'Homely Holmer' it used to get called ... yes i saw lorne post that on russ' thread ... EC used to follow it, another poster now called Yorikke as well ... i never followed it closely, never held it ... there's an old thread for it around here somewhere, if memory serves the same people who liked Black Pearl liked Holmer, they were both EC picks and had apparent fundamentals up the ying-yang yet never made it ... he should come over here, EC
Here's the old Alamos thread - #Subject-13430 .. amusing reading back over the old stuff, some of it ... now there's one that makes an impressive all-data bigcharts chart, lol ... and ya know what - i hold it today ... never thought i would hold another Chester Millar play but ee-yup well into the third millenium here we are dancin' ... here's a Kaiser tracker pasted from sh post 4278980 -
' Kaiser Bottom-Fish Tracker 2001-029
Copyright 2001 John A Kaiser
October 24, 2001
Alamos Minerals Ltd (AAS-V: $0.20)
Tel #: (604) 643-1787
Web Site: www.alamos-minerals.com
Alamos rebounds from the dead with a leveraged gold play
Alamos Minerals Ltd (AAS-V: $0.20) has been an acutely
embarrassing and disappointing bottom-fish, but a deal
announced October 17 promises to turn this unpleasant
situation around in a big way. When I pegged Alamos a top
priority bottom-fish in late 1997 it had everything going for it:
excellent people credentials in the name of Chester Millar, a
legendary mine developer who discovered Afton and pioneered
heap leaching through Glamis Gold, a cash rich $7 million
treasury that had been topped up in 1997 through a private
placement completed at $2.50 with a combination of
insiders, hotshots and institutions on the heels of Francisco
Gold's El Sauzal promotion, and a sleeper gold deposit called
La Fortuna acquired from a failed Rick Rule promotion called
San Fernando that has gone on to new life as an oil and gas
producer called Keywest Energy Corp.
When Chester Millar pronounced that Alamos would be the
"culmination of his career", something compelled me to shelve
my usual cynicism and ignore the ambiguity implicit in this
statement. Alamos went on to tackle a series of small scale
projects that offered modest rewards, a strategy unfitting for
Millar's brand name status, but consistent with his business
philosophy of starting small and using the resulting cash flow
to develop bigger and better projects. Unfortunately, the La
Fortuna, Arequipa M and San Antonio projects all delivered
cash robbing failure.
This all happened
during a declining gold market that Millar attributed to large
scale central bank liquidation of gold reserves and an
overabundance of gold producers with projects bankrolled by
financiers with visions of $1,000 gold in their eyes, an
unfortunate situation whose end he still believes is
a long way down the road. With the failure of one mickey mouse
project after the other and the attrition of Alamos' treasury to a
couple hundred thousand dollars, the market gradually lost
interest in Alamos and Chester Millar.
In mid 2001 when Alamos agreed to a merger with National
Gold Corp (NGT-V: $0.14) on terms involving a 3:1 rollback for
Alamos, a merger with a junior run by gold bug amateurs who
knew little about developing gold deposits discarded by the
majors, I resigned myself to the conclusion that the culmination
of Chester Millar's career amounted to little more than a sad
whimper.
One way or another Salamandra will be a glorious culmination
of Chester Millar's career, But on October 17 Alamos made a
startling announcement that the merger had been cancelled,
and in its stead Alamos had signed an option to earn a 50%
interest in National Gold's Salamandra gold project in
Mexico by contributing $2,375,000 (Cdn) over the next 12
months for exploration and underlying property payments that
come due during this period.
Alamos and National Gold would share equally in any additional
outstanding payments to vendors Placer Dome and Kennecott
as well as mine development costs. In addition Alamos would
be required to pay $2 million to National Gold over the four
years following commencement of profitable production. I found
the announcement startling because 1) Chester Millar expects
gold to stay stuck in the $250-$300 range during the
foreseeable future, 2) the Salamandra project carries baggage
in the form of metallurgical, environmental and local people
problems that will require considerable ingenuity
to overcome, 3) Alamos' meagre treasury of $200,000 required
a significant fund raising effort by a management team that had
frittered away $7 million with little to show for it, 4) Chester Millar
at the age of 74 would have to assemble a team of younger
gung-ho experts to pull off the necessary fund
raising and mine development grunt work, and, 5) National Gold
was taking a great risk of infuriating its gold bug backers by
optioning half the 3.4 million ounce gold resource on terms that
were reasonable for an anti-gold bug. As a person who shares
Chester Millar's view that gold will not be ready to boom until the
central banks are no longer in a position to sell another ounce
either directly through official sales or indirectly through
leasing, my immediate reaction was that this announcement
was some sort of joke.
