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 

Fast Tracking A Excellent Copper Project in Copper Country…

Excelsior Mining  MIN-V

Fast Tracking A Excellent Copper Project in Copper Country…

Share Price: $0.50

Shares Outstanding: 55.4 Million   

Market Cap: $25 Million

Management:17.4%                                                                                                                                                                

Sullivan Family Trust:16.3%

For the last month since my last article I have been stomaching market volatility and trying to find the most risk adjusted copper junior in the market, in unstable times like today you do not want to be investing in a project with a huge CAPEX because the credit markets are still dry, you want to invest in a company that has a reasonable CAPEX this is the sweet spot with high commodity prices, money can still be raised.

It is obvious that copper is in a tremendous bull market rally, the underlying commodity prices will not faultier so you are somewhat protected from the downside when you buy a copper junior vs gold junior, copper is consumed and gone forever the same cannot be said about gold.

Not often do you get an opportunity to invest in a junior exploration company and see it through to production in the mining industry. I would suspect 1/100 projects actually see it through production from discovery. The biggest project killer is time; time is of a essence in a cyclical mining cycle, usually it takes a company 8-12 years from discovery to production, by the time the project is fully financed and permitted the good times are over and the party is long gone and it is no longer attractive to run the mine. Copper is at 4 dollars a pound today, commodity prices are at all time highs today because in the 90s and the early 2000s there was no exploration for metals, as prices were low, today we spending record amounts on exploration and soon we will replenish our supplies and then again we will see a downturn in metal prices. This is the beauty of the cyclical cycle, it is self correcting. The key points we have to look at, as investors are how do I profit from this cycle? Investing in a HUGE project that is 10-15 years in the development cycle like CUU.V or NDM.TO may not be the best course of action right now, investing in smaller companies with near term potential will get you the same return faster, do not be lured by glitzy drill results or promotions, look at near term potential and reasonable costs.        

 This Not Another Venture Promo…

I have Identified Excelsior as a company that is fast tracking their production Excelsior mining has gotten a lot of things done in a very short period of time. The low cost Gunnison project is located in Arizona, for those of you that are unaware; Arizona is Copper Country, USA this great copper state produces 60% of the Americas copper or 750,000 metric tons. Excelsior is a very special and unique deposit, it can be mined using ISR methods, these kind of mining projects  are MUCH easier to permit, the CAPEX is a fraction of a traditional open pit mine and best of all they cheaper to operate, and lastly they do not produce unsightly pits and they are considered to be better for the environment. I will get into describing ISR in more detail later on in the blog. The management team can raise the big bucks needed to fund this project into production. The project is on track to be mining in 2014 a mere three years away. Excelsior has been listed on the TSX Venture for about 2 years, they have made great strides, I expect this trend to continue. Management is top notch, combined they have over 70 years of copper mining experience

The Key Points On ISR Mining.

ISR mining accounts for nearly all uranium mining in the USA, it also accounts for 20% of global uranium mining. This is not a new fly by night method of mining the principles behind it are very simple.
Essentially lots of injection wells, the injection wells are injected with a solution, the solution goes out and collects all the copper from the porous rocks in a safe and controlled manner, then the solution in recovered by recovery wells. The solution that is now filled with copper oxide is taken to a plant and extracted. Thousands of these wells are drilled all over the property. 

You are probably looking at the grades, the average is 0.3%, don’t get fooled by low grades, low grade deposits can be mined efficiently and cost effectively using ISR methods.

            Why In-Situ Recovery Mining is VERY attractive:

-       Significantly Lower CAPEX, and the operating costs throughout the life of the mine are lower

-       ISR Mining is non evasive; no ore is moved, no unsightly open pits are left

-       Fewer permits are needed, mines can be in production within 18 months

-       Minimal noise, dust and greenhouse gases

-       Reclamation cost’s are minimal

Finding a copper deposit that can be mined using In-Situ Recovery methods is like hitting a jackpot; all the stars have to align and when they do it creates a perfect storm. Like I mentioned at the start of this article time is of essence, most companies that are in the stage that Excelsior is in today will not benefit from high metal prices as it will take them 8-10 years before they can be producing, Excelsior plans on doing this exact same feat within 3 years! There are many other factors that can kill a project, but in the end it is a numbers game.

How do you know if a project can be mined using ISR Methods?

-       The resource has to be below the water table

-       9 of the 14 global ISR copper projects are actually located right in Arizona near the Gunnison project

-       The rock has to be highly fractured and the copper should be a copper oxide for best results

The Hunt For the Next Ten bagger 

Key Points that will make Excelsior a ten bagger:

-       Geology

-       Operating Costs

-       Current Market Cap

-       Market Cap VS copper in ground

-       Location

-       Management

The operating costs for the Florence project are supposed to be slated at around .69 cents a pound; I believe that the Gunnison project will have costs inline with the Florence deposit. The CAPEX should also be inline with the Florence project; these projects are almost identical the only difference is that Curis Resources has an 18-month head start on Excelsior.

The current market cap is grossly undervalued for a company that has 4.7 billion pounds of copper and a potential to increase that significantly.

