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Vulcan Minerals Inc. (VUL - Alberta Stock Exchange)
May 21, 1998 Current Price: $0.30
Vulcan is a Newfoundland based publicly traded exploration company on the Alberta Stock Exchange (symbol VUL). It was listed for trading on August 28, 1995. Initially, the focus of the company has been in Newfoundland and Labrador because of its exceptional untapped resource potential. Vulcan has a competitive advantage in this area because of its knowledge of the geology, exploration history, industry and government contacts. More recently the company acquired a significant land position in Alberta for diamonds, joining one of the most exciting area plays in Canada.
Vulcan focuses on grassroots exploration opportunities that have the potential to host "elephant" size deposits. Four of the company's main projects fall into this category. At Carbonear, Newfoundland the potential exists for a large base metals deposit. On the west coast of Newfoundland the company's petroleum permits, both onshore and offshore, have potential to contain large (>100,000,000 bbl) oil fields in addition to shallow oil pools. At Goose South, Labrador the potential for a large tonnage titanium-iron deposit is excellent. As well, the property has potential for Voisey's Bay type copper-nickel deposits. The Alberta Diamond acreage is strategically located along major basement structures which have the potential to host kimberlite intrusions in northern Alberta.
The company put together a series of excellent projects which will be advanced to drilling stages either by equity financing or joint ventures.
SHARE STRUCTURE
SYMBOL: VUL
LISTED: Alberta Stock Exchange
WORKING CAPITAL: $550,000
AUTHORIZED: Unlimited
1998 CAPITAL EXPENDITURE:$500,000
ISSUED: 9,519,500
INSIDER CONTROL/OWNERSHIP: 30%
EST. PUBLIC FLOAT: ~4 million
INSTITUTIONAL OWNERSHIP: N/A
FULLY DILUTED: 10,899,500
CURRENT PRICE RANGE: $0.35-$0.45
52 WEEK LOW:$0.25
MARKET CAPITALIZATION:3.4 million
52 WEEK HIGH: $0.68
LAST 30 DAY TRADING VOLUME AVERAGE: 8000
Alberta Diamond Claims
On May 9, 1997 Vulcan announced that it had applied for mineral permits in Alberta covering approximately 2.16 million acres. This was very shortly after Ashton Mining of Canada had announced the first results of its micro-diamond analysis from 3 of 11 kimberlites that they recently discovered in the Buffalo Hills area of Alberta. Subsequently Ashton has discovered 23 kimberlites most of which contain diamonds, several of which are being tested by bulk samples. These results are very encouraging and indicate that Alberta could host economic diamond pipes. Such prospects have resulted in practically all of Alberta being staked for diamonds.
Vulcan's blocks consist of the Hay River block (approximately 205,000 acres), Peace River block (approximately 455,000 acres) and the Lac la Biche block (approximately 1,500,000 acres) These blocks were staked over large NE-SW trending structures which, based on regional magnetic data, are believed to be basement controlled. Basement control is important because it provides a zone of structural weakness up through which kimberlites could penetrate. The Hay River block covers the Great Slave Lake shear zone, known locally as the Hay River fault. It forms the northern boundary of the Buffalo Head terrane and other basement terranes in northern Alberta. The Lac la Biche block covers the Snow Bird Tectonic zone which is interpreted to form the southern boundary of the Buffalo Head terrane and other basement terranes in northern Alberta. The Ashton kimberlite discovery is near the eastern axis of the Peace River Arch. The Peace River Arch is an area of extensive basement structural activity well known to produce petroleum traps in northwest Alberta. Its boundaries may well be related to the boundaries of a basement terrane. A prominent northeast trending fault (the south Peace River Fault) along the south side of the main Peace River Arch extends through the general area of the Ashton discovery at its northern end. Towards the south this fault is proximal to the Monopros Mountain Lake kimberlite. Although the Peace River Arch area contains a number of NE trending faults with complementary NW-SE faults, the next major NE system occurs along the northern margin of the Peace River Arch and is called the Boundary Lake Fault.
