stock pick of the week & recent news analysisStock Pick of the Week, by Jay Taylor
Piedmont Mining Corp.
Traded: Pink Sheets- PIED
Shares Outstanding: 52,261,517
Initial Recommendation: 10/11/03: $0.06
Price 5/5/06: $0.25
Market Capitalization: $13 million
Historical Resource: 8 million ounces - AG
Progress Rating: "C"
Business: Gold & Silver Exploration Company
Web: [www dot piedmontmining dot com]
Piedmont Mining Corp. was the first company ever recommended in these pages
based solely on the strength of a management team. We believed at the time
that CEO Dr. Robert Shields would build his management team into an even
more formidable group of mining professionals and that they would in turn
acquire some mining projects of considerable merit that would give
shareholders a chance to turn this 6-cent stock into a major win. .
With the stock now selling north of $0.20, this pick has already been a
success of sorts thanks to Dr. Shields, who has indeed performed to our
expectations thus far. Shields has assembled a very talented management
team who have picked five highly prospective gold and silver targets. Not
to take anything away from the various PIED management team members, but we
think the biggest coup of all pulled off by Shields was the acquisition of
Dr Lewis B. Gustafson. He not only brings to PIED shareholders a huge
amount of mine exploration intellectual capital, but his connections and
prestige in the industry have also helped PIED land some outstanding
properties. What is exciting now for PIED shareholders is that the first of
those properties is about to be drilled.
PIED has just entered into the so-called "quiet period," as dictated by the
SEC. So, management is not permitted to tell you what they are up to, but
its joint venture partner on two of those five properties, namely AuEx
Ventures, Inc., is free to tell you what is going on with two of those
properties-the Trinity Silver Project and a gold target known as the Pasco
Canyon Gold Project.
On May 3, AuEx announced that eight angle holes totaling approximately
3,000 feet are scheduled to be drilled on the property. The purpose of
those holes will be to confirm the structural attitude, thickness, and
grade of sulfide silver mineralization projected to exist beneath the
former producing Trinity Silver Mine. This mineralization, as reported on
February 7, 2006, is indicated from 1980's vintage vertical, conventional,
air circulation rotary drilling, which is not optimum for evaluating the
likely structurally controlled mineralization.
Recent analysis by AuEx of bench level blast hole data generated by US
Borax in the late 1980's during mining also supports the high angle
character of the higher-grade silver values. Based on vertical holes put
down by Borax in the past, approximately eight million ounces of silver
from four million tons of material is known to exist. However, drilling was
far from complete. The current eight-hole drill program should be completed
by early June with assay results to be available thereafter. I am
anticipating that some good numbers will be forthcoming and if so, it could
send this stock substantially higher.
There are no guarantees that Trinity Silver will evolve into something big
and wonderful for shareholders, though there is a chance it could. Trinity
Silver is simply the first property on which PIED's shareholders will be
treated to drill results. Piedmont has assembled four more properties that
were handpicked by management. Any or all of those properties could evolve
into something big as well. Time will tell. But what I see happening for
PIED now is that a company with nothing more than intellectual property is
getting much closer to building tangible net worth for shareholders. And
keep in mind that, with all their properties in prestigious precious metals
belts in the world (in Nevada), the company definitely has a shot at
building meaningful value for shareholders.
Trinity Silver Property Background
AuEx acquired the Trinity Silver Property from Newmont Mining Company which
it subsequently joint ventured to Piedmont Mining Company. According to
Newmont records the Trinity silver mine, which was operated by U.S. Borax
from 1987 to 1989, produced approximately 5mm ounces of silver from
approximately 1.1mm tons of oxidized ore grading approximately 6 ounces
silver per ton utilizing heap leach technology. The mine which is pictured
on your right, was subsequently reclaimed.
Silver mineralization was discovered at Trinity by U.S. Borax in 1981 and
was subsequently explored under a joint venture between U.S. Borax and
Santa Fe Pacific Gold Corp. from 1982 until 1986 leading to the development
of the Trinity mine that produced for a little over 2 years. The property
was subsequently explored further by Santa Fe Pacific Gold in the period
1990 to 1992 but has seen no exploration since that time.
Reports prepared by U.S. Borax indicate that the property contained when
mining concluded approximately 4mm tons of silver mineralization grading
over 2 ounces per ton silver. AuEx has not completed the work necessary to
verify this information, and as it predates NI 43-101, it should not be
considered as NI 43-101 compliant or reliable. The property will require
considerable work before it can be reliably evaluated. In the meantime,
AuEx believes the mineralization information to be only indicative of the
property's potential. The property consists of 41 unpatented mining claims
and 1,280 acres of land owned by Newmont and 3,760 acres of fee leases
controlled by Newmont for a total package of about 5,800 acres.
Pasco Canyon Gold Project
This is an earlier-stage project. AuEx stated in its May 3 press release
that it has begun geological field mapping and is in the process of
gathering some outcrop sampling. This work is designed to confirm and
provide a better understanding of the nature and extent of the hydrothermal
system that has hopefully carried valuable gold and silver onto this
property. We could see some reverse circulation drilling by fall of this
year.
