Speculaive Stocks say IWA should be trading between 2 and 3 dollars.
Joe
"With Platinum and Palladium soaring to the stratosphere, can gold and silver
be far behind? Well it is difficult to make any argument against as on one hand,
we have reports of serious turmoil in the bond and derivatives market once again
and it appears that the bullion dealers, aka Goldman Sachs and Deustche Bank
etc., are in trouble, ( again ) according to GATA.
And on the other hand, gold has jumped up $21.00 over this past two days to
close
at $308.00 on Friday, a far cry from the $520 that Palladium and Platinum are
trading at, but reminiscent of the September jump. This will also place
problems
back into Ashanti and Cambior's court as the hedge counterparties have rolled
over the repayment a couple of times and will not want to do this indefinitely.
Next we have Placer Dome, one of North America's largest Gold Miners, actively
assuming a role in fostering higher prices by eschewing hedging. This follows
on Gold Fields buying back it's hedge book to stand relatively hedge free. Now
if more miners do this we can expect the volatility of Gold to increase, as
there
is apparently a shortage of large quantities available.
With less gold available forward, how are the reputed borrowers of gold going
to pay it back to the lenders. According to what we know, there is anywhere up
to 10 - 14,000 tonnes short in the market and the liklihood of this being repaid
is next to zero.
Volatility means, at minimum, lots of opportunities to profit, as the internet
stocks have been volatile, and the Gold Stocks can be had for a fraction of the
price of the internets, and as a bonus they have a valuable product for sale.
Of course, there will be an inital drop in sales as sticker shock hits those
who have now been accustomed to buying gold for under $300, but that will pass,
just as we get used to paying higher prices for oil.
What does this hold for us? We have been particularly focussed this past year
on the precious metals markets rather than following on with the flavor of the
day, namely the internet related stocks. We felt that last September the
stranglehold
would have been broken, but it was not to be and the stranglers rapidly got
their
hands back on the windpipe. But the precious metals market is still breathing.
We placed most of our attention on the speculative precious metals stocks and
the market for these this past two years has been, in a word, terrible. Yet all
is not lost here. Many of these companies have no money and no story to attract
money with. They are in a catch 22 situation.. Many of them need funds just to
keep the properties they hold in good standing and this has not been happening,
so all the while, some juniors have been quietly amassing or consolidating
properties,
that other juniors couldn't afford to hold.
This is a testament to the nature of the promoters abilities to prosper when
times are tough and their companies will be the early beneficiaries of a
consistent
upwards move in gold.
The better ones will also benefit from the lack of exploration funding that has
been available to most of the juniors. When the senior miners are not putting
money into the ground, it is the juniors who make the finds and they have been
stifled by lack of cash. So with very little in the way of new finds or quality
properties, those that have managed to survive and develop their properties will
find themselves the subject of interest from the seniors, for replacing ore.
We have not commented much this past month on our last years pick,
International
Wayside Gold Mines IWA/CDNX, however this was not due to ignoring it.
They have just released news that we consider to be both timely, in regard to
the price of gold and momentous in the company's development. This shows how,
even in these tough times, a junior exploration company that is focussed can
survive and prosper.
The news was they have retained under contract an influential group of mine
developers
to get this mine into production. This group was instrumental in bring the
Premier
Mine into production and have been involved in the development of a number of
mines, so their expertise in bringing properties to production is unquestioned.
The news release also stated the annual production, once the property is on
operation,
would be in excess of 100,000 oz a year from the 1 million ounce resource in
the open pit, and supplemented by the higher grades that are being developed
from the BC Vein and the Island Mountain mine.
This is the first time any reference has been made to production ounces and that
in itself is significant. The next is the make up of the team. Two of the
parties,
Chan Buckland and Hank Ewanchuk, have been in the mining and mine finance game
for a number of years and are well respected in the industry for their business
acumen and knowledge. We can be sure they would not be involved in this project
without it having a a good chance of success and there involvement increases
that likelihood.
Of course, this is more than likely only one of the projects they have on their
plate but from our point, it is significant they are associating themselves with
Wayside, as it indicates a confidence this project will get up and running.
We will more than likely not see much in the way of news from this group until
they have done their due diligence, which will most probably also see drilling
on the Gold Quartz property to bring the ounces from a resource to a reserve.
This is normally required before any construction financing is forthcoming.
Wayside is continuing drilling on the BC Vein. This is a massive vein, up to
30ft wide, 2400ft of exposed length and at least 900ft deep, that was drilled
for the first time fifteen months ago and where one drill intercept was a 70ft
intersection containing grades as high as 1.2opt and that 35 ft of that
intercept
graded 1/2oz ton. There are other parallel veins that have never been drilled
and more than likely also contain significant quantities of gold as well.
They are also currently drilling on the Island Mountain mine, approximately two
miles away and part of the consolidated property. We have not heard any results
from this area other than the initial drilling and some assays of 1 oz ton.
All in all, with gold rapidly moving up this company's stock, in our opinion,
becomes a top priority buy at the current CDN$0.20 as it has been under
accumulation
for 18 months and when any overhang is gone, this stock will move up.
As a potential 100,000oz producer, it will also become a significant producer
with a lot of cash in a very short time and should command a price of at least
$3.00. There are very few of these companies out there in the incipient start
up period and they become attractive to the seniors as a way to replace ore.
Especially as an open pit typically produces at around $185 an ounce.
So looking at figures based on todays price of gold we would see a cash cost
of $185, and a total cost ( based upon other similar open pits ) of about $250
for a potential profit per ounce of gold mined of $58/oz or $5.8 million
dollars.
Any further gains in the price of gold will increase the profit exponentially.
For example at $320 gold the profit would jump to $7 million and at $330 gold
it would be $8 million, or gains of 20% for each $10 jump in gold.
Now Barrick has just released an earnings report of $0.85 a share and their
shares
are trading at $18 for a multiplier of 20 times earnings. Using this as a bench
mark we could see Wayside trade at between $2 and $3 a share from the current
$0.20. This does not include any speculative premium that may be placed upon
this stock.
Barry Jones
Speculative Stocks
As always, any decisions made to buy or sell on our views are made at the
readers
sole risk. Due diligence should always be conducted." |
