₪ David Pescod's Late Edition August 31, 2006
PACIFICA RESOURCES (V-PAX) $0.74 +0.05
SKYGOLD VENTURES (V-SKV) $2.35 +0.05
Promoter/mining executive Don Mosher reminds us today that it was back in February we had a little discussion about the imminent junior mining market correction. We have a little grey hair and Mosher’s hair is threatening to turn grey, which means we’ve seen a few cycles in the market. And one thing we’ve learned is that the markets never go straight up without picking an opportunity to correct or punish people.
We had both expected a correction after such a long, sweet ride, but what happened through March, April and May was for many stocks more than a correction—it was a crash.
Mosher who is on the board of Rodinia Minerals and Dajin Resources, but also does much of the hard work for Skygold Ventures, Great Panther and was one of the money raisers for the IPO of Wavefront Energy.
He has been appalled to see so many mining stocks clipped 50% and suggests that the market has gone from one extreme to another. From seeing nothing but the good in every potential mining play up until April/May to today, where all they ask are hard questions and no one gets the benefit of any doubt.
We ask him to come up with an example of something that’s been cut by 50% or more that should be getting a little more respect in the market, other than some of his own stories of course.
Pacifica Resources is an example that he uses and the chart shows you that it’s been battered. This is an old base-metal play in the Howard’s Pass area of the Yukon, NWT. It seems to get looked at every time mining stocks have their day in the sun. Mosher suggests that the project in the Selwyn Basin is almost 35 kilometers long and is probably flirting now with reserves, resources or whatever of almost half a billion tonnes grading probably 5% zinc and 2% lead. (Today they come up with some additional drilling results which were much sweeter of 4.0 meters grading 21.74% zinc and 15.75% lead).
So we decide to play devils advocate and ask Mosher some hard questions on this company, taking the negative view the market does in most plays these days (and despite owning a few PAX ourselves). First of all, management of Pacifica is under a bit of a cloud as they played a role in promoting the Yukon Zinc story which feasibility studies show, didn’t make sense and the stock crashed. Secondly, winter is coming on and this is a way-northern story. There is also no infrastructure, in this remote area and the big problem with everybody trying to build something in Alberta, the Yukon and the NWT these days—lack of men, materials and expenses of any kind have gone through the roof.
Mosher agrees that’s the negative way the market would be looking at it, but he says first of all, with eight drills turning, there’s going to be a flow of news for quite some time, probably until past Christmas at least.
As far as infrastructure, he admits there is almost nothing up there, but then you simply super-concentrate what you find, there will be a way to get it to port. He points out that they are bringing in different smelters from around the world and possibly partner up with them in some sort of joint venture that would eliminate the need for ever more financings (there are already almost 90 million shares outstanding).
As far as it being an expensive location, Mosher agrees, but then points out again that this is probably one of the world’s biggest, yet to be developed base metal projects, at a time when the world needs zinc badly. And at higher prices.
Mosher is a big believer that momentum can swing yet again and he suggests going into September, when people get back to work and hoping to make a buck in the markets again, volumes will pick up. Mosher might have a point, particularly what we’ve seen in today’s market - with gold having a better day, silver a great day, Goldcorp buying out Glamis Gold, creating a bit of a buzz, some excitement being created by Blue Pearl Mining about them being a producer sometime soon and Cumberland being awarded its permit in Nunavut. Maybe the market can go from one extreme to the other.
Meanwhile Mosher won’t go without mentioning some of his own plays and reminding us that the news today out on Wavefront, a person should pay attention to and as far as Skygold Ventures, their acquisition of a million acres adding onto their large program certainly gives a lot more ground to work on.
AMERIGO RESOURCES (T-ARG) $1.85 -0.05
We caught up today with Mark Jarvis, one of the founders of Ultra Petroleum who you would have thought, would have cashed in his chips and be spending a lot of time these days counting his money or writing that script he always dreamed of doing. Heck no, he decided to go from the oil and gas business into the even more hectic world of junior mining and took over Hard Creek Nickel. Today we asked him if he could only buy junior mining story, what would it be? He suggests that Amerigo Resources today is offering one of those buying opportunities because of some bad news. The company he suggests, has experienced management with some people from Teck and is basically treating tailings from previous production and probably has enough supply to last them 30 to 50 years. And he suggest, it even has a dividend! Mark Jarvis (from entrepreneur to coupon clipper?) The reason he suggests they’ve got a problem is that it looks like there’s a constriction in supply of their tailings for the facility and it could last as long as four months. That’s means the stock has taken a hit and he suggests a couple of months down the road, when production resumes, he hopes to see those higher stock prices again. Meanwhile, as far as predicting metal prices, Jarvis is very much on the bullish side. He points to all the known porphyry/copper projects out there in the world and how long it will take them to get them developed. “Five to 10 years at least, of great metal prices” he suggests.
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