A Very Impressive Report on IWA
This report was recently released by Speculativestocks.com
Perception and Value.
Which is which and how do you tell for sure. To the uninitiated, often,
perception is reality. You see it, experience it, hear it, taste it, feel it, so
it must be real, right? Well maybe not.
Todays instant world gives us more information than we can possibly digest from
sources that present themselves as trustworthy and reputable.
So how does the average investor determine what is, and isn't, reliable
information from a reputable source? Well the obvious answer is, how do you know
anything for sure. If you want to believe it you will, no matter what anyone
else says.
Many of us have a prediliction for believing everything that is presented to us
because we believe it is a reliable source, and who is to say it isn't? Those
who believed Martin Armstrong of Princeton Economics,was a reputable and
trustworthy source, can belie this, as they have lost over a $billion and
counting.
More trusted in the LTCM fund last year and then there was YBM Magnex, Phillips,
Tiger fund losing large amounts and a host of others not to mention the Bre-Ex
mining scandal the losses which pale in comparison to the billions of losses
achieved by the above named companies and funds.
Many of us lose smaller amounts by believing others who have less stellar
credentials. All because we either don't pay attention, do not do our homework,
or trust someone who isn't what they say they are. At Speculative Stocks we
attempt to convey to our members and guests that, no matter what anyone else
says, if you don't do your homework, you are at risk.
Now that is not to say we always follow our own advice, because in reality who
ever follows 100% the best advice they can get, because sometimes we want to
think what someone else believes is true, despite the evidence to the contrary.
Okay, A wonderful philosophical tale and what does it have to do with perception
and value?
This past year has been devastating for the precious metals markets and most
investors, seeing the writing on the wall have gravitated to other market
sectors to attempt to make gains.
Yet today we have what we consider to be unparallelled low prices in the
precious metals stocks. Many higher cost mines are closing and as our last
commentary on lease rates showed, many companies just cannot make a profit in
these low price times. So why would anyone invest in the precious metals
markets?
There will always be someone who will buy gold, whether for the intrinsic value,
the monetary value or because it just plain looks good. There will always be
people looking for gold to replace the constantly declining orebodies and to
maintain a supply into a market that demands it, just as there will be mining
companies that will mine it.
So how do we determine whether or not a Speculative Stock has a value and
whether this value is perceived or has a base in reality.
We will use our current guest pick of International Wayside Gold Mines IWA/VSE
wayside-gold.com
We have had this stock posted for just on a year and the perception is this
stock has very little value. But is this true?
Let us look at what we do know. Last year the stock hit a low price of $0.06
after a high of $1.30 and in September 1998 they announced the first holes on
the BC vein that created a new resource. The stock went up to $0.28 but has
drifted between the very recent $0.08 and $0.22 for most of this past year. This
is mainly due to the current weakness in the gold market.
The Company has the Cariboo Gold property between Wells and Barkerville, in
British Columbia, wholly under their control. This mining camp has produced over
3 million ounces of gold and Wayside believes there is possibly as much again in
situ able to be mined for a profit. ( Ah! A wonderful word this 'Profit' ) The
mine camp has records going back for many years and Wayside has correlated all
this information into computer models that show where the gold was mined, what
values, what drilling was done and where, and most importantly what drill holes
were completed and no more work performed.
The BC vein is a classic example of this. This vein had a 10,000ft drift driven
to it in the 40's yet very little work was ever done on the vein until the
recent drilling program that has consistently found grades of .28oz/tonne. This
vein is 2,400 ft long and between 15 and 30 feet wide extending to a depth of
800ft. In short a considerable resource. There has not been an official resource
given out by the company to date however they have been drilling this
consistently and new assays are due to be released from the latest round of
drill holes very shortly.
We have done our own calculations here and suggest that 2,400ft x 800 x say 15ft
as an average width at assuming an average 0.28oz/tonne and using a figure of 12
cu/ft to a tonnes, should give a deposit of around 670,000oz. Of course we must
reiterate, without confirmation, this is only a speculation on our part.