The southern end of the Boundary Lake fault cuts into the northern end of Vulcan's Peace River block. As well the western extension of the Peace River axis cuts through the Vulcan's Peace River block. Numerous other, smaller-scale faults are inferred to occur on the block as well and provide favourable conduits for kimberlite extrusions.
The basement geologic history of northern Alberta is dominated by NE-SW trending shear structures. Whether or not kimberlite intrusions are spatially associated with these structures is uncertain. However, they provide excellent sites in the search for kimberlites. Indicator mineral sampling over most of Alberta is demonstrating the potential for kimberlites over vast areas. The utility of indicator minerals on a regional scale is probably of limited value given the extensive reworking and transportation of material in the Alberta sedimentary basin. Exploration will consist of aeromagnetic surveys over prioritized areas in search of geophysical anomalies consistent with kimberlite extrusions.
Preliminary review of reconnaissance aeromagnetic data over Vulcan's blocks available from the Geological Survey of Canada flown from 2 to 5 km line spacing outlines numerous magnetic anomalies, many of which are one line anomalies (meaning they are less than 2 or 5 km in diameter depending on the relevant flight line spacing). Kimberlites discovered by Ashton vary from 150-600 metres in diameter and were delineated by aeromagnetic surveys and seismic data. Vulcan is in the process of compiling all relevant geologic and geophysical data that is presently available in respect of its blocks. Exploration will initially consist of high-resolution aeromagnetic surveys.
Carbonear - Base Metals
The "Carbonear" property covers 414 claims containing approximately 63 square kilometers located 80 km. west of St. John's, Newfoundland. It is one of the most anomalous portions of Newfoundland in lake sediment Zn, Pb, Cu, Ag and Au values. The property contains several large gossan zones and was explored in the early 1990's by Cominco who conducted geochemical and airborne geophysical surveys. Several airborne magnetic anomalies and EM conductors were located but none were followed up by ground geophysical surveys and drilling. The property has geological potential similar to the giant Sullivan base metal deposits of British Columbia (160,000,000 tonnes of 6% Lead, 6% Zinc and > 2 oz/tonne Silver).
The Carbonear property contains two large aeromagnetic and electromagnetic targets up to 2 km in length which coincide with lead and zinc soil and stream sediment geochemical anomalies. These two areas were the focus of a 1997 reconnaissance drill program. That program intersected extensive disseminated lead and zinc mineralization including 1.2 meters of 1.58% zinc, 4.10%Pb, 0.6m - 1.44%Zn, 1.63%Pb and 3.7m of 1.0% Pb Zn combined. Further geophysical surveys are planned to delineate more targets for drilling. As well the property contains several unexplained lake sediment geochemical gold anomalies of up to 7.8 parts per billion (ppb) gold in an area where 90% of all lake sediment samples contained less than 2 ppb gold.
West Coast Newfoundland - Petroleum
Several major oil companies have been exploring in western Newfoundland in the last several years with at least one discovery made. Exploration to date has focussed on the foreland edge of the northern Appalachian fold-and-thrust belt, where the principal reservoirs are dolomites correlative with the productive Ellenburger Formation in Texas and equivalent reservoirs in fields such as the Albion-Scipio in the Michigan Basin.
