Research Report J Taylor's WWW.MININGSTOCKS.COM
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Weekly Hotline Message (Now in our 25th Year) December 23, 2006
New Uranium Recommendation
Noront Resources Ltd.
Business: Exploring for gold, uranium, and base metals in Quebec and Mexico
Traded TSX-V: NOT
Pink Sheets: NOSOF
Shares Outstanding: $54.5 Million*
Price 12/22/06: US$0.794
Market Cap: $43.3
Progress Rating: 'C'
Telephone Number: 416 864-1456
Web Site: www.norontresources.com
*Before C$15 million financing, which will add approximately 30 million shares.
An article on page 14 of the latest issue of 'The Northern Miner' caught my attention. It was headed 'Noront hits bonanza grades at Windfall.' As I read the article I picked up on a number that was absolutely astoundingly high gold assay. In fact, it was one of the highest gold assays I have ever seen. The number that was quoted from drill hole NOT-06-100 on the company's Windfall Property in northern Quebec was 1,327.9 grams of gold per tonne, which equates to 46.8 ounces per tonne. At $600 gold, that amounts to a value of around $28,000 per tonne!
A word of caution is in order for new investors in the junior gold stock sector. Exceptionally high grade numbers like those noted above should not be taken too seriously in terms of projecting a potential value for a project. First of all, when you get extremely high readings like that just mentioned, it is way beyond average for a given project. Secondly, even if there are other high-grade intercepts on the property, a huge number of questions need to be resolved before the economics of any project can be determined. Having said that, numbers like those mentioned above are exciting and important in that they do suggest the possibility that a commercial gold deposit could be in the making, especially when taken in conjunction with prior assays like 0.92 oz/ton over 31.16 ft., 0.27 oz/ton over 75 ft., 0.249 oz/ton over 43.95 ft., and 0.33 oz/ton over 22.3 ft. Widths of the gold-bearing structures have reportedly ranged from one meter to 17 meters and appear to be limited in vertical continuity; and gold mineralization is erratic. Visible gold has been present in some samples. Exceptional amounts of visible gold were present in the above-noted high-grade hole.
Since 1998, some 60 drill holes totaling 16,345 meters have been put down on this property with no less than 27 significant gold intersections being recorded down to a maximum vertical depth of 300 meters. Assays so far have been widely spaced, so the drill program just completed by the company was aimed in part at gaining a better appreciation for continuity of mineralization. The main focus of this year's drill program (the location of hole NOT-06-100), which has just been completed, is an area measuring 800 meters by 800 meters just to the east of prior high-grade gold values.
The drill program that was just completed was comprised of 12 holes. The first three holes before NOT-06-100 were not mineralized with gold. Core from the remaining eight holes are still at the lab. Obviously we will be watching for those with great interest. It's too early to tell whether this obscure little company is in the process of discovering a goldmine, but they are posting some very exciting numbers. If Windfall does turn into a viable economic ore body, the property should live up to its name
Noront Is Not a One-Trick Pony
As you can see from the stock chart above, Noront's shares have moved up smartly since the announcement of hole 100. When I hear about a discovery hole like NOT-06-100 that has triggered a share price higher, especially when it is not yet possible to ascertain the economics of a project, I look to see if there are other properties of value that could help underpin the higher share price. Otherwise, I might be a lot less willing to pay up for a surge in the price on the basis of a company with just one project.
Noront has several very interesting, and I think, highly promising properties, which I will describe briefly to you in a moment. But the one that sealed the deal for me, given my desire for uranium exploration, was the company's Hunters Point Property. That property, which is both a uranium and gold target, has had some very impressive surface uranium assays, such as 7.7% and 3.5% taken from grab samples #1 and #2, respectively. Sample #1 also carried 0.7 oz. gold/ton and Sample #2, 0.17 oz. gold/ton. Both samples also contained some interesting value for silver, copper, and lead. Other grab samples previously taken on this property ranged upward to 3.5% as well.
