Cortez Area Play from JAN 19Cortez Area Play Overheated?
By David J. DesLauriers
19 Jan 2006 at 04:13 PM EST
TORONTO (ResourceInvestor.com) -- In the last month or so, valuations have doubled, tripled and more on most of the junior companies that have land positions in the prospective Cortez area of Nevada.
The huge run-up however, certainly seems more like a marketing success than a reflection of rapidly improving fundamentals. Almost all of the big name newsletter writers are hot on at least one, and probably a few of the companies working in the area, and Rob McEwen’s intermittent purchase of equity interests in some of the local players would seem to offer the only explanations for the surge across the board.
In short, the Cortez area play has been ‘discovered.’ What has yet to be discovered by any of these companies are any seriously promotable assay results. Indeed, it would seem that the only company that has come up with anything that looks exciting to the retail community thus far is Staccato Gold [TSXv:CAT].
Most results by some of the explorers with larger land positions to date have intersected parts per billion (ppb), and some rocks that carbon-date to a past period ending in ‘zoic,’ which might indicate that they were formed at the ideal time, and hold promise.
Miranda and Bravo
The fact though is that poor results don’t seem to faze the retail community, which has a great appetite for this area at the moment. Take Miranda Gold, which ran up first to C$1.50 on speculation that McEwen might take a piece of the company, and then to C$2.16 as a result of a German newsletter tout.
Miranda released some uninspiring drill results today and fell to a low of C$1.47 on the day, before rebounding nicely to close at C$1.72. Obviously the company has many other targets and properties to examine and so these numbers were not really a big deal, but one would expect, given the magnitude of the recent run-up, to see a bit more of a reaction than that.
Another example of the enthusiasm for Cortez is the performance of Bravo Venture Group [TSXv:BVG], which close today at C$1.98, or more than four times the level at which shares were changing hands exactly one month ago. During this same period, the only thing press released by the company was the resumption of drilling on the South Lone Mountain project joint ventured with Placer Dome [TSX:PDG; NYSE:PDG]. Prudent investors will realize that the current share price gives Bravo a market capitalization of nearly C$100 million.
Conclusion
None of this is to say that the area doesn’t have great potential, but the play may perhaps be ahead of itself at the moment - and when exploration companies quadruple without any material justification, intelligent and disciplined speculators capture the opportunity to take something off of the table.
Collectively, Bravo [TSXv:BVG], CMQ [TSXv:CMQ], Coral [TSXv:CGR], Greencastle [TSXv:VGN], J-Pacific [TSXv:JPN], Minterra [TSXv:MTR], Miranda [OTCBB:MRDDF], Nevada Pacific [TSXv:NPG],Stacatto [TSXv:CAT], Tone [TSXv:TNS] U.S. Gold [OTCBB:USGL], Victoria [TSXv:VIT], and White Knight [TSXv:WKR],are valued at in and around C$550 million by the market.
A couple of months ago, the number was less than half of this. To some extent it is justified, as these companies control an area which looks like it will almost certainly host another discovery the size of Placer Dome’s Cortez Hills/ ET Blue – but the whole stab at re-interpreting geology is still at a very early stage.
Speculating on mineral exploration is about preserving capital so that one is still around and able to play the game again tomorrow. For that reason, those presently taking a punt in these high-fliers should consider the valuations being awarded by Mr. Market, and act accordingly.