The Gunnison project is in Arizona, Arizona is copper country, more importantly its ISR mining country; 9 out of 14 global ISR mining projects are located in Arizona. When it comes to ISR mining, Arizona has the most skilled professionals and it has a competent workforce that understands the specific challenges and needs of the industry.  The citizens of Arizona are also supportive of mining; they understand that mining is a critical part of the economy.

The deposit is not located in the middle of no where, it is 2.5hr from Phoenix and 60 miles from Tucson, there are major highways and rail lines that connect to the project. This is project is located in a legendary mining district and the company controls almost 3900 acres in the region. The project is not located on or near any Indian reserve, it is far from the public, there is no scenic areas surrounding it and no one currently lives near it, this is truly the perfect place for a mine.

Short Term Catalysts

-       Hydrological and Metallurgical Results due within a month; these results will provide substantial evidence to the market that Gunnison is minable using ISR methods.

-       A PEA is due later this year, a PEA will prove to the market that this is a legitimate project and the stock will start its inevitable parabolic rise.

-       Jackson Hole Update; Ben the bank pretty much promised a QE3 if things got bad, I see copper stocks benefiting the most from QE3 as they have been lagging, and Dr. Copper is a indicator of the economies over all well being. Expect some sort of QE3 later this month

MineOnomics

Excelsior has an indicated resource of 3.21 Billion pounds of copper oxide, and another 1.21 Billion in the inferred category. This is a large project; the expected cost per pound should be under 70 cents a pound. The average for a copper company that is putting a project into production these days is about 1.30, companies like Anvil Mining, Copper Mountain, Mercator Minerals etc, they have all went into production within the last year with a cost per pound average of over 1.20. 150 million pounds at 4.00 would give excelsior 600 million a year, with an average cash cost of .70 cents a pound the total gross profit would be 495 million according to my napkin economics model! 

Excelsior currently trades at a measly 0.006 cents per pound this gives the company a market cap somewhere north of 30 million companies such a copper mountain mining trade at 0.14 cents per pound, as Excelsior continues to move up the ladder by proving feasibility and starting construction I see Excelsior reaching higher valuations as the cost per pound will defiantly be lower. 

At 50 cents and a market cap of about 25 million, I see no risk investing in this wonderful copper company, I think the company will keep ripping it up proving up more copper and I truly see this producing before 2013. If you want to see what type of potential this company can have when they have their PEA out look at its older brother Curis Resources. I really see Excelsior gaining traction when the PEA is released.

The Grand Summary

The world is increasingly going electric, we are seeing dozens of new electric cars coming into showrooms, we are hearing about smart grids, electric hybrids, an electric car uses on average of 60 kilograms of copper a conventional automobile uses 24 KG. North Americans are tired of being held hostage by political problems in the Middle East and we are generally tired of using fossil fuels that are ruining our planet, and we all have heard by now that China and India have finally decided to join the rest of the civilized world by pluging into the electric grid. Profit from the upcoming electric revolution by buying Excelsior Mining Shares today.

Discourse: This is one of my biggest holdings, I hold this personally and in a fund I manage.

Thank you for reading this week’s edition of Resource Corp!

Its finally September LET THE GAMES BEGIN!!!

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!

The golden time to buy gold!

Never in my years of investing in commodity stocks have I seen gold stocks trade at such low valuations.
Producers are trading at there lowest price per earnings!  Why? People are doubting this gold rally! Gold is not in a bubble, gold will be in a bubble when gold stocks are trading 30-40x earnings; When everybody and there grandmother is filling there portfolios and pockets with gold shares then I will be the first to say that we are in a bubble, and trust me gold will one day be a bubble. Legitimate deposits are trading at 60-100 dollars a oz. something has to give!
We are going to hit 1700 dollar gold this year mark it on your calender, the catalysts behind it will be Qe3, the gold rally in September, Investors rushing into gold as a safe haven from depreciating currencies, inflation, debt downgrades... The list is ENDLESS.
Now that I have gotten rid of the preface of this article lets get into the goods, here are the stocks that I think will outperform the markets, and unlike other bloggers  that like to PUSH stocks I will give you my 2 cents on why  I think they will outperform. The stocks mentioned below will be split into three asset classes; explorers for the dare devils advanced exploration for the gamblers and producers for the risk adverse!

Explorers: 



1) ROG.V   Rox Gold


Shares Outstanding: 49 Million
Cash: 6.5 Million
Market Cap: 20.85 Million
Most Recent Stock Price: .55  


The main project Rox Gold has is the Yaramoko project in Burkina Faso, they optioned this from riverstone resources. The company has had great success in there drill program highlights include 6 meters of 24.62 GPT, 62 meters of .62 GPT, 12m of 5.6GPT and 20m of 2.20GPT.
The company is planning on another aggressive drill program that will consist of 5000m, the company is cashed up, management seems to be top notch. They are also in a very hot gold district. I expect phase 2 drill results to be in line with phase one drill results. The geology seems like the project is of significant size.
This is a high risk high reward stock, if drill results are inline with phase one drill results expect the stock to rocket, a PP was done at .75 cents recently so you are getting in at a lower price than the big boys.



