canaco on board, Strike Gold will have no issues dealing with the authorities in Tanzania, which is always attractive to investors.

I will be following this project very closely as more geological work, specifically airborne surveys and on-the-ground sampling becomes available. I will be updating the blog regularly. I truly believe that this property has the potential to be a multi-million ounce deposit.

  Project highlights:

• Connected by Highway
• Joint Venture with Canaco
• Elephant Territory
• Large Land Base

Ontario... New Gold Rush?

In addition to this new property, Strike Gold has also made advancements in Ontario, which includes the Satterly Lake Project. There has been much historic drilling on this property which is not yet NI 43101 compliant.

Highlight drill hole to date:

• 1.37gpt over 117m 

There has also been very positive grab samples, Ontario is having a renissance simlar to the gold rush with companies like Augen Gold, Trelawney, and Gold Canyon which I recently featured in an ariticle a few months ago. The property hosts sulfides that are all usually gold bearing;the geological landscape of this project looks similar to springpole lake. The Bircho-Urchi greenstone belts are similar to Red Lake, where Goldcorp has a flagship-mining prokect. The red lake mining project has one of the lowest cash costs coming in at 288 dollars a oz. 

The Next Critical Metal?

Strike Gold also hosts two great high grade graphite deposits, for those of you guys thinking WTF is graphite? I have a paragraph below explaining the importance of this metal.

Graphite 101

A key reason that I like Strike Gold is in addition to the gold is because the company has 2 world class graphite exploration plays. The demand for graphite is rising at astronomical rates. The need for lightweight and high strength Carbon fibre is creasing as the world moves to more fuel efficient cars/jets for example the new Boeing dream liner is made almost entirely out of carbon fibre. This is supposed to be the replacement for the aging 747. Graphite is also used in nuclear reactors, fuel cells, batteries, solar cells, and most importantly in hockey sticks used by the NHL greats!

With great demand like this, I can see China curbing their exports.  This is an highly expected move by China because they also curbed their exports of Rare Earth Metals in the past year. North America is becoming considerably more aware of factors such as these so I believe they will be working hard to secure critical supply of these niche metals.

Recently Graphite prices have hit $3000 dollars/ton.  Although they have pulled back recently with this bear market, they have made great moves that can only be matched by the tremendous rise in gold prices. Graphite is clearly in a bull market rally I believe this trend will continue as we become more sophisticated and more aware of the environment.

I will not get into detail about the Graphite deposits at this time but here are the highlights for more information on them check out the Powerpoint Presentation 

Now is a great time to buy Strike Gold as there will be a sister company known as Strike Graphite, with a market cap like this it is clear the Graphite assets are being valued at ZERO, so a spin out will get the graphite projects the value they deserve.

•        Politically stable location (Saskatchewan)
•        Very high grade vs. peers
•        One of the only graphite explorer’s on the venture
•        Fast tracking potential
•   Spin out will value graphite assets

The Hunt For The Next 10 bagger! 

The company trades with a tiny market cap of about 8.4 million, for a company with 4 world class exploration projects I think this is very low. Expect a gradual rise in share price as the company matures, this is a very new company that was recently formed and with more promotion and awareness things are going to change QUICK! This company over higher than 10 bagger potential! It still only has a market cap of 84 million as if it were ten bags! Not often do you get a chance to get in at the ground floor! Now is your chance to grab it by the horns! If you act now you will get a FREE share of Strike Graphite!

In conclusion to this short blog, I rate Strike Gold a screaming buy, the graphite and gold projects hedge each other out very well in my opinion. Graphite is a play on the industrial strength of the economy while gold is a great hedge to have if the economy goes in the gutter again! You can't lose on this one folks.

For More Information Visit www.strikegoldcorp.com 

Edgewater Exploration

Edgewater Exploration (EDW-TSXv) has 1.5M ounces of Gold in Spain and trading at a ~$20M enterprise value! That’s $15per ounce of gold for every share. And unlike many juniors that may be struggling to raise capital right now, EDW has close to $12M in the bank and plenty news flow coming.  This stock is starting to look DIRT CHEAP. 

If you like advanced stage gold assets, deep pockets and experience management, there is nothing to not like about what Edgewater has created for shareholders.

There are two ways to value this company right now: 

1)   Value Corcoesto (1.5M ounces in Spain) at $10 per ounce enterprise value (a fraction of peer comparables) and you are getting the upside the very exciting exploration Ghana prospect which looks like early days Bibiani (5M+ ounces gold and) or Chirano (5M+ ounces gold) for free.