The Salamandra project was no mickey mouse punt like the
high grade Arequipa M project or the low grade San Antonio
project. Salamandra was a project that offered huge rewards
and a big corresponding failure cost.
This project, I thought, was a fitting culmination for Millar's
career because he was either going to succeed gloriously,
or fail gloriously. And for speculators, it is the word
"gloriously" that counts. But was Chester Millar up to the task?
Salamandra play is a have your cake and eat it too situation
for Alamos investors I managed to get hold of Chester Millar
Friday afternoon and confirmed that he had indeed unearthed
and drunk a bottle of piss and vinegar during the summer. He
plans to bring in new expertise to handle the nuts and bolts of
deposit development and shopping the story around to
investors while he lends his experience and brand name clout
to the project.
He isn't very interested in the 3.4 million ounces contained in
a 68.8 million tonne resource of 1.6 g/t gold in the Mulatos zone
estimated at a cutoff grade of 0.8 g/t on the basis of 511 drill
holes and 994 underground samples. Much of that resource is
in the form of sulphides that require a substantially higher gold
price to be economic. And Millar is not prepared to make any
decisions whose positive outcome hinges on a gold price
above $300. His quarry is a high grade core within the Mulatos
deposit which represents 11.5 million tonnes of 3.16 g/t gold
at a cutoff of 2 g/t. That is a resource of 1,160,000 ounces. The
Mulatos ore has yielded an average recovery of 66.2% for heap
leach tests, a fairly low recovery rate that points to metallurgical
problems.
But Millar, who has studied the data generated by the US $30
million Placer and Kennecott spent on this project, thinks the key
to better recoveries lies in the 3/4 inch crush size Placer used in
all its heap leach tests. Millar thinks a smaller crush
size could yield a recovery boost that more than offsets the
increased crushing cost.
Miller plans to spend the next 2-3 months drilling the high
grade zone in preparation for extraction of a bulk sample for
heap leach testing. He expects to have the heap leach test
results by the middle of next year when he will be in a position
to decide whether or not the project merits development.
From a speculator's viewpoint, this represents an eight month
window during which no negative project news will flow, and
during which the market will respond positively to any upward
blips in the gold price. For anti-gold bugs like myself the Alamos
option of the Salamandra project represents a way to have my
cake and eat it too: on the one hand I am betting that Chester
Millar can create value on the basis of a conservative outlook for
the price of gold, and on the other hand I have full exposure to
the upside that would ensue if the gold bug dreams of a
major gold breakout become reality. Through the
Salamandra option Alamos has transformed itself from a
really disappointing bottom-fish dud into a perfect bottom-fish
for speculators who want exposure to the substantial upside
implicit in a gold bull market without having to be a true
believer.
Alamos announces $900,000 financing
On October 23 Alamos announced a non-brokered private
placement of 6 million units at $0.15. Each unit includes a
warrant exercisable at $0.20 for nine months from closing.
Alamos is not presently an annual information form filer, so this
financing will have a 12 month hold period, at least until
Alamos files its AIF. The junior has 14,878,030 shares issued
plus 710,000 options at $0.48 that will probably be repriced. The
Millar family owns about 2 million of these shares. Much of the
rest is broadly held. On a fully diluted basis Alamos will have
27,588,030 shares outstanding. At current market prices and a
50% net interest, the market is assigning an implied project
value of $10 million to the Salamandra project. That is cheap
considering that this project not only boasts a global
resource of 3.4 million gold ounces, but this represents only
one of seven mineralized systems within an epithermal district
covered by the 15,117 tha property.
The financing is paying a 7% commission on the non-insider
portion, but I have a suspicion that this financing will find no
shortage of buyers. Some of it will no doubt be placed by
director John McCluskey with his network, which has not had a
decent win, or compelling gold story for a long time.
The rest will be placed with smart money types willing to bet
beyond the Salamandra project on the possibility that Chester
Millar will try to build Alamos into another Glamis Gold by
acquiring other gold projects. Millar is famous as a cheapskate
bottom-fisher who no doubt has his eyes on a number of
sleeper gold deposits whose asking prices have withered
during the lengthy gold slump. Millar is probably familiar with the
push-pull bait and switch company building method that is a
trademark style of Robert Friedland. By the time the day of
reckoning arrives next summer for the Salamandra project, the
buyers of this private placement will be eager to see other gold
projects in place that can carry the junior's market
capitalization if the Salamandra play evaporates. Of course, if
we get a gold rally during this period, the Salamandra project
itself can become the focus of a major exploration campaign
designed to identify new gold resources.
