AN UPDATE WITH ALFRED STEWART OF CANACCORD CAPITAL CORP.
(As of June 4, 2007)
We are here with Alfred Stewart, who does some of there exploring for those commodities a few years ago
weren’t worth very much, but the market has re-rated them.
Dave: I guess we might as well get to your two favorite
stories of the day. One of which is Selkirk Metals. Can we
have your take on this, because this has been your favorite
for a little while now?
Alfred: That’s right and it’s because I was an exploration
geologist with Esso Minerals in the late 1970’s and early
80’s and we looked at this property (the Ruddock Creek)
that Selkirk had in 1980. I spent a weekend walking on the
property and basically we recommended it to Esso, but
Esso did not get the deal. It was picked up by Cominco
and it was explored by Cominco up until 1996. In 1996, the
NPD were elected for the second time in the famous
“Fudget Budget” election and Cominco dropped a lot of
their mining properties across the Province and this was
one of them. At the time zinc was $0.35 a pound. Zinc is
now somewhere between $1.50 and $2.00 a pound, so people
again, are focusing on large zinc properties in British
Columbia and this is certainly one of the best.
Dave: So you are assuming that the zinc and other base
metals stay high for another decade?
Alfred: I think we are in a new super-cycle. Between
1980 and 2002 it was a bear market for metals and now
Asian demand for metals is putting us into a new supercycle.
Dave: What is it about the property you are so intrigued
with?
Alfred: What I am intrigued with is the combination of
grade and size of the property. The grades of this company
have been encountering in its drilling are up to 20%
combined lead/zinc. Which when you put pencil to paper,
you realize that this rock runs between $800 and
$1000 per ton. That is an extremely attractive grade. The
second thing I like about it is, this property is 25 miles
north of the TransCanada Highway between Kamloops
and Revelstoke, which is basically extremely good for
logistics. In terms of size, the thing I like about the property is that all the exploration done to date has been on
one end of the property and the lead/zinc zone plunges
into the mountain and apparently comes out the other
side, five kilometers away. When you look at the size of
the property it looks like one kilometer of strike length
has been explored and there are four kilometers of strike
length that haven’t been explored. Those four kilometers
are basically through the middle of the mountain. In order
to get this thing developed, what needs to happen is
the company needs to go underground and develop
through underground exploration and that is what Selkirk
is doing this summer.
Dave: Where do they stand on that exploration program
now? Have they just started?
Alfred: They just kicked off the exploration program a
couple of weeks ago so we are expecting not a lot of
news for the next couple of months, but we are expecting
the fall to be a very exciting time for Selkirk.
Dave: When you talk about logistics, it’s also not that far
away from the Cominco smelter, which apparently needs
feed.
Alfred: Yes. Whenever I mention that factor to the company,
they always say that we are not far from the
smelter, but we are also not far from rail head and the
TransCanada Highway and they have no particular need
to sell it to Trail. It can go anywhere with the kind of
grades that they are encountering.
Dave: Now there has been talk that it’s an obvious takeover
candidate by possibly Cominco down the road because
it is so close by. Is that in the realm of possibility,
or is that just people dreaming?
Alfred: From my perspective, the most important thing is
that they need to develop and delineate the resource and
as long as their exploration program adds tons and
grade to the asset, then I think they should continue to
explore. I think it is premature if they’ve only explored
15% or 20% of the deposit to talk about take-overs. Most
mining companies are extremely conservative and they
would probably like to do a take-over after a feasibility
has been done (witness Nova Gold deal with Teck Corporation)
that only happened after a feasibility was delivered
and certainly Selkirk is still in the early exploration
phase, so I don’t think a take-out is in the cards anytime
soon.
Dave: As far as tonnage and grade, what do you think
they have now and what would be your target for down
the road?
Alfred: I think they have something in the ballpark of 10
million tons and down the road is anybody’s guess.
When you look at a system that’s five kilometers long,
then the deposit could probably be a multiple of that size.
This was originally a Sedex deposit like the Sullivan
Mine, but it was metamorphosed to the point where the
rocks almost melted. They behaved like plastic and the
lead/zinc zones got squeezed into lenses and they are
somewhat irregular, so it requires a fair amount of exploration
to exploit.
Dave: How about a time-line you see for the next two
years?
Alfred: I think they’ll just continue to explore and with
the underground adit being put in, then I think they will
be able to mount a much longer season of exploration
and the drilling from underground will be able to add to
the resources more quickly than in the past where they
had to drill 2000-foot holes from surface.
Dave: Now you have already even worked out some targets
for later this year and for next year?
Alfred: Basically, I believe that the stock could easily
double to triple from here depending on the exploration
success from this underground exploration program.
Dave: I guess the obvious question is what can go
wrong?
Alfred: First of all, the overall market could correct and
if the overall market corrects, then Selkirk could come
down along with the rest of the stocks. A second risk is
simply drilling risk because these sulphide lenses are
irregular and pinched into lobes, there is some uncertainty
as to exactly where the best lead/zinc zones are.
So basically drilling risk and market risk.
Dave: As far as your targets, you were suggesting $2.50
later this year and $5.00 sometime next year?
Alfred: Yes. |
