Continuation of earlier post.
Wemmerus Mining Letter
Volume 3/Number 11
November 20, 1998
LATITUDE MINERALS CORP.
I remember when the dyed-in-the-wool New York stock-market playing crowd's favorite gold surrogates were the shares of Royal Oak Mines, or Echo Bay Mines. Just let there be a whiff of a gold-price increase, and they'd all be on the telephone telling their brokers to pick them up some "RYO", or "ECO", on the "curb". However, those days are gone - because the managements of both companies gambled on how to get to "the Mother-Lode". And, both lost……
The world's dominate gold-miners, are usually the ones with the lowest cash-costs of mining an ounce of gold. It gives them great competitive advantage in times such as these, when gold prices have fallen substantially. While the high-cost producers are watching their profits (and stock-price) fall with the price of gold - the low-cost producers are buying-up reserves (at depressed-prices) and their high-cost competitors cheap stock - because they're still generating a cash-flow with their lower production costs!
Several years back, Margaret Witte (President of Royal Oak Mines) was the "toast" of the mining-world. It seemed she had come up with a "new concept," in mining. She would buy the "cats and dogs" (mines with only high-cost reserves left in them) from the major-miners - and then proceed to bust down the miners pay to lower her "cash-costs". It seemed to be working for a while - until one of her miners started creating death, and destruction in one of Royal Oak's mines by trying to blow it up. I don't know if its the pragmatic experience gained in labor-relations, or the worry that some day lower gold-prices would squeeze-out her profit-margins on those low-grade mines, - but, she started to develop the low cost Keness Mine up in British Columbia - which hosts 990 million pounds of copper, and 4.1 million ozs. of gold. Estimated cash-costs of mining the gold is pegged at US$128 per Ounce - net of 80¢ pound copper credits. However, before she could bring the Kemess Mine on-line, the price of gold fell to levels where Royal Oak was running a negative cash flow. Her only way out was to get the Kemess Mine into production - but, Royal Oak didn't have the money So, she had to borrow $120 million, at junk bond rates, to do so. The junkman cometh, and the junkman goeth. Or, at least, Royal Oak's luster did……
Echo Bay has lost its luster, to. Last Year the company lost US$300,000,000! And, the once great Lupin Mine is now silent. The wealth this former high-flyer had amassed, was squandered on high-priced properties in a global acquisition binge. Of course, they're not the only North American miner that thought the "mother-lode" was anywhere, except North America. However, in the case of Echo Bay Mines, what happened seems ironic. Let me tell you about the great North American exploration team, and some of the properties, that Echo Bay had - and the promising little exploration company that has them now…
COMPANY: LATITUDE MINERALS CORPORATION
EXCHANGE LISTED: Vancouver Stock Exchange
TRADING SYMBOL: LTU.V
RECENT PRICE: C$0.37
52-WEEK HIGH/LOW: C$0.89/$C.16
SHARES OUTSTANDING: 5.8 Million
COMPANY CONTACT: Brian Hillhouse / l-(800)668-0071
The two year old bear-market in mining shares has produced an extraordinary number of undervalued issues for the patient investor to capitalize on. Latitude Minerals is one of those issues.
The core of Latitude Minerals' management-team looks like the old Echo Bay Mines exploration executive suite. That's because they're one, and the same. John Carden (who received his Ph.D in Geology from the University of Alaska in 1978) served as Echo Bay's Director of U.S. Exploration from 1994 to l998. When it comes to organizing, and executing, mu1ti-million dollar exploration-programs - remember his name.
"Mitchell Bernardi is a seasoned exploration pro of 22 years, who left Western Washington University, in 1977, with a Master's Degree in Geology. He was Echo Bay's top-gun Senior Exploration Geologist, out of Spokane, from 1992 to 1998.
Donald Ranta, of Latitude Minerals, is a well-seasoned veteran of 35 years in the exploration business. After earning a Master's Degree in Geology from the Mackay School of Mines in 1967, he moved on to pick-up his Ph.D in Geology from the prestigious Colorado School of Mines in 1974. In the mid-1980's he was responsible for the discovery of the world-class, two-million ounce, Sleeper gold mine, while working for Amax. And, between 1993 and 1997, he served as Echo Bay's Vice President/Exploration - with a technical staff of 40 men, and annual budgets of up to $37 million…
However, it was Messrs. Carden and Bernardi who were responsible for bringing Echo Bay properties, of substance, to Latitude Minerals - which, at the time, was a small, Vancouver-based, explorer with properties in Sumatra, Venezuela, Baffin Island, and south of Voisey Bay, in Labrador. Now, Latitude has the opportunity to earn a 49% interest (and buy another 49% for US$1.4 million, from Echo Bay) in an advanced-stage (Placer-Dome, Pegasus, and Echo Bay spent a total of US$6 million on its exploration) property in Idaho, that presently hosts a MINEABLE reserve of 417,000 ounces ozs. of gold (resource of 700,000 ozs.), called the Kilgore Gold Deposit. The 49% "earn-in" will cost Latitude US$3 million, in work-commitments and property-payments, over five-years - not bad for a property with the potential to host one to three million ounces according to Garden and Bernardi.
Also, through Carden and Bernardi, Latitude has an option to acquire a 100% interest in the Miller Mountain Gold Deposit in west-central Montana - which hosts an open-pit MINEABLE reserve of 157,500 ozs. of gold - for US$700,000 of exploration expenditures over three years, lease-payments of US$20,000 per year, and 20,000 Latitude shares - plus a 3-4% NSR, upon production. When Pegasus drilled this property, they pegged the gold resource count at 290,000 ounces - but, it has the
potential to be a multi-million ounce deposit.
Latitude (again, via Carden and Bernardi) holds a 100% interest in the Blue Hill Creek Project, which is located near the southern border of Idaho. Recent drilling, by Latitude, confirmed the results of Meridian Minerals' 1986-87 drilling-programs which indicated a deposit that hosted a gold resource of 170,000 ounces in a configuration that would be amenable to open-pit mining. And, the recent drilling increased the deposit's size a deposit that remains open in all directions, and at depth. How big is the Blue Hill Creek deposit, now? Well, dimensions of the main target (the Ampa Zone) stand at 1,100 feet, by 800 feet, by 250 feet! And again, it's still expandable….
Just latitude's mineable reserves on the Kilgore and Miller Mountain properties (566,160 ozs. if fully vested with purchase option exercised), have an "in-situ" value (at today's depressed price of roughly US$15 per ounce) of US$8.49 million. Deduct the roughly US$5 million in property payments, work commitments, etc., needed to be 98% vested in the Kilgore property and 100% vested in Miller Mountain property, and the net-value of those "in-situ" mineable reserves drops to roughly US$3.49 million. That's C$5.37 million - or C$0.92 per share. Yet, Latitude's shares are now trading for just C$0.37 per share. It appears that the shares are well-undervalued - especially if one considers that value of Latitude's other properties (including the Blue Hill Creek property) were not included in the above "back-of-the-envelope"
type of calculations…
But, however you figure it, Latitude is cheap!
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