Salamandra price tag deferred until 2008 unless gold persists
above $300
What about National Gold Corp, which will have about 26.1
million shares fully diluted if a recently announced financing
closes? After a modest trading blip the stock has gone down a
few pennies in the aftermath of the Alamos option. National
Gold is a former capital pool rescued from the graveyard in
2000 by Albert Matter, a former broker who was a big wheel
during the resource junior cycle that ended in 1997.
Matter is a gold bug who negotiated the initial Salamandra
deal in December 2000 with the expectation that he would
catch a gold rally wave a short time later to pay for the
acquisition. The initial deal was very expensive, requiring
National Gold to pay $10.5 million (Cdn) over four years plus a
2% NSR on the first 2 million ounces of production. The killer
was a $3 million cash payment within one year, with the
remainder due at the end of four years.
>
On August 21 National Gold announced a revised deal
whereby all but $250,000 is due in 2008 and 2010 unless the
gold price goes up. A total of $2.75 million becomes due 60
days after the date the nine month trailing average price of goal
hits US $300 per ounce. If the nine month trailing average is
$325, the remaining balance of $7.5 million will be due 90 days
after October 1, 2004. The NSR is now a sliding scale royalty
that slides from 1% below $300 to 5% above $400. With gold
holding steady below $300, the clock on the accelerated
payment deadline has not even begun ticking. A troublesome
scenario for National Gold and Alamos would be a narrow
trading range of $300-$325 for gold, a range that is not
sufficient to have a big impact on the economics of the Mulatos
deposit, and, at least in my view, is insufficient to ignite a gold
market mania among investors. However, I am also of the view
that if gold managed to hover in this range for nine months, this
would probably be base building for a move in the upwards
direction. Millar, whose brand status enables him to cash
in more effectively on a gold bull market at an institutional
level than a relatively unknown group such as the National
Gold management, is not overly worried about an accelerated
payment trigger. Although the deal announcement does not
spell it out, Millar is operating under the assumption that an
accelerated payment would be shared equally by Alamos and
National Gold. One question that does nag is why Placer
and Kennecott are so eager to get rid of a multi-million ounce
gold project with untested district potential, one on which they
have spent US $30 million since 1993?
One answer that has been suggested is the desire to convert
the investment into a tax loss, something that may only be
possible through a sale.
National Gold market hampered by a paper overhang and a
credibility deficit National Gold's illiquid stock gapped to the
$0.70 level after the initial Salamandra deal, but collapsed in
March when Haywood proved unable to close a $5.2 million
financing at $0.65. Since then National Gold has completed
cheaper financings that represent dilution of about 15 million
shares and warrants at prices $0.15-$0.30. National Gold is an
AIF filer, so a good portion of this paper is hanging over the
market as free trading paper. The initial merger proposal with
Alamos had the smell of a bailout
for Alamos shareholders in exchange for Chester Millar's
expertise. I am not privy to the politics of the relationship between
the Millar and Matter groups, but the latest deal has the smell of
a bailout for National Gold. It seems that at the end of the day
Chester Millar wanted a bigger price for the credibility he
could bestow on the Salamandra project. The new deal puts full
responsibility for the project's near term success or failure in
Millar's lap, and reward of his success will accrue to Alamos
shareholders 50%.
My own speculation is that Millar will evolve a game
plan that will unyoke the market valuation bond between Alamos
and National Gold, which is presently about equal if you
completely discount Alamos' 250,000 ounce La Fortuna gold
deposit. In other words, Alamos and National Gold should trade
at about the same price until one of them acquires a
significant new project. In practical terms, this means that Albert
Matter's network will probably concentrate its promotional
efforts on Alamos, whose less liquid market represents
considerably lower selling resistance. In other words, if Alamos
goes up because of speculation about the Salamandra
project's potential, arbitrage logic will generate ancillary buying
of National Gold so that a rising Alamos stock will drag up
National Gold. For bottom-fishers this means that Alamos is
the more timely buy right now, while National Gold becomes
interesting as a bottom-fish buy if the valuation gap between
the two companies widens.
Alamos for gold bears, National Gold for gold bulls I presently do
not own any Alamos, but if my goal is to own a bottom-fish that
is a bet on both people and gold, Alamos is the best bargain I
can see among Canadian gold juniors. For those of you who
think gold is going to the moon tomorrow, perhaps because you
believe the central bank vaults are already empty of gold, and the
Gata crowd will succeed in pushing the gold conspiracy
theories into the mainstream press, National Gold may be a
better buy. The Matter group is hungry and aggressive. While
Millar would probably dismiss the early stages of a gold rally as
a flash in the pan, Matter would likely pump it up as the
beginning of much better things to come.
It boils down to your personal outlook for the future of
the gold price. My bet is that Chester Millar can make Mulatos
work below $300, and if we get a higher gold price, I won't
complain about the windfall.
[No statement or expression of opinion, or any other matter
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