Lest we forget or for the sake of nostalgia. I don't remember seeing this commententary on a prior posting & I've read every one of them, some of them twice.
Pacific Rim Mining Corp.
Gold Exploration
Symbol: PFG (VSE)
Last 12 Months: $0.43 - $4.40
Current Price: $4.20 on 01/31/97
Shares Out: 19 million (f/d)
Float: 5 million (estimated)
--------------------------------------------------------------------------------
Pacific Rim Mining Corp. is a Vancouver-based company that trades on the Vancouver Stock Exchange (PFG). The company's objective is to acquire mining exploration properties that have the potential of becoming producing mines. Following this mandate, the gold/silver Diablillos and the base metals La Colorada properties were acquired at the end of 1992. Both properties are located in the Province of Salta, Argentina.
In 1996, the company expanded its international holdings by the acquisition of the Cerro Blanco property directly adjacent to the northeast corner of the company's Diablillos gold/silver property, that is 70% optioned to Barrick Gold (ABX - TSE, $37.00).
The company also acquired a 100% undivided interest in a 82 square kilometre block in the rich Kalimantan gold belt in Indonesia. The property is 40 km. south of the Kelian Mine and 120 km southwest of the massive Bre-X gold discovery. This recently acquired property has sedimentary rocks and intrusives of the same miocene age which appears to have emplaced mineralization in tertiary sediments in both the Kelian mine and the Bre-X deposit.
Pacific Rim has incorporated, in 1992, a 100% wholly-owned subsidiary company, Pacific Rim Mining Corp. (Argentina), S.A. This subsidiary company has established corporate offices in city of Salta, Argentina from where exploration work is managed. In 1993, Pacific Rim acquired all the intellectual data gathered by BHP Minerals during its three year option on the Diablillos property. In December, 1993, the company completed 1,000 meters of HQ-core drilling in five holes in the Oculto Zone, the most advanced of the four known gold-bearing zones on the property.
Very encouraging results prompted the company to conduct a second phase of exploration by completing a magnetometer ground survey over the entire property and 35 km lines of IP survey. In June, 1994, the company contracted 2,000 meters of diamond drilling in the Oculto Zone.
This work resulted in a new summary of proven reserves of 5,132,306 tonnes in all categories grading .07 oz/t gold and 6.9 oz/t silver. The company's geological consultant has indicated that it is reasonable to assume significant additional tonnage can be discovered in the Oculto Zone which is open in all directions and has clear indications of an extension to the northeast, the location of the company's Cerro Blanco property.
Pacific Rim has an agreement with Barrick Gold whereby Barrick can earn up to 70% interest in the property by completing US$10.5 million of drilling. Barrick began drilling in July 1996 and recently announced a major drill program which began in early January, 1997.
In 1993. Pacific Rim carried out a satellite imagery study of the La Colorada property and started a compilation of the available regional information on and around this large (55,000 Ha) massive sulphide deposit. In 1994, Dr. Raul Leguizamon, a Professor of Palaeontology at the University of Cordoba, carried out sratigraphic-palaeontological studies of the rocks that host mineralization on the property and concluded that their age is similar to those rocks that host mineralization at Mina Aguilar, a world-class deposit of zinc-lead-silver located about 85 km. to the northeast of the La Colorada property.
In 1996, the La Colorada property has caught the attention of several major mining companies who have expressed keen interest in pursuing a form of joint venture to perform extensive exploration work on the property. Due to the properties enormous size, company management is inclined to pursue a joint venture mode to further develop this property. Several of these major mining companies have taken site inspections of the property and the company has received one written offer to joint venture the exploration work needed to be done and this offer is being considered by management.
Pacific Rim also owns some gold/copper mining properties in the Johanson Lake area in central British Columbia called the Croy claims. Hemlo Gold Corporation, which has an interest in the area (Soup Claims) adjacent to the company's claims, conducted exploration last Fall.
Option With Barrick
Barrick Gold Corporation has agreed to purchase a 10% interest in Pacific Rim Mining Corp.'s wholly owned subsidiary, Pacific Rim Mining Corp. (Argentina), S.A. for US$1.5 million with the option to increase their holdings to 70%.
The Argentine subsidiary has as its main asset a 100% undivided interest in the Diablillos property. If exercising their option in full (to a production decision) the value to the company will accrue to at least US $10.5 over a four year period plus US$4 million/yr. to a production decision.
A comprehensive drill program is underway at this time under the control, direction and management of Barrick Gold Corporation.
Mining in Argentina
A dramatic economic and political turnaround in the last five years has occurred in Argentina. A democratic government is firmly established with a recently renewed mandate of rejuvenating private sector investment and is considered one of the most politically stable in South America. It has dramatically bought down annual inflation to less than 4% per annum, reduced government expenditures and obtained budget surpluses in the last two years, privatized state-owned enterprises, and enacted favourable legislation to attract major foreign investment.
Virtually no private-sector mining exploration was conducted in the past thirty years. It is well known internationally, that Argentina has tremendous mining potential and is now quickly developing a supporting infrastructure. The government and the people welcome and encourage foreign investment and are making every effort to facilitate mining investment. To this end, the government enacted the New Mining Legislation which was approved in 1993 and establishes a highly favourable and competitive investment climate.
Highlights of this legislation are:
The Argentinian government guarantees tax stability for 30 years;
Royalties are capped at 3% of product value at the mine;
Corporate tax is 30% of profit;
Imports of mining exploration are exempt from import and/or customs duties;
100% of exploration and development costs are deductible;
Costs to feasibility are considered deductible expenses in the first year of production;
Costs of machinery, equipment, vehicles, etc. can be amortized over the first three years of production;
Infrastructure costs: 60% can be amortized in the first year and 20% on the second and the third year of production respectively.