Onshore Petroleum:
The Corporation owns 25% of the issued shares of London Resources Inc., a private corporation ("London"). A Shareholders Agreement exists between London and the Corporation which governs the dealings between the two corporations. London successfully bid on two onshore petroleum exploration permits in a 1996 sale on the west coast of Newfoundland covering approximately 150,000 acres. In 1995 Hunt Oil made a discovery approximately 30 km from Vulcan's permit 96-105 on its first well. It flowed 1528 bbl/day and 1742 bbl/day of high quality oil (51øAPI) over two related zones. The zones also flowed 2.6 and 2.3 million cubic feet of gas respectively. On an extended flow test for 9.5 days the well produced 5012 bbl of oil and 9.194 million cubic feet of gas on a declining basis. Although the commerciality of the well has not yet been established, it demonstrates the significant petroleum potential of the area. In November 1996 London drilled a test hole to 500 feet on permit 96-105 for a reported oil occurrence. The hole penetrated a petroliferous conglomerate from 450 - 500 feet which bled a light brown, non biodegraded oil over the 50 foot interval. The conglomerate is of Carboniferous age and confirms the presence of shallow oil targets at less than 1000 feet. In March 1998 Vulcan carried out a seismic program designed to locate a drilling target for a 1998 drilling program. Further, the Corporation has entered into a farmin agreement with London whereby it can earn a 50% undivided interest in the Flat Bay petroleum permit (96-105) by acquiring a minimum of 20 km of seismic data and drilling a well on the permit by July 1998.
Offshore Petroleum:
In January 1998, Vulcan was the successful bidder on three offshore petroleum licenses (approximately 1.2 million acres) in the Gulf of St. Lawrence adjacent to the coast of western Newfoundland. Each license has an initial term of five years, extendable for four more years if a well is drilled on. Two of the licenses contain approximately 650 line kilometers of 2-D seismic. The Company is in the process of interpreting this data and compiling a property assessment report toward attracting joint venture partners to acquire additional seismic and drill test the licenses. The west coast of Newfoundland is an under-evaluated petroleum province which has recently attracted companies such as Hunt Oil, Mobil Oil, and Pan Canadian Petroleum as landholders.
Goose South - Titanium
Vulcan Minerals Inc. owns 100% interest in 266 mineral claims (6500 hectares) 30 miles southeast of Goose Bay in Labrador covering part of the Mealy Mountain - anorthosite - gabbro intrusive suite. Preliminary grab sampling over less than 100 hectares indicates significant titanium/iron mineralization assaying as high as 8.67% TiO2 and 41.53% total iron oxides in weathered anorthositic-gabbroic samples. The property covers a large aeromagnetic anomaly forming two lobes 9.0 km x 2.5 km and 7.0 km x 2.0 km, providing excellent potential for a large tonnage deposit. Titanium and iron are mined at Lac Allard, Quebec in a similar geologic setting 300 km southwest. The property also contains potential for nickel-copper-cobalt sulphides within the anorthositic-gabbroic intrusives as well as rarer elements such as scandium and vanadium. An airborne magnetic and electromagnetic survey was flown over the property in March 1997. Several large magnetic features were defined and are believed to be related to titanium/iron mineralization while several conductors were located that could have sulphide (copper-nickel) potential. The property requires ground geophysical surveys prior to drilling a program to test for both sulphides and titanium.
Round Tables Management's Viewpoint:
John Kaiser Quote: A good overview on Vulcan
"During 1997 Vulcan pinned its hopes on the Carbonear lead-zinc prospect in Newfoundland that Cons Viscount optioned and drilled, but unfortunately no discovery holes were drilled and Viscount has since dropped the option. When the oil & gas boys in Calgary showed Ashton how to find kimberlite pipes, Pat Laracy, who triples as a lawyer, geologist and oil & gas geoscientist, scurried to Alberta and map staked 2.18 million acres of what he thinks are structurally significant areas outside the main Buffalo Head craton, which Ashton et al had already blanket staked. The Peace River block straddles the Peace River Arch adjacent to the BC border, the Hay River block straddles the Great Slave Lake Shear Zone, and the Lac la Biche block straddles the Snowbird Tectonic Zone. Vulcan hopes to farm out this land once the Alberta diamond play spreads beyond the Buffalo Head. Meanwhile Vulcan will concentrate on its Flat Bay oil & gas onshore prospect in western Newfoundland, where the Port-au-Port offshore oil play of Hunt/Pancanadian appears set to come to life after a one year hiatus. Laracy is a toiling geologist I think one day will connect big time."
