Everyone knows the adage?buy low and sell high, but buying low means buying what few others value. Just a few sellers can attract more panicked selling and, conversely, a couple major shareholders can spur more optimistic buying. Market leaders have the courage and skill to stray from the herd and buy a stock based on its actual value, not simply because everyone else is buying.
The same logic holds true for exploration companies: Create investor wealth by buying and developing properties where others have failed ? due to higher commodity prices, market conditions, politics or lack of courage or skill.
PMI Gold's (TSX.V:PMV) President Doug MacQuarrie has had his eye on the Asankrangwa gold belt in Ghana, West Africa since 1994 when he co-commissioned the first modern, geophysical airborne survey flown over the belt. The survey determined that the belt was a major unexplored break, equivalent in features and structure to the prolific Ashanti belt located nearby. The major difference being that although virtually the entire belt had been staked by juniors, the Asankrangwa has had far less production than Ashanti.
So when the gold price fell and the juniors began to drop away en masse, MacQuarrie and his Ghanaian partners followed his contrarian instincts and bought concessions along the Asankrangwa, in the heart of the Ghana Gold Triangle, for a fraction of the price they would cost today.
It's this kind of maverick thinking that put PMI ahead of the curve before the bull market started and continues to distinguish it today.
MacQuarrie plans a mine distinctly different from its peers. Intent on moving to production on its Kubi project, MacQuarrie envisions a small, inexpensive 500 tonne per day operation that targets high-grade gold initially averaging between 12 and 15 g/t, and results in about the same amount of gold produced as in a bulk-tonnage low-grade open pit mine.
Kubi, which PMI acquired in October of this year, has a 43-101* compliant resource estimate of 604,000 indicated ounces of gold and 315,000 inferred ounces. Between 1999 and 2005 the Kubi mine produced 59,000 ounces of gold for AngloGold Ashanti from 500,000 tonnes of ore at an average grade of 3.65 g/t.
Before completing pre-feasibility on Kubi, PMI is focused on raising $50 million in project financing to put both the Kubi and Obotan past producing mines back into production as underground operations. The Kubi project is further advanced and PMI will move on it first, developing toward pre-feasibility as soon as financing is in place. The mining lease has already been issued. The mine is located only twenty minutes south of infrastructure at Obuasi, Ghana's main underground mining district. And because the gold grades are high, MacQuarrie plans to move to production within eighteen months.
Mining high-grade, low tonnage presents the opportunity for lower capital costs, lower financing requirements, and short time lines to production. However, like in the past, when MacQuarrie bought concessions in Ghana at the same time as other juniors were selling off, MacQuarrie appears the contrarian.
?We are serious about putting two mines into production and concentrating on margin,? he says. His model is different. It's not large scale, and it's not high tech, but it is potentially lucrative.
And there are side benefits. Mining in a developing country like Ghana, creates the opportunity for providing labour for hundreds of trained but unemployed locals. Instead of spending money on expensive capital equipment such as a jumbo drill rigs which employ few operators, PMI is able to train and pay many unemployed Ghanaians to use and repair cheap low-tech conventional equipment like jack-legs and stopers, while saving on capital costs.
Similarly, instead of processing hundreds of thousands of tonnes of ore in a huge open pit, PMI can keep its environmental footprint light and save on reclamation costs, all for the same net amount of gold. Projects like this, MacQuarrie contends, ?are easier to sell to developing countries. You don't end up having to move families and villages, and provide more and longer term employment opportunities.?
In addition to Kubi, production at Obotan is on the horizon as well. Past production at Obotan on the Asankrangwa belt totalled 730,000 ounces of gold ? 590,000 of which came from the Nkran pit with the remaining 140,000 from the Adubiaso and Abore pits.
While there isn't yet a 43-101 resource estimate for the Nkran project, Golder Associates have been commissioned to prepare one for early 2008. PMI Gold believes there is an exploration target of up to 2 million ounces under the Nkran pit.
Recent assays from a 2,539 m drill program on the Obotan property included highlights from the Nkran pit of 44.5 m of 2.61 g/t gold testing the down dip extension of the orebody. And a drill hole 170 m to the south of the southern end of the pit returned a highlight of 2.7 m of 8.91 g/t gold.
MacQuarrie is confident in his strategy, however different it may be. And he has another plan that should sound good to investors: ?Once we've paid back the bank we're going to pay our shareholders a significant percentage of our net earnings, after all the bank debt is retired, as dividends.?
PMI stock is currently trading at about $0.24 with a 52 week high of $0.47. Fully diluted, the company has 87M shares outstanding.
This article is intended for information purposes only, and is not a recommendation to buy or sell the equities of any company mentioned herein. It is based on sources believed to be reliable, but no warranty as to accuracy is expressed or implied. The opinions expressed in the article are those of the author except where statements are attributed to individuals other than the author, in which case the opinions are those of the individual to whom they are attributed.
Samples taken as vertical chip channel samples at intervals along the walls in the historic workings returned high-grade assays with a weighted average of 2.57 per cent copper (Cu), 86.8 grams per tonne silver (Ag), 0.97 per cent zinc (Zn) and 0.19 g/t gold (Au) over an average vertical height of 1.89 m.
