From the Northern Miner, Yorkton on Junior. I was thinking that the golf game with Speros, did us some good. Ho well at least we paid for it.
MINING MARKETS & INVESTMENT NEWS -- INVESTMENT COMMENTARY -- Yorkton
eyes potential junior performers
Vancouver
Negative market sentiment has left many Canadian junior resource companies near historic lows, with a good
number trading below their cash break-up value. Retail analysts Douglas Leishman and Art Ettlinger of Yorkton
Securities cite the Asian Flu, weak base and precious metal prices, and the recent collapse of the Russian ruble as
factors responsible for the erosion of investor confidence.
The analysts believe it will take either a sharp increase in commodity prices or a major mineral discovery to shake the junior
sector out of its current depression. With that in mind, they released a research report designed as a response to the frequently
asked question, "What stocks should I own when the junior resource sector recovers?" The report, titled Fear and Loathing in
the Resource Market: Turning Depression to Your Advantage, details five companies with major assets that have the potential
to be developed into economically viable reserves. Most of the companies are adequately funded to weather the downturn in
the markets, and the analysts point out that their projects are all managed by experienced professionals.
Joint-venture partners Auspex Minerals (APJ-V) and International Vestor Resources (IVS-V) are recommended at 25 cents
and 45 cents, respectively. The companies are exploring and developing advanced-stage, zinc-enriched base metal deposits in
the Iberian pyrite belt of southern Portugal. Each can acquire a 75% interest in the Aljustrel mine complex from the mining
company owned by the Portuguese state, and each owns a 60% interest in the adjacent Estacao massive sulphide deposit.
The Aljustrel complex includes a modern, fully permitted, 1.2-million-tonne-per-year mill and processing plant, as well as a
tailings plant, rail line, dedicated port facility and four separate base metal-enriched massive sulphide deposits containing a total
resource of 150 million tonnes. Prior expenditures exceeded US$130 million.
The underground mine, which operated from early 1991 to March 1992, closed as a result of low metal prices and poor mining
practice. The acquisition agreement allows the partners four years to bring the project to production and calls for the
completion of a feasibility study at an estimated cost of $12 million and the assumption of $7 million in debt.
The partners intend to demonstrate the potential for at least 20 million tonnes of higher-grade material valued at greater than 6%
zinc plus lead, copper and precious metal credits. The material is believed to be amenable to underground bulk-mining
methods.
A negative associated with the project is that the companies may have to finance at low prices in order to complete the
feasibility obligations. "Auspex and International Vestor have acquired an outstanding exploration and development asset at a
very reasonable cost in one of the world's premier mining districts," write the analysts. "Shares should be accumulated at the
current low prices."
Miramar Mining (MAE-T) is trading at a discount to its cash value of $2 per share. The company's main assets are: a 100%
interest in the high-cost Con gold mine in the Northwest Territories, which has been closed by strike action since mid-May;
$98.5 million in cash as of the end of June; and a 54% interest in Northern Orion Exploration (NNO-T), whose main assets are
in Cuba and Argentina. Northern Orion's assets include a 30% participating interest in the Agua Rica copper porphyry project,
where a budgeted $8.5-million development and exploration program is advancing the 1-billion-tonne-plus mineral resource to
the final feasibility stage.
Leishman and Ettlinger suggest Miramar may be looking to make a significant acquisition, and they do not rule out an eventual
merger with Northern Orion: "A turn in market sentiment toward resource issues, combined with higher metal prices, should
have a positive impact upon the share price of Miramar."
The company was trading at $1.25 at presstime.
With $10 million in cash and a 90% interest in two advanced gold projects in Western Africa (containing a combined
drill-indicated gold resource of 2.6 million oz.), Nevsun Resources (NSU-T), trading at 50 cents, is thought to represent a good
opportunity to buy "potentially economic gold resources in two relatively stable regimes in Western Africa."
Nevsun owns a 90% interest in the Kubi deposit, which is south and adjacent to Ashanti Goldfields' main production property
in Ghana. Kubi is estimated to contain 4.7 million tonnes grading 5.95 grams, equivalent to 700,000 contained ounces.
In Mali, the company holds a 90% interest in the Tabakoto project, where a drill-indicated and inferred resource is calculated
at 8.2 million tonnes averaging 7.12 grams, equivalent to 1.9 million contained ounces. As well, Nevsun has two exploration
concessions in Mali and one in Ghana.
The company is led by John Clarke, former managing director of Ashanti Goldfields.
Based on strong portfolio of assets, Solomon Resources (SRB-V) is recommended as a buy at 14 cents. Led by President
Lawrence Nagy and director Ronald Netolitzky, Solomon has $4 million cash in its treasury and a low monthly burn rate. It
owns 1 million shares of Viceroy Resource (VOY-T), which is generating speculative interest as it prepares to drill the
Quebrada del Diablo gold discovery in northern Argentina.
Solomon also holds a half-interest in the Bombore gold property in Burkina Faso, West Africa, where widely spaced
reconnaissance drilling has identified at least seven areas of anomalous gold mineralization in a soil anomaly measuring 14 by
1.5 km. The company has hired Strathcona Mineral Services to review the project and provide a reserve estimate.
Winspear Resources (WSP-V) is recommended at a share price of $1.01 to investors seeking exposure in an ore-grade
diamond discovery in the Northwest Territories. With a 68% interest in the Camsell Lake project, the company is involved in a
late summer drilling effort to delineate the structural continuity and thickness of the NW Snap Lake dyke, which has yielded
diamonds worth an estimated US$301 per carat, at an implied grade of 1.14 carats per tonne.
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