RE: Casey On Discovery Holes & VMS DepositsKeep bashing boys and girls,,,lol
easy $ 2.00 by this friday
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Casey on discovery holes and VMS deposits.
We recently visited Explorers' League Honoree Ron Netolitzky in his Vancouver office to follow up on comments he made at our Chicago conference about the geological markers he looks for when personally evaluating whether to invest in a junior exploration company.
According to Ron, he is willing to bet his money based on just one or two drill holes, provided those holes indicate that a discovery has been made. Of course, it takes some level of understanding of geology to be able to grasp the significance of drill results, and to assess whether or not those results indicate a serious discovery (a task we happily undertake for subscribers to the International Speculator).
If you can buy into the company before the market grasps the full significance of a discovery hole—and that can sometimes take months—the investment results can be stunning.
Consider Aurelian (V.ARU), which declared assay results from four holes in early April 2006, as well as from four holes in early June 2006 from their Condor project in Ecuador. The results catapulted ARU's share price from around C$0.80 (in early April 2006) to a peak of around C$23 (in mid-June 2006). Those who understood the geology and therefore anticipated where this project was going bought heavily before the share price took off.
For sure, the assay results are important and relatively easy to understand, but what is much more important is to understand the setting of the mineralization.
For instance, if in a porphyry deposit, which tend to be large and consistent, a company drills a 100-meter hole of 0.5% copper, the odds of this turning into a big deposit are good. Another example of a good bet on consistency and geophysical signature is a volcanic massive sulphide (VMS) deposit. In either of these systems, if an exploration company hits a very good hole, there is a fair chance of that being the discovery hole. By contrast, if a similar result comes from a vein system, one excellent hole is nowhere close to providing similar odds of a future success.
Ron pointed out that Barrick bought the Pierina Mine when it had very few holes in it. The mineralization there is a high-sulphidation epithermal system, which is similar to a porphyry.
Likewise, because the Eskay Creek deposit--a mine that Ron is credited with finding--has VMS mineralization, Ron knew early on that there was something big in the offing. Others who understood the early results put their money on the table and made fortunes.
Quoting the Eskay Creek story from the December 2005 International Speculator…
"…the second big find of the decade came when Consolidated Stikine Resources and Calpine Resources, through a convoluted series of transactions, ended up developing the Eskay Creek discovery in British Columbia. While we couldn't locate a reliable data set on the more broadly held companies of the day, many of which were here today and gone tomorrow, we were able to reconstruct the highlights of the period.
"In 1988, Consolidated Stikine was a $0.10 shell. By August of 1990, it was trading as high as $73 before being taken over shortly thereafter at $70 per share by Homestake Mining (now a part of Barrick). For those who like to think in percentages, that is about a 70,000% gain, or 700 to 1."