OR…

2)   Value the Enchi Ghana exploration project at $15M   enterprise value which looks like early days Bibiani (5M+ ounces gold) and early days Chirano (5M+ ounces gold) and you are getting the value of Spain for free. The model of the Ghana project looks so similar to the early days Chirano and Bibiani that Kinross cut a cheque in the last $11M financing at $0.80 to control 12.5% fully diluted interest in the Company. (Yes – stock now trading below $0.50)

Here are a few more details on the projects:

The Corcesto Project in Spain is 100% owned by Edgewater Exploration; it has a NI 43-101 compliant resource of 1.5 million ounces @ 1.74 g/t Au (M&I+I) Further details found here

Studies are currently underway to demonstrate how this project will be mined, it is anticipated the project will be amenable to both open pit and underground methods. Edgewater currently holds a small-scale mining license yet the company has begun the permitting process for a larger scale mining operation as the gold deposit has grown and continues to grow since the last exploitation permit was granted. The Corcesto Project has 7 major veins running through it and with some more drilling I can see Edgewater further increasing the economically viable ounces of gold. Edgewater currently has three drill rigs turning on this project now.

Edgewater has been working on a Preliminary Economic Assessment on the Corcoesto Gold Project.  Results from the study are anticipated during Q4, 2011.

Once again this is currently being value at $15 per ounce enterprise value so investors would be getting the Enchi gold project in Ghana for free.

The Enchi Project is just south west of the producing Chirano and Bibiani mines, Ghana West Africa, elephant country. And it is looking like both of those highly profitable deposits in its infancy.

I urge you to review the power point presentation as it contains much more detailed geological review.  But below is a map that shows the proximity to the producing mines.

Enchi remains on strike, on the same shear zone, and multiple zones have replicated early days drilling to the highly profitable gold producing Bibiani and Chirano mines. The company currently has three drills turning on the project so exploration news flow should be continuous

Shouldn’t this play be worth the $20M enterprise value in the stock alone right now?

Please contact Ryan King, VP of Corporate Development for further details of the company. He is very approachable, factual and won’t feed you with the typical over-hype you get from most junior mining executives.

Contact

Ryan King

604-628-1010

www.edgewaterx.com

Unity Is Spinning Outta Control!!!

Unity Energy Corp  UTY.V

SP: $0.35
S/O: 21.26 Million
Market Cap: $7.4 Million

http://unityenergycorp.com/

Initiating coverage @ $0.35
Rated: Strong Buy
Discourse: Ownership of Stock

Has there ever been a more perfect time to invest in uranium? For those that missed the initial uranium rally earlier this year before Fukushima there is a “second chance” Unity Energy is aggressively developing there properties. This 7 million dollar company has the potential to be the next big developer in the Athabasca Basin. 

They are also spinning out a key gold asset in northern Saskatchewan. Never has there been a better time to buy uranium stocks and Unity in particular. In the words of their commander in chief  “Positive results indicated at Dickens Lake justify this gold asset creating its own market and raising funds for further exploration and to add shareholder value. Unity Energy's roots shall remain grounded in energy through exploration of its significant portfolio of prospective uranium properties in the Athabasca Basin." - Anita Algie President and CEO Unity Energy.

Uranium is going to get hotter than Fukushima  

The longer term fundamentals of the sector remain solid and many countries have publically stated their strong continued commitment to nuclear energy.

 
The uranium spot price looks like it is just about to break out again, the current price is $54 a pound, a far cry from this years high of $75.00, so if you missed round one on the uranium breakout this is the “second chance” we all hope for but never seem to get.
 
The power hungry citizens of China and India don’t care where the energy comes from they just want it, China has 25 nuclear reactors under construction and India is the cutting edge leader in developing Thorium based reactors, With oil once again rocketing Uranium stocks have never looked so cheap. 

 
Recently I have started to notice consolidation in the uranium sector, Bannerman Resources (BAN:TSX) recently has had a offer from a Chinese uranium company to buy them out.

 
Investors have realized that modern nuclear technology is safe and reliable, the mishaps that happened in Japan are all due to mismanagement and there poor safety record, At a meeting of the G8's Nuclear Safety and Security Group, held in Tokyo in 2008, an IAEA expert warned that a strong earthquake with a magnitude above 7.0 could pose a "serious problem" for Japan's nuclear power stations, In March 2006 the Japanese government opposed a court order to close a nuclear plant in the west part of the country over doubts about its ability to withstand an earthquake. Japan's Nuclear and Industrial Safety Agency believed it was "safe" and that "all safety analyses were appropriately conducted"
 
I believe that Unity Energy will eventually become a household name such as Hathor or Fission with the same or more potential.
 