In 1980, the area was staked by Géoconseils Jack Stoch Ltée., which optioned the property to Canadian Occidental Petroleum Limited. Occidental carried out some preliminary surface exploration work including an airborne spectrometer survey over the claim area as well as the strike extension of the gold-uranium bearing quartzite. Subsequently, they performed mapping and humus and rock geochemistry on the claim group along with limited scintillometer work. Earlier work also revealed some interesting uranium and gold assays such as 1.14% uranium and 0.294 oz/ton gold over a strike length of 75 feet and an average width of one foot.
As with the gold property, this project is still at an early stage but shows great promise, not only because of high grab samples but also because of its overall geology. With the markets for uranium crying out for new discoveries to fuel nuclear power plants for many years from now, any significant uranium discoveries on the Hunters Point Project could drive this stock substantially higher.
Other Projects
Noront holds a number of 'other' properties, any one of which could be anything but 'other' for shareholders. Here is a brief description of those properties.
Double Eagle Project
Noront currently holds two large claim blocks that management believes to be the next large base metal camp in Canada , McFaulds Lake in northeastern Ontario. Since base metal deposits in other Canadian camps, Noranda for example, appear in clusters, management has actively staked as much ground as finances allowed around the three recent and significant discoveries of Spider Resources and KWG's joint venture in the McFaulds Lake Camp. Significant new diamond drill results recently announced by Spider/KWG returned copper results as follows:
13.8m of 5.5% copper incl. 4.63m of 10.4% copper AND a second hole returned 15.0m of 4.06% copper and 3.31m of 9.98% copper
Noront holds 12 contiguous claims (north block) comprising approximately 180 units, as well as four claims comprising approximately 64 units in a joint venture with Freewest Resources as previously announced, which claim group is contiguous to the south and west of the original Spider/KWG claim group.
Additionally, the company has acquired 13 contiguous claims comprised of 208 units located southwest of the company's north block. A third block of ten claims consisting of approximately 150 units contiguous to the company's southwest block, was purchased from a private company and will, upon regulatory approvals, be recorded in the company's name. The company will have acquired or joint ventured a total of approximately 602 40-acre units, or 24,480 acres, or about 9,700 hectares.
Burnt Hill Property
The Burnt Hill Tungsten Project (the 'Burnt Hill Property') consists of four blocks, totaling 51 mineral claims comprising approximately 816 hectares (2,040 acres). This property has had some limited but very high grade tungsten production coming from it in the early years of the last century, and it has been sporadically explored since then, including a program by the mineral division of International Paper in the 1970s. They were interested in the property as a source of timber as well as a possible tungsten deposit. I was not attracted to this stock at all because of the Burnt Hill property. However, in speaking to Company President Richard Nemis before writing this piece I was impressed by the fact that there is a 43-101 resource of 2.5 million pounds of tungsten at Burnt Hill and that management expects to put this project into production in fairly short order. From what I understand the mine needs to be dewatered and permitted and then production can begin. Mr. Nemis suggested the possibility exists to expand this deposit considerably further with relatively little exploration. Also I understand very little capital will be required to get this project into production. And with tungsten selling at $17 per pound, this 'little' project could generate some meaningful cash flows to the company fairly quickly. Moreover, from what I gather there is very considerable exploration potential here as well.
Volcan I Project
Noront optioned the El Volcan Copper-Nickel Property near Todos Santos on Baja, Mexico . A ground magnetometer survey revealed several strong anomalies along a north-south trend where previous trenching in 1968 discovered significant copper-nickel sulfide mineralization across widths up to 16 meters in a series of trenches along a 400-meter strike length. In 2005, check chip channel samples where taken from the 50-foot trench averaged 2.95% copper and 0.355% nickel across 50 feet. Cobalt assays gave values ranging from 230 parts per million (ppm) to 950 ppm (0.095% cobalt), while precious metals (Au, Pt, Pd) assay results gave values up to 0.504 grams per ton. No diamond drilling, to the company's knowledge, has ever been completed on the project. Management plans to carry out more work including more trench sampling and gathering of data from prior work before it establishes drill targets. Clearly, the kinds of copper and nickel values noted above are worth noting and would appear to offer good upside potential for shareholders.