These favourable changes have initiated an exploration boom in Argentina. As one of the first international mining companies to establish offices in Argentina, Pacific Rim is well positioned to take advantage of this exciting business climate.
Let's Talk Value
When a prudent investor prepares to invest in a public company, the question: "Does the purchase price reflect real value?" should come up. At the current market price of around $4.00/share, Pacific Rim rates as a buy!
By comparison to other companies, doing the same thing, in the same areas, listed on the same exchange, with comparable balance sheets and with comparable dilution ratios, Pacific Rim Mining Corp. should pass any analyst's tests as to value. It is not at all unusual to find gold stocks selling at many times their equity value; (ie. stocks having a market capitalization of say $20 million and a equity or break-up value of say $2 million).
With Pacific Rim, just the opposite is true. If one was to take the 'value' (appraised) of Pacific Rim's property, and assets, less debt and divide that by the number of outstanding shares (undiluted) you could justify a value of over $3.50/share. Now add to that, the value of the completed share purchase agreement with Barrick Gold Corporation with their management, track record, and exploration expertise together with the normal 'speculative' value of their US$10.5 million drilling program, that is underway at this time, and one could easily justify a share price of $5.00 a share or more. As a point of interest, in evidencing Barrick's commitment to exploration in South America, it bid $27.00 per share (cash offer) for the control of Arequipa Resources Ltd., a Vancouver mining company operating in Peru.
Future Planning
With the exploration, and related financing, of the Diablillos property well underway, with Barrick Gold Corporation, the company can now concentrate on the development of the company's wholly owned Cerro Blanco property and on a joint venture for the development of the wholly owned La Colorada property. Pacific Rim is pursuing the possibility of a joint venture on the recently acquired Indonesian gold property on which a work program is underway at this time and an aggressive, but prudent, approach to acquiring new properties having mineralized potential.
Recommendation
I recommend you buy as soon as possible, before the price reaches $5.00 or more and, if the new drilling program is successful, much higher levels in the months ahead. My initial target is at least $8.00 but this is subject to upward revision once drill results are released. Remember, Barrick is starting the next phase of drilling this month. It is Barrick's involvement that gives us a lot of confidence in Pacific Rim. Barrick has done its due diligence on the company and the property.
Subscribers who also receive our sister publication, Stock Line, will recognize PFG as a recommendation we made in early January. There is a new development that made this stock so attractive that I am compelled to recommend it here as well, the first time I've followed up on a Stock Line recommendation.
The new development stems from a private placement completed on January 31, 1997 for 2,475,000 at $1.32 plus an equal number of warrants exercisable at $1.52 within two years.. This P/P was announced last December when the share price was at $1.50.
It's not the actual private placement that caught my eye and aroused my interest, it was one of the placees, Catherine McLeod-Seltzer, through a numbered company - 515082 B.C.
You see, Catherine McLeod is a shrewd business person and a skilled negotiator. It was McLeod at the helm of Arequipa when she negotiated a buyout by Barrick at $27.00 per share. She knows how to get full value for the shareholders and it's great to see her take a position in Pacific Rim. She has clout and her's is a hot name in Canadian mining circles. Her involvement strengthens the rumors that she is going to join the board of directors of Pacific Rim and become the new CEO.
This development will be viewed positively by mining analysts and stockbrokers. That means more interest in the company and greater demand for PFG shares. I can't see the share price going anywhere but up and my target price of $8.00 may be on the low side.
We have to assume that Barrick may want to take over Pacific Rim. McLeod will make sure shareholders get the best price. She won't sell out quietly or cheaply. Let's see how this develops in the weeks ahead.
Barrick is drilling Diablillos right now and it won't be too long before it will be able to confirm the size and grade of this deposit. Watch the share price jump as we get closer to an announcement.
One final note, Pacific Rim has a 100% interest in the property next door, Cerro Blanco, and geological data points to the possibility that the zones on Diablillos are continuous with Cerro Blanco. Pacific Rim has announced it will drill Cerro Blanco and the drills are being rounded up now. Drills and work crews are scarce in this area due to all the exploration activity so let's see if McLeod can use her clout to get a couple of drills turning on the site.
South America is a hot exploration area right now and will continue to be so. Use Pacific Rim for your participation.
Technical Analysis
Pacific Rim's stock chart is about as strong-looking as any chart we've analysed in recent years. The trend is strongly higher as it has broken through $4.00 and will likely make new highs in future trading sessions.
Despite the price having doubled since mid-December, there was only moderate profit taking during early January. An encouraging statistic is the increased volume in daily trading as the price advances. Currently, there is strong demand for the shares.
A big plus is the liquidity that PFG offers. The shares are actively traded with average daily volume exceeding 200,000 shares.
The support level is yet to be established but the $3.75 mark is a likely candidate. I cannot pinpoint any substantial resistance level during the recent upsurge but $6.00 might encourage some profit taking from shareholders who entered at lower prices during the last six months.
Late Breaking News
A news release was just issued after the close of trading that Catherine McLeod-Seltzer has indeed joined the board of directors of Pacific Rim Mining. More info in the next issue.
For additional information
Pacific Rim Mining Corp.
822 - 510 West Hastings Street
Vancouver, BC Canada
V6P 1L8
(604) 689-1976 or
1-800-617-7747
pacrim-mining.com
e-mail: pacrim@cyberstore.com
Rick
Will email URL if requested. Didn't wish to violate any copyright laws.
|