Are you in it for the Green or the Gold?
 

Unity has the perfect combination! Uranium and Gold, I believe they both hedge each other out perfectly! Unity recently decided to spin out there Northern Saskatchewan gold project, into a new venture called Patrone Gold. I believe this is a great decision, the company is not getting any value for the gold properties, the recent spin out of Prophecy is a great example of a successful spin out, (NKL:TSX). Everyone knows about the uranium projects, but the golden question is who knows about Unity’s GOLD PROJECT IN LA RONGE GOLD BELT? Unity completed a VTEM survey of the Dickens Lake Project and final results and interpretation are expected in the near term This gold district has produced 600,000 oz in the past, The Dickens Lake Gold Project is getting NO value right now with current valuations,expect the stock to rocket when it starts trading.

Time to pick your favorite lake.
Waterbury Lake? McKenzie Lake? Close Lake? Lampin Lake? Thorburn Lake?  Hoppy Lake?  Kirkpatricks Lake?  Dickens Lake?

At least if the uranium mining business collapses Unity shareholders could profit from luxury lakeside condos!

The lake that interests me the most is Thorburn, the property is surrounded by Cameco claims and it is very close to Hathor’s Roughrider Zone. Surrounding companies have drilled with tons of success, uranium has been found in percentages as high as 10% over 9 meters in surrounding areas. Preliminary ore reserve calculations indicate that the project contains approximately 5 million pounds of uranium as a area is defined expect this number to rocket. The Thorburn property is 14.5km south east of the world's largest and highest grade uranium mine,Cameco’s Cigar Lake mine.

Surrounding Drillholes of Interest:

• 4m at 3.5% U
• 44.50m at 2.0% U
• 9.90m at 10% U
• 10.40m at 7.0% U

As you can see these grades are VERY high clearly there is mineralization running through the property. The geology is very similar to the large uranium deposits that are found in the Athabasca basin. 
 
Athabasca Basin 101
So investors unfamiliar to uranium are probably wondering what the hell is the Athabasca Basin? Why should I care about this Basin? Where is it? 
 
The Athabasca Basin is in northern Saskatchewan, it is 100,000 km squared. The Athabasca Basin accounts for 30% of the world's uranium production. The area currently hosts reserves upwards of 650 million pounds of uranium. 
 
The Athabasca Basin is host to unconformity-associated type Uranium deposits. Mineralization occurs at, above or below the unconformity. This area is largely controlled by AREVA and Cameco, although currently there are 20 or so Juniors drilling and outlining deposits. Unity has key properties in all the right places, they are a area play to Fission and Hathor, they are also conveniently located near Cigar Lake. Cameco as a large scale producer will only buy out the largest deposits, companies like Hathor and Fission need to increase their deposits sizes and land holdings in order to catch the attention of Cameco and AVERA.

Infrastructure points of outlining a uranium deposit in the Athabasca Basin

• Ample power supply nearby
• Easy access to mine site from road
• The Athabasca Basin is the hub for all uranium core sample testing
• Abundant water supply
• A workforce that is highly experienced in developing uranium deposits

 

Anita’s Running A Tight Ship 

When I first got involved with Unity, the key reason that got me interested was the share structure, this company has a tight float with only 21,142,000 shares outstanding and a market cap of around 7 million dollars this thing can move really hard and when  there are any indications of serious mineralization this stock can easily go up 10x and still have a market cap lower than Fission and Hathor. Another key point I would like to put out is that  49 North (FNR:TSX) owns 2,490,000 shares or almost 12% of the float. 49 North is a Saskatchewan based resource company, when it comes to knowing the right plays in Saskatchewan I would trust them to know what is best in there own back yard.

 
Another point I would like to mention is that Unity has never done any dilutive financings, all financings have been higher than the previous financings or the same, the company recently did a PP that just came free trading which shows in the stock because the recent financing was almost 18% of the float.

Securing Critical Supply

Securing Critical Supply

Formation Metals  FCO.TO

SP: $1.00
S/O: 90.7 million
Market Cap: $90 million
http://www.formationmetals.com


Initiating coverage @ $1.00
Rated: Strong Buy
Discourse: Ownership of stock/warrants



On this edition of Resource Corp, I am going to feature a cobalt company that is feeling blue. Formation Metals has somewhat under preformed the market in the last 52 weeks; but I sense that the market will change its tune very soon!

