MONTREAL – Canada’s largest banks are setting loose a fresh batch of gold analysts. Their mission: evaluate $100 million to $800 million prospectors.
The new blood, among them Dan Earle at Toronto Dominion (TD Newcrest), Nick Campbell at Canaccord, Trevor Turnbull at Scotia Bank and Jeff Killeen at CIBC, are trawling Africa, South America and Canada for likely winners in the market cap race to $1 billion.
“I think we have two things happening that might be secular shifts,” geologist and mining executive Quinton Hennigh tells me today (Thursday, in Del Mar, California one day before this Canada Day/Fourth of July weekend).
“One is that the banks, as they look for new underwriting business, are willing to consider small companies that are mostly off investors’ radar screens. The other is that these new analysts are not your traditional CFAs. They are more from the (mining) industry,” says Dr. Hennigh, whose affiliated prospectors include Gold Canyon Resources (TSX: V.GCU, Stock Forum), EurOmax Resources (TSX: V.EOX, Stock Forum) and Evolving Gold (TSX: T.EVG, Stock Forum).
I just spent a few days with one of those new analysts. We were visiting Canaco Resources’ (TSX: V.CAN, Stock Forum) Harvest gold and polymetallic project in Ethiopia and its Magambazi project in Tanzania. Jeff Killeen, age 31, peppered executives and geologists with a rigorous set of queries, the most expansive interrogatives I’ve encountered on a site visit since my recent travels with two doctors of geology: Dr. Hennigh (West Africa) and asset manager and mining executive Dr. Paul Zweng (Mexico, Colombia, Peru). (Photo above: Jeff Killeen, at right, with Canaco consultant geologist Sandy Archibald, center, in Ethiopia – Thom Calandra photo)
No wonder. Mr. Killeen of CIBC graduated with honours in geology from Carleton University in Ottawa. He’s spent time toiling for prospectors in the field. He is as sharp in the jungle as the auto-focus on his SLR digital camera.
Several of these newbies, working now or scheduled to be signed on at Scotia Bank, BMO, Royal Bank and so on, already have identified massive winners. Dan Earle, for instance, appears to have been early and correct identifying gold (and silver) deposits at Extorre Gold (TSX: T.XG, Stock Forum) in Argentina and now-gobbled Ventana Gold in my beloved Colombia.
Spring time: SSP
There are other signs that a melt-UP (as in upward) is looming for reputable yet tiny prospectors. This week in Southern California, I saw a robust turnout for Sandspring Resources in several meetings in Newport Beach, La Jolla and Carlsbad.
The Guyana gold-copper prospector (TSX: V.SSP, Stock Forum) is one of the crop of prime juniors I have researched at length and on-site these past three years for natural resources publisher Stockhouse. (Note: I am assisting SSP and its founder, John Adams, in partnership with investor outreach firm Torrey Hills Capital of Del Mar, California. I own SSP shares.) Photo here: John Adams, right, telling the Guyana story at a La Jolla gathering – Thom Calandra photo.
I say robustturnouts because any financial professional or private investor showing up for a road-show meeting just a day or two before the Canada Day and USA Independence Day weekend must be serious. This week, they are.
“I think we’re seeing some of the aggressive funds, and brokers, looking to benefit from this slide in equity prices,” SSP Chairman John Adams tells me just before a meeting in Carlsbad, California. “When they see that we’ve explored only two percent of Toroparu and the rest of the property, and they see our value (enterprise value) by the ounce (gold-equivalent; 9.8 million ounces in all categories) is just $23, they get a little excited.”
Other points of interest for professional asset managers and brokers at these meetings: looming news events (a preliminary economic assessment of Toroparu); projected cap-ex cost if project proceeds to development; life of mine; probable strip ratio; potential for higher grades via both in-fill drilling and frisky step-out drilling; number of rigs on site (3).
Such criteria are part of a landscape that asset managers and wealthy investors insist on before they hit the “buy” button. RBC’s Michael Curran has a $4.50 price target on the $2.20 Canadian SSP.
Another melt-UP sign amidst the continuing slide in metals equities (a hammering of most commodities-linked equities that began April 1 and which I believe ended on Wednesday of this past week): prospectors that have far-reaching (frisky) drill programs on their properties, coupled with specific and creative targeting models, are getting attention in Canada and Australian stock markets. I see block trades of stock (500,000 and greater shares) on the rise – for instance, Nevada’s Gold Standard Ventures (TSX: V.GV, Stock Forum) this week – as mid-sized investors and hedge funds seek reasonable bargains.
“We have been successful in placing shares with wealthy investors,” Jonathan Adwe, CEO of Gold Standard, tells me from Vancouver, Canada, this week. I’ve been to GV’s Railroad Project near Elko. Geologist Dave Mathewson is the master of modeling the monstrous land package; he gets assistance from long time Nevada prospector and geologist Carl Pescio, who is a large shareholder and something of a legend in that USA state.
Finally, non-brokered private equity placements at seeming premiums to market are on the rise as well. The latest on my screen: Jim Moore’s Inter-Citic Minerals (TSX: T.ICI, Stock Forum), which is building a formidable resource in remote western China.
Notes: My Tanzania report on Canaco’s Magambazi concession in the Handeniis in the works for next week. … On the disclosure end, concerning this report, I own shares of Sandspring, Gold Canyon and Canaco. … Gold Standard and EurOmax are clients of Torrey Hills Capital … I will be speaking at the Gold Antitrust Action Committee’s August gathering at The Savoy in London. Sponsor companies include Golden Predator and Samex Mining. … I am attending a tour of Golden Valley Mines’ (TSX: V.GZZ, Stock Forum) project near Val D’or this Canada Day weekend.
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