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LB
Scavenger's List Part I
November 24, 1997
A selection of low-priced, cash-rich, seasonal buys
Part I of our 1997 Scavenger's List is comprised solely of those cash-rich juniors whose market
value has now reached levels which, in some cases, discounts cash positions. In several instances
we note that some cash-rich juniors are also asset rich or guided by experienced, successful, and
respected management. Part I is the first of three parts. Part II will focus on asset-rich, or
fundamentally strong, juniors. Part III will highlight companies with strong, respected management,
who are also large shareholders of their respective companies.
In December 1996, we published our first annual edition of the Scavenger's List. That report was a compilation of 41 junior
companies we believed provided the speculative scavenger with the opportunity to accumulate a basket of low-priced,
seasonal buys.
The objective of the Scavenger's List is to identify junior companies who's combination of management, assets, exploration
exposure, insider positioning, and technical trends could provide excellent capital appreciation within a 12-month period. The list
attempts to take advantage of a seasonal sell-off in the November/December period, which typically occurs due, in part, to
tax-loss selling, the seasonality of resource exploration, and of the winter holiday season. In 1996, due to the then buoyant
market environment, the basket from which we were able to select "penny-stocks" was, from an historical perspective,
relatively small. The performance of our top 5 performers from the 1996 list can be seen below.
Top 5 Performers from 1996 Scavenger's List
Company
Symbol/Exchange
Recommend
$
Subsequent
High
% Return
Northern Abitibi
NAI:A
$0.36
$2.60
622%
Cypress Minerals
CYP:V
$0.33
$1.83
454%
Kalahari Resources
KLA:V
$0.40
$1.68
320%
Donner Resources
DRZ:V
$1.05
$4.30
309%
Alamos Minerals
AAS:V
$0.95
$3.79
298%
Overall, on a weighted average basis, the 1996 Scavenger's List returned 106% to subsequent highs.
Due to the rapid market sell-off over the past two quarters, the number of companies from which we were able to review in
order to make this year's selections has become exponentially larger than that in 1996. In fact, the difficulty we experienced
this go-around was in accurately gauging overhead pressure, which could dramatically suppress price performance on an issue,
due to much higher-priced financing overhangs. This phenomenon is likely unique to this year's selection criterion, the primary
reason being that the latter half of 1997 experienced a rapid and persistent sell-off in all mining sectors. Thus, most
companies recommended are trading at or near 12-month lows. Our criteria in Part I is to focus on cash-rich juniors. This
primary objective is, in some instances, further supported by fundamentally inexpensive, speculative assets or strong
management.
Recommended Strategy
Although we sifted through hundreds of juniors to arrive at our selections, the key to success, as with all investing, is to evenly
distribute your speculative dollars among a basket of companies to spread risk and leverage exposure. In some instances,
companies presented are not terribly liquid, so patience is required on accumulation. An averaging down purchase program is
recommended. Most importantly, tailor your portfolio to your own investment strategy by focusing on groups, sectors, assets,
or other criteria with which you have had proven success in the past. Closing prices quoted are as of November 24, 1997. In
terms of price target objectives, given the ever-changing dynamics in the overall marketplace, we would recommend that any
short-term gains of over 33.3% be realized, at minimum by selling one-third of a position. The overall objective of a basket of
Scavenger candidates is to gain exposure to at least one "high-flyer" out of a basket of five companies. With the above noted
strategy on realizing short-term gains, such exposure to a high-flyer may represent half of any original purchase. In other words,
given the nature of junior companies, and the current market environment, we must emphasize that profit taking is
not harmful to your health.
Companies in the Scavengers list
Alamos Minerals (AAS : V)
52 Wk Hi/Lo: $3.79-0.60 Close: 0.55
Shares Issued: 14.8M; 17.2M f.d.
Working Capital: $5.1M Per Share:
$0.35
Owns La Fortuna Au project, Mexico, with reserves of 2.9M tonnes
grading 2.57 g/t Au and 34.8 g/t Ag, among several other exploration
assets. Sound management headed by Chester Millar.
Antares Mining (ANZ : T)
52 Wk Hi/Lo: $4.30-0.40 Close: 0.46
Shares Issued: 32.2M; 38.8M f.d.
Working Capital: $9.2M Per Share:
$0.285
Holds 76.5% interest in Ojolali Au-Ag prospect, Indonesia; 24.7% of
Rappa Holdings, a South African gold recovery operation; 37% interest in
Lady Lina Au mine, Zimbabwe and joint venture prospects in the
Toodoggone area BC.
