SILVER IS POISED TO EXPLODE IN PRICE, AND CARDERO RESOURCES MAY BE ITS GREATEST BENEFACTOR
By Dr. Richard S. Appel
Jan 2 2003
>>La Providencia has already experienced profitable mining at today’s silver prices. This, coupled with the fact that its silver grade is exceptional, the associated copper values may be sufficient to cover the mining costs, the extent of the ore body has the potential to be enormous, and the recent Argentina devaluation has reduced the cost of working in that country by over 50%, I believe that La Providencia has the potential to become a world class silver mine. Recently, Bob Moriarty the editor of 321gold.com, stated that he felt Cardero had the potential to be an "easy ten-bagger". If silver explodes in price, as I believe is imminent, coupled with the development of Cardero’s Olaroz Project, Moriarty’s projection might prove to be right on target.<<
I have followed the silver market for over four decades. I remember when silver coins and paper silver certificates circulated as our money. 1965 was the year when silver was removed from our coinage. Within a few years, virtually all of the billions upon billions of silver dimes, quarters and half dollars were extracted from circulation by our citizens. This was my first experience with Gresham’s Law where "bad money drives good money out of circulation". A few years later it was announced that silver was to be withdrawn from the backing of the silver certificates.
In 1965, silver had risen in price to a level where the coins and certificates were worth more than their face value. When silver rose above $1.40 the coins could be melted for a profit. The silver certificates similarly fared as they were redeemable for a fixed amount of silver. The higher silver price allowed people to exchange the certificates for silver bullion with the U.S. Government, and sell the received silver for a profit. These were the final acts that removed the last vestige of any real backing from our domestic money.
I studied and invested in silver, and the silver mining companies located in Coeur D’Alene, Idaho, from the mid-1970's into the early 1980's. Further, I vividly recall silver’s price and the junior mining stocks going ballistic during 1979, into early 1980, when silver touched $52.50 an ounce. Silver later collapsed in price when the rules were changed "to liquidation orders only", by the Commodity Futures Trading Commission. I also remember when silver bottomed near $3.50 an ounce in early 1993.
I will not repeat the legion of reasons why I believe that silver is poised to move to much higher price levels. Suffice it to say I think that silver is destined to reach $25 or higher per ounce, and within the next several years. Silver feels to me like it is ready to overcome the $4.75-$4.80 ceiling that has retarded its Bull Market advance. I am confident that when this occurs it will quickly move to $6.00 per ounce. Given the fact that silver closed today at $4.80 we may not have long to wait!
When I invested in the junior silver mining companies located within the Silver Mile of Idaho, the only thing that these companies had in their favor was their "location". They were all situated around or between the Sunshine Mine and Hecla’s Lucky Friday Mine. These were both enormous, historic high grade silver mines. Investors bought these small companies with the hope that they too would be explored and similar rich silver deposits would be found within their permit borders. However, during the entire period that witnessed their shares multiply greatly in price, not one junior experienced other than limited exploration. Their directors had little money to use to develop their properties. These companies were strictly in an "area play" with investors hoping and wishing for rich mineral rewards. In truth, their only potential for stock appreciation was due to their proximity to important silver mines and the hope that their properties too would become mines.
I have been actively searching for undervalued silver stocks that would benefit from both a sharply higher silver price as well, as from exploration success for the white metal, but I had a number of obstacles that I had to first overcome. Pure silver mines are quite rare and are typically small. Over 70% of the earth’s silver is produced as a byproduct of copper, zinc, lead or gold mining. Further, many of the primary available silver stock investments were not profitable at or near today’s silver price. I could not recommend them as I viewed these companies as being expensive call options on the price of silver. In my desire to find an economic silver deposit I had let the word out among a number of important geologists in the mining industry, that I wanted large silver properties.
When You Think Silver, Think Cardero Resources.
I first learned of Cardero Resources (CDU-CDNX) earlier this year when an old friend, David Shaw called. David is both an honest individual and an exceptional structural geologist, who knows how I feel about silver and silver companies. He told me about what appeared to be an excellent gold property that Cardero was exploring. Additionally, he informed me that Cardero was in search of large silver properties as they too desired to join the hunt for another Comstock Load. I immediately informed my readers about the company as I also knew Cardero’s president, Henk Val Alphen for nearly a decade. He had proven himself to me to be among the most reputable and competent individuals in the mining industry. Henk was an important piece in my search for an outstanding silver play as he had generated great success for a number of other junior exploration companies. Further, I was confident that if anyone in the industry would find a great silver property, Henk would be the one to bet on.
