By David Mason
W
hen you go to a func-tion
and find out it’s
standing-room only,
it’s human nature to
become excited about what might
be in store. We have an affinity to
that which is in short supply – the
scarce commodity – and all else desired by the
majority. Fuel cells and their potential to shift
the demand curve for a number of com-pounds
and components have created a
spark in an otherwise dim mineral-resource
market (hydrocarbons excluded).
Palladium (Pd) in particular has been
affected positively by the resurgence in this
almost-ancient technology, and the applica-tion
of fuel cells is still essentially in the
research stage. Pd not only acts as a catalyst
but also has the capacity to store hydrogen in
the atomic lattice. This might seem boring
and technical, but the explosion in the price
of Pd (currently more than US$1,000 an
ounce) can be described as nothing short of
breathtaking.
The adjacent table depicts a representative
number of Canadian resource companies that
are exploring for, or developing, Pd properties.
Two companies stand out: North American
Palladium Ltd. (PDL-TSE, $15.20, 807-624-
0960, www.napalladium.com), which is
preparing for production, and Starfield
Resources (SRU-CDNX, $0.63, 604-608-0400,
www.starfieldres.com), one of the few
exploration stocks that has quantifi-able
Pd resources.
The table is a cursory glance at the
most active sector in the mining
world. We have selected Canadian Pd
resources that can be quantified with a
reasonable degree of accuracy. There
are many well-managed firms with
projects that might soon provide substantive
results.
For the speculator, two of the four stocks
have merit. Geomaque Explorations Ltd.
(GEO-TSE, $0.29, 416-956-7470, www.geo-maque.
com) and Starfield Resources fit the
description, owing to the preliminary stage of
development, low market capitalization, high
potential for increasing the resource base, and
the prospect for being high profile in the near
future.
As for which one to buy right now, we
would choose Starfield for the following rea-sons:
1) copper-nickel grades are almost stand-alone
for development, and platinum-group
metals are a bonus (notwithstanding the
remote location of the Ferguson Lake project);
2) high-grade core with a substantial palla-dium
content, which will soon be drilled in
their mid-winter program;
3) overall dimensions of the deposits and
the trend, as known to date.
Both companies, though, are well man-aged
with highly professional teams. SRU’s
project is at Ferguson Lake in Nunavut, east-ern
N.W.T., about 120 miles east of Rankin
Inlet on the northwest rim of Hudson Bay. This
property was partially developed by Inco
almost four decades ago and then, in recent
years, by Homestake. In both of these earlier
programs, platinum and Pd prices were much
lower, and the project was assessed to be mar-ginally
economic.
Since then, fuel cells have impacted metal
prices. As well, diamond-mine development
in N.W.T. has opened the possibility of
reduced infrastructure costs (roads, power,
etc.). Also, SRU has the advantage of intensive
work performed by major companies at no
cost to it.
SRU’s property is large (57,304 acres) and is
composed of six zones within a geological for-mation
that can be traced for at least 14 kilo-metres.
Three of these zones have indicated
and inferred drill reserves that total more than
19 million tonnes, as well as a total of 29 mil-lion
tonnes of resource, including geological-inferred
estimates. Beginning in mid-February,
three drills will complete 25,000
metres of diamond drilling in about 50 holes.
Two of these drills will concentrate on deep
drilling with complementary down-hole geo-physics,
while the third drill will probe the new
zone. The latter zone contains high-grade
pods and might greatly enhance average
grades. This program could produce results
that add significant value to SRU’s stock price.
Geofin, an independent consulting firm,
has calculated a stock value for SRU of several
dollars a share. We would agree the upside
potential is about four to five times current
share price (based on known information),
presuming that nickel and copper grades are
shown to carry the substantial capital costs in
that part of Canada.
Look for exciting press releases and a
greater exposure for this emerging player on
the Canadian mining scene. The timing could
be exceptional, as we swing into a vibrant
resource market.
David Mason is a geologist and CEO of Augen
Capital Inc., Toronto. He or his clients might
hold positions in securities described.
Fuel cells and palladium
potent investor brew
SELECTED CANADIAN PALLADIUM COMPANIES
Company Symbol Stock Price Shares Out Resource *Market cap./oz.
$/Share mm mm oz. Pd of Pd
North Am. Pd. PDL 15.20 50 6.4 240.
Franco-Nevada FN 16.40 180 4.2 694.
Geomaque Expl. GEO 0.29 55 1.3 12.
Starfield Res. SRU 0.63 26 1.5 10.
*market capitalization divided by ounces of Pd resource measured and inferred
Notes: 1.PDL has 4 mm oz. proven and probable
2.FN: 4.2 mm is platinum plus Pd., gold and other metals not considered
3.GEO has 0.3 mm oz. platinum., plus other projects
4.SRU has platinum, copper, nickel, and cobalt resources
David Mason
14 / February 2, 2001 I N V E S T O R ’ S D I G E S T Issue 3 / 01
© Copyright 2001 by MPL Communications Inc., Reproduced by permission of Investor's Digest of Canada 133 Richmond St. W. Toronto, ON M5H 3M8 |