Idaho's new walk to fame.


Potatoes were Idaho's claim to fame but Formation Metals will put the great potato state back on the map with this sizable cobalt deposit. I know it is hard to believe but high grade cobalt can be found outside of the Congo, so if you want politically de-risked exposure to cobalt Formation is the place to be. 65% of the world's cobalt comes from Africa and if I was a betting man I would say that 45% of the 65% came from Congo, if anyone owns First Quantum they know the pain first hand of investing in Congo, they recently had a mine that got seized, so if a company with a 14 billion dollar market cap gets robbed like that you betcha that the pirate government of Congo would not be shy on stealing your exploration companies project! The Ram project is the only feasible large scale cobalt deposit in North America.

Cobalt 101

So you guys are probably wondering why I am not blogging the hottest gold play with 1600 gold, why Cobalt? What the hell is Cobalt a color?
Cobalt is a gray, hard, lustrous metal, which was first discovered in 1739 , most people think that the metal is blue the color Cobalt is blue but the metal is plain old gray. Cobalt is a rare base metal, most of it is a byproduct of copper or nickel mining. It is very rare to find a pure cobalt deposit like the Ram Project.
About 32% of Cobalt is used for industrial uses such as paints, drill bits, ball bearings, and 36% for environmental such as solar panels, fuel cells, and batteries for hybrid vehicles, and 22% for strategic uses such jet engines and turbine blades and 9% for electronics including propulsion systems, cell phones, memory chips and hard disk drives. As you can see, Cobalt is a critical metal with many uses. With China and India going on a aircraft buying spree Cobalt will be in high demand, trust me the skies are looking blue for cobalt producers. The Paris Air Show shattered aircraft sales records, for those of you not familiar with the Paris air show it is the world's biggest convention for aircraft sales. Boeing estimates India alone will buy $150 billion dollars of jets in the next 20 years.
Securing the safe and consistent supply for rare elements such as Cobalt are key to the security of North America, right now we are the largest consumers of Cobalt and all of it is imported, I believe that Formation will be a key supplier of Cobalt in the USA, if you are a Formation shareholder you are probably sipping pina coladas and laughing because Formation Metals owns the sole cobalt deposit in North America!

MineOnomics

The capex for the Idaho cobalt deposit stand at $141,903,963. The IRR using a conservative $22.52 cost per pound price is 22.30%, currently the spot price of cobalt is at $18.25, the price of Cobalt was over $50 before the great recession of 2008.  Proven and Probable Reserve category of 29.5 million pounds of cobalt, 31.4 million pounds of copper and 37 thousand ounces of gold. The project is expected to have a 10 year mine life, with further drilling this can be expanded as the project is still open in directions. The company has 20 targets and only four have been drilled, only one is used for the Project's proven and probable reserves. This project has the potential to be MASSIVE.  The company plans on producing 3.3 million pounds a year with a 22 dollar average cost the company will bring in almost 75 million dollars after subtracting 25 million for the cash cost you are left with approximately 50 million dollars in earnings a year.

Buy truckloads of Formation NOW!!!

 
Jennings Capital recently put a speculative buy rating on Formation for $2.60, this thing is the real deal. The management team has made spectacular deals, they picked up a Hydro Metallurgical plant about 200 miles away for 1.2 million, the replacement cost for the plant is roughly 80 million! They have also have raised money in the toughest of markets.
The Ram mine has near term production potential, the company is on track for construction. High lead items have already been ordered and the company is about to enter a highly lucrative construction period, usually mining companies appreciate drastically because of constant news flow.
Formation also has 2 "secret" uranium projects in Saskatchewan, they have a JV with Cameco and AREVA, the two heavyweights in the uranium industry. The company also has a copper project in Idaho, I am sure once there is cash flow coming in the management at Formation will want to dip there toes in more projects.
Remember a 80 million dollar PP was done at $1.50 earlier this year, so by buying the warrant and the share you are paying $1.28, you are getting a better deal than the big boys!!!
I would recommend picking up the warrants along with the shares for extra leverage, if what me and the boys at Jennings Capital are thinking is true expect a 10 bagger within a few years, add all the pieces together and I think that Formation Metals is a very strong buy at current prices, I see very little downside and tremendous upside!