MII SRU-V OReSEARCH UPDATE - May 13, 2001
mininginsights.com
WE STUDY THE PRESENT
Starfield Resources stock put on $0.03 Friday with the
news that the first hole of the 2001 drilling program
hit some decent mineralization a long way down. Drill
hole FL01-68 hit two bands of mineralization over
33.13m.
We estimate true thickness to be between 28m and 30m
with overall grades of 0.72% copper, 0.49% nickel,
0.06% cobalt, 1.19 g/t palladium, and 0.23 g/t
platinum. Note that this includes the interval between
the two richer zones. The company didn't supply results
so we've taken it to be zero. It is certainly more than
zero, however, not economic, which makes our grade
estimate likely the most conservative you'll see.
This hole was drilled 120m east of hole FL00-67. This
hole is a bit more complicated, with five mineralized
bands separated by varying degrees of lower grade
(unreported) mineralization. For the same exercise, we
calculate a true thickness of 72m of 0.61% copper,
0.33% nickel, 0.04% cobalt, 0.87 g/t palladium and 0.17
g/t platinum. Same caveats apply.
TO PREDICT FUTURE POSITIVES
Assume a simple average thickness for the two
intersections 120m apart. The current hole, number
FL01-70 is testing an area 80m down dip. So, the
results of the next two holes will define a box 120
wide and 80m tall. Add our estimate of the average true
thickness of 52m with a specific gravity of 3.0
tonnes/m3, corrected for a 75% recovery of all metals,
with a gross margin of, say, 12%, and we're looking at
1.25MM tonnes of (at current metals prices)
US$57/tonne rock hitting the bottom line. Or, C$16MM
of potential post-production value. In other words,
conservative arm-waving shows that about half of
Starfield's current market cap is tied up in the
box the company is now drilling.
AND MITIGATE FUTURE NEGATIVES
There is still some risk that two unknown corners of
the box now being drilled won't return the same kind of
values. However, our previous analyses of the Ferguson
Lake drill results show a remarkable degree of
consistency in grade, value, and metals leverage.
Still, for our peace of mind, we're in the process of
studying the statistical relationship between assays of
the mineral you can identify in core (copper) against
the minerals you can't identify in core (everything
else). We'll report on the results in the next MII SRU
OReSEARCH UPDATE.
STEP BACK 4 BILLION YEARS OR SO
Now think back to the time when the original
mineralizing system spewed these metals out into an
anoxic basin. The areal extent of anything that could
provoke a thickness of more than 50m is by definition a
lot more than 120m on the horizontal and 80m on the
vertical. SRU shareholders, we think you are going to
greatly enjoy the next set of drilling results.
VALUATION PARAMETERS
Spread Ratio: 5%. Good.
Last Bump:$0.70
Max. Block: 104,000 shares
Profit Appreciation: 2.3 consistently low, but that's
the price of extreme liquidity.
INVESTMENT CONCLUSION
We have found no items that concern us in our analysis.
There are no liquidity concerns, which means you can
build or divest holdings without paying too much or
watching the price drop like a stone. The low share
price volatility and high Max. Block are your
guarantees of a stable holding driven by asset
creation.
And in the next couple of months, there should be LOTS
of that.
Jim Steel
Mining Insights Inc. |
