Here is the second newsletter put out. This is by The Hard Rock Analyst and acknowledgement is herein given.
The Hard Rock Analyst - Special Delivery
Special Delivery #149 – 16 December 2002
So what now that the gold price has popped and made a new 5-year high in lock step with the € breaking through June’s ceiling? For the moment we expect momentum to bring further gains in both before year’s end, but are cautious that many were caught off-guard at the timing and are puzzling the situation through. At a Us$333/oz close on Friday the gold price is within the danger area for some producer hedging and this could spike the price near term. Perhaps the best gauge hedge covering would be flux coming into the market for the Australian $ and the South African Rand since both could be part of the mix for off-side hedge books. Producers have been preparing for this jump so we are not expecting the same kind of action we saw with the European Central Banks announcement in 1999, but then we are past the highs of that spike already. Stay or get into gold stocks, but with a trader’s eye for the time being.
Even though we were looking for gold price gains, we were caught off-guard by a new silver deal coming back to market last week. Strathclair Ventures Ltd (SVL-V; closing Friday up $0.09 at $0.42 on 96,500 shares) was released to trade on Wednesday even though it has not completed all the required votes and approvals to finalize the new deal. The new deal is a series of silver project in Guatemala, two of which have existing Resources of about 28 million oz with expansion potential and two with high grade results but not yet sufficient data for a recognized Resource. The concept is to establish near term production while continuing with resource expansion, and the new group has the right background to do both. The group is headed by Scott Drever who was a part of management at Dome Mines when it merged to become Placer Dome, and headed Blackdome Mines in the late 80s when it was a darling of the then smaller high-grade list for its production on its namesake gold mine in British Columbia. Drever’s partner Eric Fier who has worked with Pegasus Gold, Newmont Gold and Eldorado Gold in the past heads the field team. The board also includes Bill MacNeil who is Chairman of small gold producer Claude Resources (CRJ-T), and the President of SVL who joined the company this past summer is George Sanders who’s history includes a background as a broker and analyst with a mining specialty. The company currently has 4.2 million shares out, of which management holds 2.2 million, and a 2.5 million unit Special Warrant offering at 13 cents that will be held as to 70% by management is also announced. In short the company is still tight and likely to stay that way at least for the moment.
The Opoteca project contains, based on work by previous operators, Indicated Resource of 5.6 million oz @ 123 g/t silver (3.6 oz/ton) plus further material at similar grades that could double the Resource estimate. This is in a near surface oxidized zone of 15 metres thickness, which makes it a prime target for near term and low cost production. The El Ocote property contains a breccia pipe that hosts a 11 million oz Indicated Resource at 181 g/t silver plus further material at lower grades. The two non-Resource projects contain high-grade vein systems that have reported strong grades by previous operators. More on these soon.
Though I have had a chance to talk to Scott Drever at some length about the concept and some of the detail of this package, the project reports have not been publicly available until now and I will be looking at the detail this coming week. However, having sat across the table from Drever in the past I know from experience he drives a hard bargain, and I know his focus is on providing shareholder value through profitable production. He has always been focused on value and in this market that will get high respect. The Resources outlined above are a fraction of the package’s potential, and the grades are as strong as any silver package in the market, of which there are very few that are actual pure silver plays like this one.
Since the shell has begun trading again without the deal actually being approved there needs to be a caution at this point. That said, from my understanding of the deal it does not sound like there are any encumbrances of concern. Certainly the in-coming management group are very well respected, and it is because of this we think a “buzz” is building around this deal and want to get early work out on it while the precious metals markets are on the front of trader’s screens and it is still new. Even with consideration of further dilution needed to move the projects forward the company will have a comfortable market-cap for its existing resource base at double Friday’s closing level, and that is before considering exploration potential (a comparison with the recent Corner Bay take-over price would make this point). We are in the SVL market for a trade at this point, with the intent of reducing costs if there is a near-term opportunity to do so to hold and add to a low cost position as the deal comes together. And we do think the stock could catch a tail wind that makes this possible. More on the company to follow.
There will be a Dispatch out with further updates in the next several days, and the new Journal will have its first monthly run out for January. After much discussion and the addition of a group to help with details of getting info out to you we have decided to resume a monthly format for the Journal (the original Hard Rock Analyst format in essence), and the Dispatch will then become a mid-point service for e-mail subscribers. Special Delivery will then resume its focus on timing, such as this current offering. We will have more on the renewed HRA Service over the next few weeks.
Regards for now - David Coffin
Hard Rock Analyst - Special Deliver is an independent publication produced by Vanguard Consulting Ltd., which is committed to providing timely and factual analysis of junior mining and other venture capital companies. Companies are chosen on the basis of a speculative potential for significant upside gains resulting from asset-base expansion. These are generally high-risk securities, and opinions contained herein are time and market sensitive. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer, solicitation or recommendation to buy or sell any securities mentioned. While we believe all sources of information to be factual and reliable we in no way represent or guarantee the accuracy thereof, nor of the statements made herein. We do not receive or request compensation in any form in order to feature companies in this publication. We may, or may not, own securities and/or options to acquire securities of the companies mentioned herein. From time to time Vanguard Consulting Ltd. may have acted in a consulting or contracting capacity for companies reviewed in this publication; the superscript VC indicates a company for which Vanguard has acted in a paid capacity in during the previous 6 months. This document is protected by the copyright laws of Canada and the U.S. and may not be reproduced in any form for other than for personal use without the prior written consent of the publisher. This document may be quoted, in context, provided that proper credit is given.
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