Check out this little sleeper. MLSM on the Canadian Dealer Network (CDN)...It's only 27c now and ready to move I heard.
YORKTON
RESEARCH COMMENT
Natural Resource Group
May 5,1998
Mining Sector - Exploration
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MILLSTREAM MINES LTD.: INITIATING COVERAGE; ATTRACTIVE BASE METAL PROJECT
(MLSM $1.00, (-0.15), CDN)
Recommendation: SPECULATIVE BUY John Kallaway (416) 864-3667
jkallaway@yorkton.com
_________________________________________________________________________________________________________
Shares Outstanding: 25.7 million Shares Fully Diluted: 32.9 million
Volume: 243,450 12-month High-Low: $1.90-$0.17
Summary
The deep drilling program at Millstream 's Potter Mine represents one of the most promising current base metal exploration projects in Canada. The drill intercepts beneath the former mine workings have been exceptionally high grade and demonstrate that the ore zones are increasing in thickness with depth. However, the project's real blue sky is associated with several large geophysical targets on the property. Presently, the company is actively seeking a joint venture partner for the project; a number of majors have apparently indicated an interest.
Background
Millstream Mines Ltd. is a Canadian exploration and development company, which has interests in a number of properties in Canada, the U.S. and the Czech Republic. Recently, the company has focused its activities at its 100%-owned Potter Mine, which is situated in northeastern Ontario, approximately 80 km east of Timmins. The property consists of 28 patented and leased claims and 10 optioned claims within the Abitibi Greenstone Belt at the confluence of the Pipestone and Destor-Porcupine faults.
The Potter Mine was originally operated between 1967 and 1971 by the Harrison Group* which was attempting to recover its contractor losses after the owning company went bankrupt during development. Low copper prices in the early 1970s forced closure of the operation in 1971, by which time 477,572 tons with an average grade of 1.63% copper had been milled. It is estimated that approximately 250,000 tons of ore with an average grade of 2.3% copper and 3.45% zinc was left in the stopes, which have now become flooded. *Millstream purchased a 100% interest in the property in exchange for a C$3.0 million in cash and a C$1.6 million promissory note. Millstream also owes the former owners C$2.0 million in debt.
In April 1996, the company initiated a geophysical program to more accurately define the ore zone along the mined strike length. This program successfully identified five magnetic anomalies and seven VLF-EM conductors. In summer 1996, a 5,000-metre shallow drill program tested the conductors flanking the magnetic highs. Three of seven holes drilled intersected over 70 metres of sulphide mineralization and defined three broad geophysical target areas; 914 metres east of the shaft, 792 metres southeast of the shaft and 1,158 metres north-north-west of the shaft.
Previous mining records indicated that the ore zones were becoming thicker and higher grade with depth. Therefore, following further geophysical work and a thorough review of all the drilling data, the company planned the first phase of its deep drilling program. Holes S97-08A, S97-09 and S97-10 were drilled to the west of the shaft and tested the strike continuity beneath the 335 metre level, while holes S97-11, S97-12 and S98-01 were drilled at greater depths below these holes. Exhibit 1 details the highlights of results of the Phase I drilling program.
Shortly after the deep drilling program began in December 1997, Millstream initiated a real-section induced polarization survey, which yielded some of the most significant geophysical results. Chargeability contour maps were produced for 300 metres, 600 metres and 900 metres depths for a large area within the vicinity of the shaft. They clearly identify a large target to the north-west of the previous underground workings that plunges in a west-north-westerly direction, as well as targets to the south, north and east of the shaft.
Exhibit 1. Deep Drilling Program Results - Highlights Of Phase I
Hole No.
From
(metres)
To
(metres)
Intercept
(metres)
Copper
(%)
Zinc
(%)
Cobalt
(%)
Silver
(g/t)
Gold
(g/t)
*Gross
Metal
Value
(US$/tonne)
S97-08A
482.40
483.90
1.50
3.62
3.19
0.136
29.5
0.2
177
491.86
494.40
2.54
2.33
9.09
0.073
37.0
0.0
186
504.20
508.20
2.00
6.00
4.37
0.082
65.5
0.8
212
537.40
543.50
6.10
2.32
3.14
0.000
27.1
0.0
78
S97-09
604.60
627.50
22.90
2.65
2.70
0.080
26.1
0.0
123
including:
613.60
623.00
9.40
3.86
4.57
0.128
38.6
0.8
200
S98-01
695.15
702.90
7.75
5.34
3.24
0.067
39.8
NA
169
including:
695.15
700.40
5.25
7.81
4.76
0.096
57.9
NA
246
773.50
776.50
3.00
2.17
3.90
0.047
15.6
NA
108
Including:
774.35
776.50
2.15
2.95
5.42
0.053
20.9
NA
142
Average
585.44
590.06
4.61
3.77
4.20
0.07
35.71
NA
157
* Based on the following Metal Prices: US$0.75/lb Cu, US$0.50/lb Zn, US$25.OO/lb Co, US$6.00/oz Ag and US$300/Oz Au.
Source: Millstream Mines Ltd.
Project Outlook
Three out of the six deep holes drilled on the property have intersected significant widths of high-grade mineralization and confirmed the theory that ore zones below the previous workings are continuous and become wider and increase in grade with depth. Over the summer period the company intends to drill two geophysical anomalies, which were more accurately defined by the recent real-section IP survey. The real 'blue sky' of the project is associated with these large geophysical targets, which have the potential to host much larger ore zones and are the basis for much of the recent interest shown by major mining companies.
Millstream's recent drilling successes have demonstrated that the Potter Mine is part of a significant mineralized system and we believe that it is reasonable to speculate that continued exploration has the potential to delineate an ore zone on the property.
In addition to this, the economics of any future operation would be enhanced by the fact that property is strategically located mid-way between Noranda 's Horne Smelter in Quebec and Falconbridge 's Kidd Creek Smelter in Ontario, both of which are competing for supplies of concentrate. We are initiating coverage of Millstream Mines Ltd. with a SPECULATIVE BUY recommendation.
Yorkton Natural Resource Group, May 5,1998
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