The biggest reason for the price decline is the action of the brokerage houses, Ross. There were a lot of shorts in place at Friday's opening.
Remember that the job of brokers is to buy and sell paper. They are not experts about mining. That is obvious. And, will soon become even clearer.
I just finished a conference call with John Ball, PFG's consulting geologist, and, Druvall Wescott, the CEO of PFG.V.
John was clear about several things.
He is of the opinion that Barrick got into this play for two reasons. First, is the huge potential size of this ore body. Second, is that they planned to use open pit mining from the outset.
Barrick has a lot of experience in Nevada with open pit mining where the costs are substantially higher, and, the ore grade is .05 oz/ton Au.
Diablillos geology is characterized by surface material that is severely oxidized, broken-up, volcanic dust/rock that can be very easily blasted and removed, according to Mr. Ball. At 250 feet below the surface and below, the main ore zone of Oculto grades significantly richer in gold content than in Nevada. Keep in mind that production costs in Argentina are significantly lower than they are in Nevada, as well.
Once the next 11 drill holes are reported, Barrick has announced their intent to move on to the second of five previously defined gold bearing epithermal zones. It may be the Laderas site directly to the north of Oculto, but this was not as yet known to the principals at Pacific Rim.
John also expressed the opinion that Barrick would probably prefer to build a mill on site to process the ore, if the property does prove to be economic.
According to Mr. Wescott, Barrick has spent approximately 1.5 million on Diablillos, to date.
They had originally committed to 3k meters of drilling and have already completed up to 5k meters and are still continuing.
Pacific Rimn's float is approximately 9.5 million shares with about 4 million of that in closely held hands. Fully diluted, there is about 13.5 million shares. The cash on hand is about 1 million with a Market Capitalization of approximately 15 million.
Another reason for the flat market response was the non-specific nature of the news release itself.
To test this hypothesis, I conducted a little research project.
First, I gave the news release from PFG.V to a professional broker friend of mine and simply asked him for his opinion. His reply was, frankly, unenthusiastic.
Then, I handed him the diagram, and said, "Does this tell you anything?"
He looked at it for a few moments, then said, "NOW it looks like you might actually have something pretty worthwhile here after all".
Please read the next paragraph very carefully.
Using the diagram, it became apparent to him FOR THE FIRST TIME that holes #96-01, 94-01, 96-05 & 96-10 are IN A STRAIGHT LINE. A line which defines a rather substantial SW/NE trending ore body. Furthermore, it also became evident that this trend is OPEN AT BOTH ENDS. ALL of the other holes that were reported ARE NOT ON STRIKE. They were only drilled to help determine the WIDTH of the main trend.
This is why I decided to make the "A Picture Is Worth A Thousand Words" post. Without the assistance of a graphic aid, it is difficult for investors to obtain an accurate picture of the real significance of these drilling results.
As most SA mines are sulfide porphyry (i.e. AZS) there is usually only low grade Cu to accompany Au values. This does not add anything of significance to the discovery.
Pacific Rim and Barrick, on the other hand, have uncovered an ore body with unusually high silver assays. This adds significant value to the results.
In order to interpret the results properly (that is from a strictly "economic" point of view) it is necessary to calculate what is called "gold equivalent values". This takes into account the current market price of Ag, then translates this into a "standardized gold value". Many people will not have mathematically factored in the huge silver assays, leading them to substantially underestimate the value of this ore body.
It is for this reason that PFG.V has re-issued the same results in "gold equivalent" values. This makes the determination of the actual economic potential of this deposit much clearer and easier to determine mathematically.
You may access the re-issued results, plus an updated diagram, at the following URL: aisun.aiinet.com (Please be advised that this download will be a little time consuming at the present time as it is mostly grahics. It was drawn by John Hall.)
It is worth noting that Pacific Rim's original geologist, Mr. John Mustard, who originally discovered this property, was hired by Barrick as their consulting geologist on Diablillos - with the added provision that he was not to discuss this property with anyone outside of Barrick.
At the present time, short of a major across the board downward correction in the entire juniors resource mining sector, PFG.V is very undervalued and has little downside risk, in my opinion.
I will continue to hold my entire position pending further developments.
Regards,
JED |