Argentina Gold (ARP : V)
52 Wk Hi/Lo: $2.99-0.85 Close: 1.05
Shares Issued: 33.1M; 34.4M f.d
Working Capital: $5.0M Per Share:
$0.15
The last RC drill hole completed last season on ARP's Veladero gold
target in Argentina intersected 168 m of 2.7 g/t from surface. Geophysical
and geochem surveys have outlined a prospective area of 2.8 km x 3.4
km. ARP owns 60% operating interest with Barrick earning a 40% interest.
Drilling will start mid-December with three rigs completing 20,000 m.
Major shareholder is the Lundin Group (40%).
Atna Resources (ATN : T)
52 Wk Hi/Lo: $6.30-1.15 Close: 1.55
Shares Issued: 20.2M; 22.9 f.d.
Working Capital: $20.5M Per Share:
$1.01
Atna holds 40% of the Wolverine VMS deposit and 1.5M shares of Grayd
Resources (GYD : V). Drilling on Wolf property in 1997 identified Zn-rich
VMS to be drilled aggressively in 1998. Sound management.
Botswana Diamondfields (BWD : V)
52 Wk Hi/Lo: $5.50-1.20 Close: 1.15
Shares Issued: 16.9M; 18.5M f.d.
Working Capital: $17.5M Per Share:
$1.04
Botswana has accumulated a broad portfolio of diamond concessions in
southern Africa including having recently secured the Gema Dourada
concession in Angola which is estimated to host over 1.0M ct. in alluvials.
Managed by John Darch and Gerald Wright.
Caribgold Resources (CG : T)
52 Wk Hi/Lo: $1.48-0.55 Close: 0.55
Shares Issued: 10.5M; 11.5M f.d.
Working Capital: $6.5M Per Share:
$0.61
Relatively inactive over the past year, CaribGold has recently acquired a
40% interest in 1.4M hectares in Sweetgrass Arch, Alberta, an area it
believes could be prospective for diamondiferous Kimberlites.
Corriente Resources (CTQ : T)
52 Wk Hi/Lo: $19.50-1.05 Close: 1.20
Shares Issued: 21.0M; 23.5M f.d.
Working Capital: $21.0M Per Share:
$1.00
Extensive holdings in Peru, Argentina, and Bolivia. The Company's mix of
advanced projects and exploration properties, coupled with technically
strong management, make Corriente one of our leading cash-rich
Scavenger candidates.
Essex Resources (ESX : V)
52 Wk Hi/Lo: $4.30-0.46 Close: 0.59
Shares Issued: 23.0M; 25.1M f.d.
Working Capital: $10.0M Per Share:
$0.43
Essex is currently in the midst of drilling the Miguela VMS targets, Bolivia.
ESX holds eight concessions in all in eastern Bolivia and was recently
listed on the T. Managed by Ian Rosier and Barb Dunfield.
Expatriate Resources (EXR : V)
52 Wk Hi/Lo: $5.00-0.41 Close: 0.50
Shares Issued: 8.6M; 10.3M f.d.
Working Capital: $3.5M Per Share:
$0.40
Holds massive sulphide prospects in Finlayson Lake area, Yukon. On the
Ice Property, Cu values up to 5.2% over 20.5 m were reported. This area
will remain a focus for EXR as well as the review of further acquisitions.
Gothic Resources (GCR : V)
52 Wk Hi/Lo: $1.77-0.65 Close: 0.66
Shares Issued: 11.8M; 17.0M f.d
Working Capital: $7.0M Per Share:
$0.59
Gothic is drilling two large potential deep gas plays in the Gulf of Mexico.
The West Cameron (8% int.) hole is nearing T.D. at 16,000 ft. in a target
adjacent to a field that has produced 970.0B cu. ft. of gas. The Stockdale
test (7.5%) should spud this week and drill to 26,000 ft. in a target adjacent
to a 7.0T cu. ft field.
International Pursuit (IPJ : T)
52 Wk Hi/Lo: $5.25-1.00 Close: 1.18
Shares Issued: 28.0M; 34.0M f.d
Working Capital: $21.0M Per Share:
$0.75
IPJ has turned into an investment bank for the $35.0M invested in the
Company by institutions in Jan./96 at $4.50. There are several active
projects including the Philippines sulphide copper deposit (220.0M t of
0.46% Cu) and grassroots gold targets in Mongolia and Indonesia. These
need further exploration to attract a retail audience.
Jordex Resources (JDX : V)
52 Wk Hi/Lo: $2.20-0.85 Close: 0.95
Shares Issued: 29.0M; 33.0M f.d
Working Capital: $21.7M Per Share:
$0.74
Jordex is in a JV on their large nickel deposit (40.0M tonnes at 1.5% Ni) in
Venezuela. Minorco can earn an 85% interest by providing US$430.0M
production financing. While Minorco works on this project, Jordex has
been actively drilling on two vein gold targets in South America. Brian
Hinchcliff is the major shareholder with 2.2M shares.