Recently, several members of the Toronto investment community toured the La Verde project, together with Ian Foreman, P.Geo, President and Julio Lopez, the company’s Exploration Manager. The La Verde project is located 45 km northwest of Hermosilo, Sonora State, Mexico. Yale acquired this project almost four months ago at a cost of US $1.6 million payable over 27 months plus a 2% Net Smelter Return. The property has an historic resource estimate dating from 1989 (which do not comply with NI 43-101* rules) of some 459,000 tonnes grading 2.59% copper, 98.54 grams per tonne silver and 0.38 grams per tonne of gold. Yale is now making considerable progress on updating and expanding that resource.
There are at least five known deposits with historic workings on the property but the company presently has it sights set on the La Verde Grande Mine itself. Walking inside the old mine workings, the blue-green hues make the copper oxide mineralization quite evident. Mining operations at the turn of the 20th century, when the area was last properly mined, utilized steam powered machinery. These limitations meant that only the highest-grade ores were mined. With modern technology and elevated metals prices, Foreman and his backers believe that a wealth of mineable ore remains, long forgotten or undiscovered.
Yale has moved quickly on La Verde. According to Ian Foreman, “La Verde Grande is much bigger than we originally thought." Yale has reexamined many of the old workings, and has taken some 200 channel samples from throughout the underground workings. Most of these are exploration drifts about two meters high by two meters wide. La Verde Grande appears to be a classic skarn-altered limestone with high grades of copper and associated silver, gold and zinc. “But there may be more to this than just a classic skarn" says Ian Foreman. Within the La Verde Grande Mine, there are four different levels, trending northeast. In addition there is an old working trending due east/west.
The walls of the old workings are covered in soot and bat guano. Some bats still fly through the old mine and give a new challenge to mine samplers and geologists. Yale Resources will try to liberate La Verde Grande mine workings from the bats and persuade them to find a new home.
Yale Resources has come up with an interesting discovery at La Verde Grande with potential important geologic and economic significance. They have discovered a shaft of at least 80 meters in La Verde Grande. Historic documentation and old geological records describing this shaft add a new dimension to the old working. Of particular note is the reference to sulphide mineralization at the bottom of the shaft. All other mineralization in the La Verde Grande Mine is oxide so therefore this is potentially very significant. The other point is that given the challenges of drilling and mining using the steam-powered equipment of that era, it is doubly significant that so many resources would have been devoted to such a development. It would have been a large undertaking to make a vertical shaft with the depth being equivalent to a 26-storey building. There is a challenge of determining what mineralization does occur in the shaft area – being safety considerations and lacking the mythical Spiderman to go down there. One way to decode the sulphide mystery would be to put down a drill hole down parallel to the shaft. The results of this could change the geological concept of La Verde Grande and add a new geological dimension.
The goal at the La Verde Project is to define more clearly mineralized zones, which contain copper mineralization grading 1 to 3 % copper. There is also a sweetener with the silver, gold and zinc content, which all add to increase the value of the mineralization. Once Yale Resources receives all the results of their channel-sampling program, they can establish a drilling program with priority targets. Their goal is to delineate a multi-million tonne resource that is amenable to open pit mining.
Yale has other targets nearby their La Verde Grande project. Julio Lopez, Exploration Manager, together with a project geologist, two junior geologists and two sampling crews have their work cut out for them. The El Picacho target is located 900 meters north east of the La Verde Grande project following the strike. The target is to explore a breccia with strong copper oxide showing over a 15-meter width that was discovered in the early 1900’s.
A second target, La Verdesita located 1300 meters south of La Verde Grande Mine has historic estimates (non-compliant with 43-101 rules) of 100,000 tonnes of 3 % copper.
These targets and other targets close by have never been explored as one package. More detailed knowledge of the geology will prove valuable There even exists a possibility that the same geological structure links up at depth, all three of the above targets.
On Nov. 6, Yale Resources released the first set of assays – 19 in all. The results confirm anomalous copper values with weighted average grading 1.21% copper, 26.6 grams per tonne of silver, 0.77 % Zn and 0.27 grams per tonne of gold. The highest grade gave a result of 1.97 meters grading 4.86% copper,131 grams per tonne of silver, 0.26% Zn, and 3.28 grams per tonne of gold.
Yale will prioritize drilling targets in all of the mineralized zones, once all the assay results are received over the coming months. The challenge now is to “sort out the smoke" to determine the best targets for drilling and potential economic mineralization.
With only 26 million shares outstanding (33.6 million shares fully diluted) and a price tag of aound $0.25 per share, Yale still represents a bargain for a near term producers that could well be paying its own way soon. The coming months could well see Yale’s share price head north for the winter.
This article is intended for information purposes only, and is not a recommendation to buy or sell the equities of any company mentioned herein. It is based on sources believed to be reliable, but no warranty as to accuracy is expressed or implied. The opinions expressed in the article are those of the author except where statements are attributed to individuals other than the author, in which case the opinions are those of the individual to whom they are attributed.
Both Katherine Young & Resourcex Investor are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Katherine Young has sinced written about articles on various topics from Investments, Leadership. Resourcex Investor is an internationally distributed newsletter about emerging junior resource companies. Sign up for a free 1-month trial to our newsletter and get instant access to news and investing tips that have helped many of our readers make more m. Katherine Young's top article generates over 1300 views. to your Favourites.
Resourcex Investor has sinced written about articles on various topics from Investments, Nokia Phones and Investments. Resourcex Investor is an internationally distributed newsletter about emerging junior resource companies. Sign up for a free 1-month trial to our newsletter and get instant access to news and investing tips that have helped many of our readers make more m. Resourcex Investor's top article generates over 14800 views. to your Favourites.