In the current negative environment for mineral exploration companies, there are a few which still stick out as offering excellent potential on a broad range of projects while being sufficiently funded to ride out the bear gold market conditions. One such company is Vulcan Minerals Inc., which, unusually in this day and age focuses itself on Canadian based exploration, and is commodity diverse, with interests in diamonds, oil and base metal exploration. Vulcans' stock price has held up very well over the last year, this is somewhat surprising in the negative resource market that we are currently experiencing.
Excerpt from The FAGAN REPORT: (Diamond Play in Alberta)
"What are the odds? Don't kid yourself! The odds of finding a commercial diamond mine are always a long shot. Having said that, the Alberta play could not have anymore going for it that it does. If a mine is found, the upside on the stocks will be phenomenal. When things get hot, all the stocks in the play will share the good fortune-whether they are on the craton or not. You can even expect others of Alberta, not even remotely associated with the Buffalo Hills area, to generate mini-plays of their own."
In Retrospect:
Vulcan offers the speculative investor excellent exposure to potentially economic discoveries in the Alberta Diamond play coupled with Newfoundland Oil and Base Metals. To recap, Vulcan's will be a very active junior this year.
Oil and Gas:
The west coast of Newfoundland has the potential to contain large oil fields (>100 million bbls). Vulcan's Seismic Program (~6km on Flat Bay Project) on its onshore block is complete. Processing should take 3 weeks. This should define depth and location of target(s). Depending upon drill rig availability, drilling should occur in early summer. If successful, this will greatly impact the net asset value of Vulcan. In January 1998, Vulcan acquired a 100% interest in three offshore petroleum licenses (1.2 million acres) along the west coast of Newfoundland. Compilation work on existing seismic data is ongoing towards joint venturing the offshore licenses.
Diamonds:
The Company's diamond prospects could be flown soon. Vulcan is in negotiation to complete the Aero Magnetics pre-financing. The financing is scheduled with Yorkton Securities with the offering prospectus should be completed circa the end of May. Roundtable Management is anticipating the Alberta diamond play will develop and continue to attract investor attention with De Beers now adding legitimacy to Alberta Diamonds. Vulcan may anticipate drilling occur in winter this year, depending upon targets and rig availability.
Base Metals:
The Carbonear Base Metal target has elephant size potential. Vulcan plans to complete Geochemical and Geophysical surveys this summer. Look for some VERY interesting developments to occur here such as a possible joint venture.
Titanium:
The Goose South is a titanium/copper-nickel sulphide target in Labrador, home of the world class Voisey's Bay deposits. Several large magnetic features were defined and are believed to be related to titanium/iron mineralization while several conductors were located that have sulphide (copper-nickel) potential. The property requires ground geophysical surveys prior to drilling to test for both sulphides and titanium. Look for a possible JV here.
In conclusion, Vulcan is led by a team of dedicated professionals which are all committed to success. This very active Company offers the speculative investor multiple near term projects which all have the ability to grant substantial leverage. At the current market capitalization of ~$3.5 million, Round Table Management views Vulcan as representing extensive upside potential for the speculative resource buyer while exhibiting tolerable downside risk at current depressed price levels.
This is a research report written for informational purposes only by Round Table Management Ltd . It is in no way intended to solicit any securities. The material presented herein is based on information and sources believed to be to be reliable but its accuracy or completeness cannot be guaranteed. Round Table Management Ltd. accepts or assumes no liability for the forgoing material and views expressed are subject to change without notice. Round Table Management Ltd., its officers, directors and employees may have a position in the Company referred to herein and may increase or decrease such positions. Round Table Management Ltd. is a paid consultant and fees do include equity and/or option positions which may be liquidated from time to time. Investors must independently verify the "blue-sky" eligibility of security and/or securities mentioned in this report before investing.
Cheers,
Round Table Management Ltd.
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