Next to it, by drilling underground and correlating all the old information
Wayside has delineated a 1 million ounce plus resource of the Gold Quartz
property that is currently being advanced to the permitting stage. All that is
needed to take it into the reserve category is a few more holes. ( actually 120
holes on fifty foot centers )
Now in January they acheived the consolidation of the entire property by taking
an option for the Mosquito and Island Mountain property, ( A look at their
website map wayside-gold.com gives an idea of the proximity
of all these properties that surround the town of Wells.)
These two mines again, were explored and mined over a number of years and were
never mined out. We understand that in the historical records there was a drill
hole completed by Hudsons Bay mining that assayed out at 2oz/tonne and yet this
was never followed up. In todays environment where data can be rapidly analysed
using computer modelling technology, it doesn't take much to correlate all the
old data to show where to drill and Wayside has been drilling this property
through Island Mountain Gold IGM/VSE that Wayside gave an option to earn 50% of
the Mosquito and Island Mountain properties. ( IGM has common directors and upon
shareholder approval the President of Wayside will also be the contolling person
in IGM ) Keeping it all in the family so to speak.
This has achieved a couple of things. It has reduced any further dilution in
Wayside and has enable further funding to bring the property closer to
production. The Mosquito/Island properties still have unmined ore and there is
every real opportunity to create another possible 500,000oz on this side of the
property.
Now let's see, we have 1,000,000 plus 600,000 plus another possible 500,000
ounces to bring us up to 2.1 million ounces of gold. There is a mine application
permit in process and there is a fully permitted mill on the Mosquito property.
They have instant access through the existing underground workings to very close
proximity to the orebodies, so the cost to go into production will be very low
in comparison to many mines and the stock is at $0.10CDN.
We have a company that, in the worst possible gold market enviroment that can be
imagined, is still raising funds and drilling, proving up resources. Why would
they do that if there wasn't value there. Especially when we consider the many
other exploration companies that have closed the doors and put up notices saying
' call me in the spring, we're hibernating'.
We also have the major mining companies cutting their exploration budgets to the
bone and curtailing many exploration projects. So where are they going to get a
quick replacement for ore that is rapidly being depleted by high grading. They
will get it from buying out companies such as Wayside of course.
Now we could go into the proposed economics of the Wayside property, but at this
point it would be even worse speculation than the amount of gold we have
surmised is there. We do believe though that with an open pit operation the
costs should be somewhere in the area of $180/oz and at the current gold price
of $256/oz this would leave a gross margin of $86/oz The ore from the BC Vein
and any ore from the Island Mountian/Mosquito area could be added to or
processed separately from the open pit ore.
The current value of the speculated resource at todays gold prices would be
about $560 million, however that is somewhat unrealistic today, so let us
calculate what someone would buy it for in the event this 2.1 million ounces is
actually there. Say $15oz in the ground and 25 million shares outstanding would
give a value of a little over $1.00 a share and the stock price is $0.10 or one
tenth of the value.
In the event these costs are proved to be reliable this is enough to make this
project extremely viable. So now we have some sort of an answer as to whether
the perception and the value can be correlated.
Now what about the major mining companies? Well we know Kinross has a stock
position made via a private placement some years back ( about 6% ) and we hear
Homestake has been actively looking at the property. We also hear another Major
has expressed some interest. Is this information reliable? Well it's like buying
a car. We expect many of the seniors are always kicking tires to see whether
there is any value they can avail themselves of, so at this point we would
expect that any interest today is just that, kicking tires. Any further large
finds on the property however will change that in a hurry.
Much of this property has never been explored, much that has been explored has
been a little haphazard. The BC vein had never been drilled until last year and
there are a number of other veins on the property that have never been drilled
to this date. So the expectation of more and significant finds cannot be
discounted.
Next week we will look a little further into the lease rates, Yen/Dollar rate,
and the still stagnant price of gold. The reason we are going to wait for a week
is we want to see what happens with the next BOE sale of 25 tonnes of the yellow
metal.
As always, this information is speculative in nature and while we consider it
reliable it is for informative purposes only and is not a recommendation to buy
or sell and any investment decisions are made at the sole risk of the reader. |