Lucero Resources (LCR : V)
52 Wk Hi/Lo: $1.85-0.46 Close: 0.48
Shares Issued: 12.3M; 13.8M f.d
Working Capital: $3.6M Per Share:
$0.29
Jim Dawson has a loyal following that has been waiting for a new focus for
the company. Exploration crews have been reviewing projects in Chile and
Alberta. We continue to be patient that a property of merit will be
acquired.
Mansfield Minerals (MDR : V)
52 Wk Hi/Lo: $8.30-1.00 Close: 1.15
Shares Issued: 16.3M; 19.1M f.d
Working Capital: $9.0M Per Share:
$0.55
Mansfield has steadily dropped in price since the property dispute on the
Cerro Samenta Cu-Au target last December. They are no nearer to a
settlement but MDR is very active on several other Argentina properties.
Rio Tinto is currently drilling the Mina Concordia Cu-Au project and MDR
has intersected 57.0 m grading 1.0% Cu and 1.0 g/t Au on the Sierra Gordo
property, both in Argentina.
Mar-West Resources (MSR : V)
52 Wk Hi/Lo: $3.29-1.00 Close: 1.27
Shares Issued: 16.5M; 18.2M f.d
Working Capital: $8.0M Per Share:
$0.48
Mar-West is getting especially hard hit by tax loss selling. They have
outlined an estimated 500,000 ozs. to their 80% interest on the San Martin
gold property in Honduras. This is an open pit low-grade resource. Drilling
will continue in January on this project as well as the Cerro Blanco gold
target in Guatemala.
Mindoro Resources (MIO : A)
52 Wk Hi/Lo: $1.34-0.20 Close: 0.20
Shares Issued: 13.3M; 24.4M f.d
Working Capital: $3.3M Per Share:
$0.24
MIO could at last provide some excitement with drilling planned in the
new year. The first target will be Kyaukkyi (30% interest) in Myanmar
(formerly Burma), a high grade gold in float target. Secondly, MIO is
looking at up to six properties in the Philippines. They should have drill
targets by year-end.
Minorca Resources (MAR : T)
52 Wk Hi/Lo: $7.25-0.65 Close: 0.92
Shares Issued: 35.5M; 37.0M f.d
Working Capital: $40.0M Per Share:
$1.12
Just weeks before the Bre-X fiasco, MAR raised $67.0M at $6.10/share
to fund their interest in the Busang deposit. The placees won an increase
in the number of shares to give a unit price of $2.50. The company spent
$25.0M to buy 32% of McWatters which produces 180,000 ozs/year from
Val-d'Or operations. Minorca has a large portfolio of exploration projects
in Guyana, Indonesia, and Nevada.
Olympic Resources (ORL : V)
52 Wk Hi/Lo: $1.24-0.33 Close: 0.34
Shares Issued: 10M; 13.5M f.d
Working Capital: $4.0M Per Share:
$0.40
Rahoul Sharan financed this company on the merits of an Indonesian
property. Sensing a lack of market appetite for news from this part of the
world, ORL has acquired 100% interest in 900,000 cu. ft. per day of natural
gas production in Alberta. This may be the start of a larger acquisition
strategy.
Omax Resources (OXR : V)
52 Wk Hi/Lo: $1.80-0.25 Close: 0.25
Shares Issued: 19.5M; 26.0M f.d.
Working Capital: $4.1M Per Share:
$0.21
Omax holds varying interests in several projects all located in Indonesia.
In late September initiated drilling on the Ciemas Cu-Au porphyry target,
West Java.
Pacific Rim Mining (PFG : V)
52 Wk Hi/Lo: $8.20-1.08 Close: 1.15
Shares Issued: 18.2M; 24.3M f.d
Working Capital: $9.0M Per Share:
$0.49
Barrick is planning another phase of drilling in the new year on the
Diabillos silver-gold deposit in Argentina. This project is at a pivotal
juncture where Barrick must decide whether to go to production leaving
PFG with 30% interest or drop the option. While Barrick carries this
program, PFG continues to look for new projects in Argentina. Major
shareholder is Catherine McLeod-Seltzer (8%).
Palmer Resources (PMD : V)
52 Wk Hi/Lo: $7.00-1.02 Close: 1.08
Shares Issued: 15.9M; 23.0M f.d
Working Capital: $10.0M Per Share:
$0.62
Palmer will continue to drill its Indonesian gold targets after intersecting
isolated yet high-grade structures in drilling to date. Initial drilling will
commence in the new year on a prospective copper target in Vietnam.