This property is located at the junction of the Table Mountain Caldera and
the Mt. Jefferson Caldera, within the Toquima Caldera Complex. This Caldera
Complex is associated with the Round Mountain Gold Deposit (10 million
ounces of gold produced), the Gold Hill Deposit (with a resource of 2
million ounces of gold), the Jefferson Canyon, and the Corcoran Canyon gold
deposits. A program of detailed geologic mapping and sampling has begun to
define drill targets. Drilling permits must then be obtained prior to
conducting a drill program.
Piedmont paid $10,000 in cash to AuEx, Inc., a wholly-owned subsidiary of
AuEx Ventures, Inc., on signing the five-year Option Agreement. Piedmont
must pay all the claims maintenance fees and expend at least $50,000 in
exploration expenditures during the first year; $100,000 during the second
year; $200,000 during the third year; $200,000 during the fourth year, and
$450,000 during the fifth year of the Option Agreement to earn a 60%
interest in the property and the project, subject to a 1% net smelter
returns royalty payable to two principals of AuEx, Inc. Piedmont may
terminate the Option Agreement at any time after the first year upon 30
days' notice. Upon achieving an undivided 60% interest, the two parties
will then form a joint venture and Piedmont will be the operator of the
joint venture.
Lewis B. Gustafson's Bio
I mentioned Dr. Gustafson's impressive background above. You can go to
PIED's Web site to read about other members of this management team, but
for your convenience here is some of what Dr. Gustafson has accomplished
over the years.
Mr. Gustafson has had a long and distinguished career in exploration and
economic geology. Born in Timmins, Ontario, he began his career as a
geologist with The Anaconda Company. He spent seven years at the El
Salvador mine in Chile, and then six years in Arizona where he became Chief
Geologist in 1975. He then was Professor of Economic Geology for six years
at the Australian National University in Canberra, Australia. From 1982 to
1986 he was Senior Staff Geologist and then Chief Research Geologist at
Freeport Exploration Company in Reno, Nevada. From 1986 to 1991 he was a
General Partner in Annapurna Exploration and a Vice President of REX
Resources, Inc. Since 1986 he has been an Independent Geological Consultant
to numerous well-known international mining companies. He has worked in
many foreign countries, including Chile, Peru, Turkey and Australia as well
as Canada and the United States. He speaks and reads three foreign languages.
During his long career Mr. Gustafson has authored or co-authored seventeen
major publications in economic and exploration geology. He is a member of
the Geological Society of America, the Society of Economic Geologists, the
Society of Mining Engineers, the Geological Society of Nevada and the
Nevada Petroleum Society and is a frequent lecturer at exploration and
mining meetings.
Mr. Gustafson has received numerous awards and commendations, especially
from the Society of Economic Geologists. He received their Lindgren Award
in 1962 and was a member of their Editorial Board from 1970 to 1980. From
1973 to 1974 he was their Thayer Lindsey Visiting Lecturer, their
Distinguished Lecturer in Applied Geology in 1989, Chairman of their Ad Hoc
Committee on Geologic Mapping from 1989 to 1993 and a Trustee of the SEG
Foundation from 1996 to 2001. From 1981 to 1984 and from 1997 to 2000 he
was a member of their Research Committee and Chairman of it in 1984. He was
also a Councilor of the Australian Mineral Foundation from 1977 to 1979 and
is currently on the Advisory Committee of the Nevada Bureau of Mines and
Geology.
Mr. Gustafson received a B.S.E degree from Princeton University, an M.S.
degree from the California Institute of Technology and a Ph.D. degree from
Harvard University.
Political Risk & Financing
In addition to new management personnel and the start of drilling on the
Trinity Silver Prospect, I wish to highlight two other factors of note that
I think bode well for PIED. First, as countries like Bolivia and Venezuela
and others in South America threaten to nationalize energy and mining
projects, keep in mind that PIED's properties are all in Nevada. Secondly,
note that IBK Capital, a well known and highly regarded Toronto-based firm,
raised nearly $1 million for PIED. This company is starting to gain the
attention of institutional investors and if the company is successful in
its exploration efforts, this should be just the beginning of attention
from the professional money managers.
SUMMARY & CONCLUSION
Piedmont Mining is still a speculative stock, but the odds of this company
coming up with something big and turning its shares into a "ten bagger"
have improved markedly. We want to emphasize our strong recommendation that
you cap your exposure to any one stock to no more than 5% of your
portfolio. That is especially true of a penny stock speculation like PIED.
Given the almost limitless appreciation potential (in percentage terms) for
this still micro-cap stock, a 5% allocation will make a significant impact
on your portfolio if this company outlines just one viable mining project
from its five target properties. I will take a limited risk (by reducing
your exposure)/unlimited upside any day. That is the kind of tradeoff I
like. And the odds are all the more enhanced, given a strong management team.