A number of months after my initial talks with David, Cardero announced that they had begun building the Olaroz Project. The core property was La Providencia of which Cardero owns 100% less a 2% NSR. Between 1983 and 1996, it had witnessed the limited mining of about 200,000 tonnes or silver ore grading 350-600 g/t (11 to 18 oz/t) from rudimentary pits. Of further importance is the fact that after the ore was concentrated and sent to a smelter, the remaining tailings average 97 g/t of silver. It was enormously rich in silver.
When David Shaw first stepped onto the property he was not greatly impressed. However, when the chip samples that he had collected returned exceptional silver values he changed his attitude and returned to review the property. Shortly after he reevaluated La Providencia, Cardero initiated an aggressive property acquisition campaign to acquire other significant exploration targets that had similar potential.
Pre-mining studies on La Providencia performed by its earlier owner Mission Alemana in 1982, delineated a large, silver and copper mineralized structure. It had a length of 710 metres and a width ranging from 150 to 250 metres. Mission Alemana mined from a number of surface pits from within this area. Additionally, it was believed to have a minimum depth of 25 to 75 metres.
Prior to acquiring the property, Cardero took 54 chip samples from the pits over an area measuring about 120 m. by 550 m. and to a vertical depth of about 75 m. Their results confirmed those stated by the vendors and averaged about 490 g/t of silver (nearly 10 oz./t). Further, this also confirmed an average of grade of 0.47% copper, 0.47% lead and 0.44% zinc. Additionally, the mineralization appeared to extend in all directions and to a greater depth.
La Providencia lies on a regional cross-cutting fracture system that management believes controlled the emplacement of its mineralization during a Miocene, dactic, volcanic event. This event is evident as several calderas with their associated dactite, extrusive domes and ring fracture structures. Cardero has since amassed a large landholding of 33,000 ha. (About 75,000 acres) that possesses a number of small, prominent circular topographical features which are believed to be potential epithermal, mineral bearing centers. Therefore, it is highly likely that more than one additional discovery will be made on their large property.
Cardero has just begun evaluating their acquisitions and too date, the Cingolo Prospect appears to be the most promising after La Providencia. It is located 15 km. West of Providencia and has a 650 m. by 500 m. area composed of kaolite and silica altered fan-glomerates. Further, epithermal style jasperoid cap-rocks, outcrop on the anomaly. Surface chip sampling by Cardero of weathered conglomerate and jasperoid cap-rocks have returned values of 20 to 391 g/t of silver. This confirms information that Cardero has from an independent exploration company’s evaluation of the property. In 1996, this company collected 5 samples of altered conglomerate averaging 747 g/t of silver.
Cardero recently began a detailed geological mapping and sampling program within the original pit area mined by Mission Alemana. Their initial results from the sampling of the east face of the North Pit was highlighted by a 45.3 metre zone averaging 840 g/t of silver and 0.72% of copper, with some associated lead and zinc. Ongoing sampling is being performed and additional results should be intermittently reported during the next few months.
Associated with the tremendous silver results are high copper values that may prove adequate for a mine in and of itself. If this holds consistent the copper may actually pay for the development of the property with the rich silver component being pure profit.
In addition to the Olaroz Project, Cardero has two additional exceptional projects in Mexico. Their 100% owned Ludivina Property has an epithermal gold vein system within an enormous 7 km. by 2 km. alteration zone. Further, their Alistos Property has the Iron Oxide Copper Gold style mineralization that is similar to the enormous Olympic Dam deposit in Australia. They have acquired mineral concessions there which total 144 sq. km., and are in negotiations with major mining companies to joint-venture this property. It is likely that an agreement will be announced early this year on the Alistos Property. Henk always looks for projects with huge economic potential.
La Providencia has already experienced profitable mining at today’s silver prices. This, coupled with the fact that its silver grade is exceptional, the associated copper values may be sufficient to cover the mining costs, the extent of the ore body has the potential to be enormous, and the recent Argentina devaluation has reduced the cost of working in that country by over 50%, I believe that La Providencia has the potential to become a world class silver mine. Recently, Bob Moriarty the editor of 321gold.com, stated that he felt Cardero had the potential to be an "easy ten-bagger". If silver explodes in price, as I believe is imminent, coupled with the development of Cardero’s Olaroz Project, Moriarty’s projection might prove to be right on target.
Cardero has about 17.5 million shares outstanding and about 28 million shares fully diluted. They should have sufficient working capital to finance an aggressive exploration campaign through at least the middle of the year without further stock dilution. I first recommended Cardero at $0.85 C. and expect to hold my Cardero stock for quite some time as they develop their Olaroz Project towards my expectations.
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