Major shareholder is Jerry Pogue (17%)
Pangea Goldfields (PGD : T)
52 Wk Hi/Lo: $7.70-1.61 Close: 2.05
Shares Issued: 20.4M; 25.0M f.d
Working Capital: $17.0M Per Share:
$0.83
Pangea is drilling seven separate projects, many in joint venture with
major mining companies. The Golden Ridge deposit in Tanzania, joint
venture with Randgold, is under feasibility to develop a 1.6M ozs. Au
resource. Anglo American is completing a pre-feasibility study on PGD's
Kahama gold deposit (1.1M open pit ozs.) in Tanzania. Well managed.
Paramount Ventures (PVF : V)
52 Wk Hi/Lo: $2.60-0.65 Close: 0.66
Shares Issued: 27.7M; 33.0M f.d
Working Capital: $14.0M Per Share:
$0.50
While the cash per share is favourable, we have not seen a new project of
merit after the company closed down its Indonesian exploration. This Paul
Conroy managed company is in position for acquisitions.
Peruvian Gold (PVO : V)
52 Wk Hi/Lo: $2.80-0.70 Close: 0.86
Shares Issued: 14.2M; 17.4M f.d.
Working Capital: $12.8M Per Share:
$0.90
Peruvian remains on the hunt for acquisitions primarily in Latin America.
On November 14, 1997, Bradstone Equity Partners (BEP.A : T) announced
they had acquired 1.42M shares, or 10% of PVO. The Company's burn rate
is low.
Queenstake Resources (QTR : T)
52 Wk Hi/Lo: $4.50-0.65 Close: 0.78
Shares Issued: 38.0M; 46.0M f.d
Working Capital: $10.0M Per Share:
$0.26
Queenstake gave the market a great ride with credible management
working up grassroots S. American mineral plays with huge potential.
Unfortunately, several drill programs have come up empty. However,
there are potentially five drill programs scheduled over the next six
months that could bring this company back into the spotlight.
Solomon Resources (SRB : V)
52 Wk Hi/Lo: $1.83-0.19 Close: 0.27
Shares Issued: 27.0M; 30.0M f.d.
Working Capital: $4.5M Per Share:
$0.16
Solomon also holds 1.0M shares of Viceroy (VOY : T) and 1.2M shares of
Oliver Gold (OGO : V), which equates to an additional $0.10/share over
current working capital. SRB also has interests in gold prospects in
Burkina Faso. The Company is lead by R. Neolitzky and L. Nagy, both well
respected in junior resource circles.
Sonoma Resouces (SNA : V)
52 Wk Hi/Lo: $1.94-0.23 Close: 0.25
Shares Issued: 16.4M; 22.0M f.d.
Working Capital: $3.6M Per Share:
$0.22
Sonoma holds exploration prospects in Argentina. The Company is
seeking to option out several prospects but will move to drill the Apeleg
Cu-Au prospect. Further acquisitions are being reviewed.
Takla Star Resources (TKR : A)
52 Wk Hi/Lo: $4.30-0.80 Close: 0.80
Shares Issued: 12.8M; 13.5M
Working Capital: $9.0M Per Share:
$0.70
Takla management have consistently been able to acquire prospects of
geologic interest, often in emerging area plays. This philosophy is
expected to drive any acquisitions in 1998. Current exploration focus is on
the Orkho Pina Au target, Bolivia. Management is well regarded.
Valerie Gold (VLG : V)
52 Wk Hi/Lo: $8.40-0.90 Close: 1.16
Shares Issued: 12.5M; 16.0M f.d.
Working Capital: $16.0M Per Share:
$1.28
One of the larger working capital positions in our list, Valerie is focusing
exploration on the Au/Ag Mamatla project, Mexico. TVX Gold holds right
of first refusal on the property. Drilling is proposed to commence early in
1998. In 1996, VLG was institutionally well followed.
Winspear Resources (WSP : A)
52 Wk Hi/Lo: $4.55-0.66 Close: 0.81
Shares Issued: 28.1M; 30.3M f.d.
Working Capital: $8.2M Per Share:
$0.29
Winspear remains focused on the identification of a kimerlitic source of
diamonds discovered in till on its Snap Lake project, NWT. Final details of a
Q1/98 exploration program are expect shortly. This is one of the better
diamond-focused juniors with enormous leverage and sound
management.
Graeme Currie
Andrew Muir, CFA
Canaccord Capital Corporation may have assumed an underwriting liability and/or entered into an agency agreement with
respect to the securities mentioned herein. |