2) RPM. V   Rye Patch Gold

Shares Outstanding: 142 Million

Cash: 9 Million

Market Cap: 48.2 Million

Most Recent Stock Price: .34

Rye patch has a excellent management team, together the management has found 80 million oz of gold, seems like to me that these guys are magnetically attracted to gold! The company has 3.1 Million oz of gold outlined and 40 million oz of silver. They have a LARGE land position and they are located in mining friendly Nevada. Management puts this company in the best words, they are a supermarket for large mining companies, RPM does not have the desire or plans to become a producing miner, they want to sell or spin out properties. There goal is to become a 10 million oz junior and they are well on the way with a limited drill program they have been having great success.
The key project for RPM is the 100% owned Wilco project but they also have another 3 great projects. Insiders own 8 % of this puppy while Kinross owns 15% and a few us funds own 35% of it.


Advanced Exploration: 


1) NES.V   Newstrike Capital

Shares Outstanding: 111 Million

Cash: 20 Million

Market Cap: 260 Million

Most Recent Stock Price: $2.50

Newstrike Capital is a gold exploration company based out of Vancouver with there main project being in mexico.
There main project the Ana Paula project was bought from Goldcorp in 2010, Goldcorp has done a lot of work with the project, lots of early exploratory drilling. The company has a large portfolio of properties. Luckas Lundin is also a significant shareholder in the company.
The drill results this company has put out this year are the creme of the crop, the best drill holes I have seen all year, highlights include 190M of 3.52 GPT and 116m of 4.71 GPT and 112M of 2.51 GPT
The company already has a project that I think is mineable all the projects in this district are well over 3 million oz, significant players in the region are Goldcorp and Torex gold. This Jr is on its way to being a producer in a few years!

2) GCU.V  Gold Canyon Resources

Shares Outstanding: 96 Million

Cash: ( I could not find the exact number but I am saying ~ 14 Million)

Market Cap: 230 Million

Most Recent Stock Price: $2.43

Gold canyon has a very very interesting management team, the company spends all there dollars on drilling. I have never seen a exploration company spend LESS on promotion; This isn't a bad thing trust me, if all junior miners played the way Gold Canyon did the venture exchange would be a great place to invest. I think they are trying to drill out a 10 million oz deposit and then there ultimate goal is to sell it. They have quite a few other projects that they want to dip there hands in once they have ample cash.
The downside to this is that the company isnt fairly valued at these prices at ALL. The company is trading at around 60 dollars a oz! In Canada!! The worlds safest mining district!
The company recently did a PP, they are fully cashed for the foreseeable future. There main project is the spring pole lake project. highlights include 28.5m @ 19.75g/t au within 100.5m @ 7.23g/t au and 4.5m @ 36.21 g/t au within 111m @ 2.03g/t au,  30m @ 5.69g/t au within 50m @ 2.56g/t au.
These are monster drill results for a monster company, right now I am sure GCU wants to get the grades up and bring the tonnage alot higher. I can see GCU north of 12 dollars within a year if gold keeps up the pace and if the boys at Gold Canyon keep getting lucky!


Producers: 


1) GBG.TO Great Basin Gold

Shares Outstanding: 453 Million

Cash: 68 Million

Market Cap: 1.1 Billion

Most Recent Stock Price: $2.05

Great Basin Gold, the producer that trades at the valuations of a driller. GBG has 453 million shares outstanding, yes it is high but there are also two producing mines backing up this baby. 
Great basin Gold is a mid tier producer that is focused on becoming a large producer. The company is slated to produce 330,000 oz a year in 2012 with a average cash cost of about $500.
The Company has 13.6 Million oz in the measured and indicated category, these guys have gold and TONS of it.
Great Basin also has tons of exploration potential, but I am buying this because a senior will snap this company up soon, its just a matter of when. With Burnstone and Holister in production this will be a cash cow. I know this company isn't as exciting as the latest gold play in the Congo but expect this to be a ten bagger in a few years, that is if they can get the poison pill in place.
Shorters be warned....


2) BGM.V   Bakerville Gold Mines


Shares Outstanding: 87 Million

Cash: 12 Million as of November 2010

Market Cap: 135 Million 

Most Recent Stock Price: $1.70

The little gold company that could! The best way to describe Bakerville, the company is slated to produce 40,000 Oz of gold this year, tiny I know but when you compare it to the market cap of this lil company you realize how undervalued this thing really is. This year they will prodce 62 million dollars worth of gold at a average cost of 1550 a oz.

The company has been very careful about selling the gold in strategic times, and they are also not growing "too fast" thereby avoiding dilution. A resource update on Bonanza ledge is pending. The company has a few good projects in the pipelines, I can seem them producing 250,000 Oz a year in 2013. Lots of growth and the exploration potential is massive, they are permitted to drill 300,000m in one project alone. This is great potential and usually unheard of. 

Well that was alot of writing, I am sure it was a chore to read but now you have the greatest gold companies in your hands, be very careful with what you do with this POWERFUL information. Please rate my blog a 5 on stock house and make sure you guys subscribe! I will be posting great articles and my thoughts on the market on a weekly basis.


Thanks for reading!