Management
The company is headed by Richard E. Nemis as president, CEO, and also a board member. His background is in the legal and financing side of the mining business. Success is no stranger to this man who funded the exploration and discovery of what may be the largest and richest antimony deposit in the world. He has also had considerable success in funding other firms in the precious metals and oil and gas sectors as well. The exploration side of the company's business is looked after by geologists John Douglas Blanchflower, Neil Novak, David Graham, and some highly capable outside consultants as well.
Financing
Clearly, the Windfall Project is first and foremost on the minds of management and its shareholders. Management recently reported that it completed a brokered financing of $15 million through IBK Capital Corp., consisting of 10.2 million flow-through units and 19.785 hard-dollar units. Each flow-through unit consists of one common share and one-half of a share purchase warrant, and the hard-dollar unit consists of one common share and one share purchase warrant. Each full warrant entitles the holder to purchase one additional common share (which share will not be a flow-through share), at a price of 75 cents, for a period of two years. Please see the Stockwatch news release of Dec. 7, 2006.
In that same report, it was noted that Noront has contracted two diamond drills for the company's Windfall Lake Gold Project in Quebec. This new diamond drill program is expected to start Feb. 1, 2007. It is aimed at better delineating the high-grade zones established in preparation for the development of an exploration ramp of approximately 2,000 feet. A new exploration ramp is intended to outline, sample, and bulk sample the gold zones known to the company at the present time and should be completed before the end of 2007.
SUMMARY & CONCLUSION
After the company raises some C$15 million, it will have some 84 million shares outstanding plus more shares and cash to come if, as expected, warrants are exercised. With a market cap approaching $70 million, this is not a real cheap stock unless of course a substantial discovery is made. That of course is what the market is betting on. Given early exploration success on not one but several properties, we think the odds are fairly good that considerable exploration success could drive this stock to much higher levels.
On the other hand, it has had a fairly dramatic run during the past few trading sessions so it could suffer a setback. But, with various targets to explore, we feel the downside risk as long as we remain in a precious metals, uranium, and base metals bull market should be rather limited. If you wait for a significant correction to buy this stock you run the risk of missing the train as it pulls out of the station, should it connect big time on one or more of its projects. With drills scheduled to turn on the company's hot Windfall Project and with another eight drill hole assays pending, we think this is one stock that speculative investors most likely will want to own over the next few months. Of course as always, we urge subscribers not to allocate more than 5% to this or any other one stock. In that way you avoid the big losses, that destroy efforts to build wealth over the longer term
J Taylor's Gold & Technology Stocks (JTGTS), is published monthly as a copyright publication of Taylor Hard Money Advisors, Inc. (THMA), Box 770871, Woodside, N.Y. Tel.: (718) 457-1426. Website: www.miningstocks.com. THMA provides investment ideas solely on a paid subscription basis. Companies are selected for presentation in JTGTS strictly on their merits as perceived by THMA. No fee is charged to the company for inclusion. The currency used in this publication is the U.S. dollar unless otherwise noted. The material contained herein is solely for information purposes. Readers are encouraged to conduct their own research and due diligence, and/or obtain professional advice. The information contained herein is based on sources, which the publisher believes to be reliable, but is not guaranteed to be accurate, and does not purport to be a complete statement or summary of the available information. Any opinions expressed are subject to change without notice. The editor, his family and associates and THMA are not responsible for errors or omissions. The editor does hold a small position in the shares of the company mentioned above. No statement or expression of any opinions contained in this report constitutes an offer to buy or sell the shares of the company mentioned above. Under copyright law, and upon their request companies mentioned in JTGTS, from time to time pay THMA a fee of $250 per page for the right to reprint articles that are otherwise restricted solely for the benefit of paid subscribers to JTGTS. Subscription rates: One Year $159; Two Years - $264; Three Years $360. Foreign delivery postal system, add 25% to regular prices.
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