Investors Digest Article on SMHShoreham Resources: A multi-dimensional discovery play
Investment advisors love to preach about the merits of diversification, and how it may
lower the risk in a portfolio. In this article, how about if we discuss the significance of
gaining exposure to several different metals, with both early and advanced exploration
prospects, located on two different continents, all from one junior exploration company?
While I am sure that approach is not what the advisors had in mind, it is worth the
exercise to investigate. Read on…
Shoreham Resources Ltd. is an ambitious junior that has managed to gain a controlling
interest in several projects. What makes the company attractive is the fact that two of
these projects have already seen extensive exploration from previous operators that
defined large deposits. I am always more interested when a new company takes a fresh
look at an old project. The overall risk level is lower than just starting from scratch on a
grass-roots stage prospect, since there is evidence that at least some mineralization was
already encountered, and there is often a body of data to work from that will help direct
future work programs.
Now that gold has finally broken out of a long consolidation pattern to set a new all-time
high, the yellow metal is once again a focus for investors. Shoreham has an option to earn
up to a 75 percent interest in the Marudi Mountain gold project, located in Guyana. This
country is not on the radar screen for many investors, but it should be. A prolific
greenstonemineral belt extends across much of Guyana, yet it remains largely underexplored.
Several exciting gold discoveries have come from this region, including the
robust Aurora Project that is being developed by Guyana Goldfields.
At Marudi Mountain, historic resources have already been outlined amounting to about
650,000 ounces of gold and the deposit area remains open laterally and to depth.
However the project geologists have determined that a lower grade gold zone exists
within the oxidized rock near surface that was completely overlooked by the previous
operator. Due to favourable economic considerations this oxidized zone may be even
more profitable to mine than the historic resource zone.
Shoreham completed a work program late in 2007 to target the near surface gold zones
through a shallow drilling program and extensive trenching. The assay results from this
work are still pending, but the company plans to present a compliant resource estimate
later this year, and it is expected that more than 1 million ounces of gold could be
defined.
For junior explorers, establishing one million ounces of gold resources for any project
demonstrates a significant achievement, to the same extent that a middle class suburban
yuppie wants to have a Mercedes in the driveway. It tends to validate the success and
indicate that something special is going on. Shoreham is considering a joint venture
arrangement at Marudi to advance the project as a lower cost producing mine.
The company also controls the option to acquire an undivided interest in the Setting Net
Lakemolybdenum project located in Northern Ontario. Molybdenum is a metal that has
held up very well during the last few years, trading in a range around $30 per pound. At
Setting Net Lake a low grade resource of about 100 million tonnes has been outlined,
grading roughly a pound of moly per tonne, and the deposit ranks as the largest
undeveloped molybdenum resource in Eastern Canada. And there is very real potential to
expand the total resources of the project with further exploration.
Shoreham has planned an extensive drill program to confirm the historic resources,
explore for new deposit areas, and to prepare an updated resource estimate. If the pending
work program is successful, then Setting Net Lake will represent another attractive asset
with the critical mass to attract a buyer ready to write a very big cheque.
In keeping with the diversification theme, consider uranium, another resource that has
performed very well of late and is currently trading well above long term average prices.
In 2006 the uranium sector attracted investment interest near mania proportions, but
things have settled down considerably since then. The fundamentals for uranium demand
however remain extremely bullish, so it is certainly a good metal to target through
exploration.
Shoreham has an option to earn a 70-percent interest in the Bearhead Lake uranium
prospect in Northern Ontario. The property is an early stage prospect, but drill programs
completed by earlier operators in the 1950’s and 1970’s have revealed uranium deposit
areas which remain open to further expansion. Shoreham has since initiated geophysical
programs that have been interpreted to suggest parallel mineralized structures may exist.
These have never been drill-tested, and therefore they represent attractive targets. In
addition, Shoreham controls an option to earn a 70-percent interest in another nearby
uranium prospect, the Matless Lake property, which is located further along the
geophysically anomalous trend.
Just to round out the grab bag of goodies for Shoreham investors, the company also has
leverage to nickel and high grade silver resources through the Favourable Lake property,
a joint venture with Gold Canyon Resources. And even an alluvial diamond project is in
themix, at the Paturo River in Guyana, which may also yield gold resources.
Now the key word for all of the above is potential. At present Shoreham does not have a
single resource that can be discussed within the mandate of NI43-101 reporting
standards. All of that could change very quickly as the company completes the work
necessary to present estimates. And that is where the upside is to be generated for
investors.
Any one of the many properties controlled by Shoreham could advance to become a
significant discovery. The market tends to eventually discount that kind of potential into
the share price.
I believe this is still the early stages of a long term secular resource bull market. And
therefore as deposits of gold, uranium, molybdenum, and other resources are defined,
they will build value for the companies that achieve that success. So it makes sense to
find attractively priced juniors that have leverage to the discovery of these resources, and
a company controlling a suite of many projects is even more attractive.
With a fully diluted capital structure of less than 55 million shares, trading in the 30-cent
range, the company could still be considered cheap on the basis of market capitalization. I
expect that the stock will begin to price in some of the potential later this year as the
magnitude of the projects become more evident. Through the built-in diversification that
the company has achieved with so many irons in the fire, Shoreham Resources could
develop into awell-rounded success story.