RE: bottom??Jay Taylor
Stock Pick of the Week Jan 13 2007
Golden Goliath Resources Ltd.
Company: A junior gold and silver company focused on exploration and
development in northwestern Mexico.
Traded TSX-V: GNG
Pink Sheets: GGTHF
Shares Outstanding: 42,283,561
Initial Recommendation 1/17/03: $0.17
Price 1/13/06: $0.248
Market Capitalization: $10.5 Million
Progress Rating: "C"
Telephone: 604-682-2950
Web Address: www.goldengoliath.com
Quite frankly, our recommendation of Golden Goliath Resources (GNG) has been a disappointment to date. There was a shot up to around the C$0.70 area toward the end of 2004 and then again in the first quarter of 2006, to make a triple top at that level, the first being before our recommendation on Jan. 17, 2003, recommendation. What's up with Golden Goliath? Why has this company with seemingly so much potential failed to keep up with most of our other recommendations?
It is easy in this business to allow one's emotions to guide one's actions. As I cast my eyes over companies in our Model Portfolio, those that have risen understandably make us happy, while lackluster performers like GNG prompt a negative response and make us blue. But as I began to review where this company is and where it could go at any moment, I felt we must not only hold on to it but also perhaps suggest this stock's current level might represent at goliath-sized golden opportunity. If this stock can break through the C$0.70 level, it could be off to the races. And in my view, it has so much exploration going for it, a rise through that level could happen with relative ease in 2007, assuming (as I do) that gold continues in a bull market. But again, why has Golden Goliath's stock performance been so lackluster?
For one thing, the company has had virtually no investor relations work carried out on its behalf. That may soon change, as we would expect management might soon become more active in telling investors its story. That alone would help cause this company to appear on more radar screens of junior gold share investors.
A second and more basic reason why this stock has not performed well yet I think is because it has such a large amount of ground to explore. GNG doesn't just have one property. It has a 100% interest in a large mining camp known as the Uruachic, and the Uruachic is a CAMP. It measures 15 kilometers by 25 kilometers of ground in an area where some 100 mom-and-pop gold and silver mines were in production dating all the way back to 1735.
In fact, there are at least seven or eight main target areas in the camp that could be considered a "property" on their own.
With so much exploration potential, why is this a problem? It is a problem for a junior mining company because smaller companies having limited resources spend a great deal of time carrying out preliminary geological work in order to prioritize more expensive drilling. If Golden Goliath had just one or two "properties" rather than the seven or eight noted above, it could hone all its efforts in on those properties and, with some drilling success, outline a resource and see its stock price rise in line with most others. Instead, the company has spread out its resources over all its "properties," doing surface geological work that gains little investor attention.
As company president Paul Sorbara told me, the company has had to take a shotgun approach to this entire area to learn more about the geology and to prioritize drill targets. With much if not most of that preliminary work out of the way, I think we can start to see more of the attention put on getting work carried out on the company's Uruachic claims, and with some good results combined with a continued bull market in gold, that should drive these shares much higher. It is interesting to note not only that GNG's claims are located in the heart of one of the most prolific gold- and silver-producing regions in the world (more than forty million ounces of gold and more than one billion ounces of silver production in the past) but also that Peñoles, the giant Mexican mining company, has now staked claims
around the edges of the Uruachic camp and is currently drilling in this area.
We do not want our complaint that too little drilling has taken place to mask some rather impressive drill holes that the company has in fact reported. As more drilling is carried out to better define mineralization in various areas, a better picture of value should be painted. It is then that we think this company's shares should hitch a ride to much higher levels.
Over the last two-and-a-half years, drilling on two areas known as the Las Bolas and Nopalera claims had very encouraging results, even though the drill used was the only one available and had a depth capability of less than 200 meters. Results included excellent-grade silver intersections near the El Manto Mine, including a 3.06 meter intersection of 597 gm/T silver, 4.57 meters grading 59.33 gm/T silver, 3.06 meters grading 69.5 gm/T silver, and 1.53 meters grading 93.00 gm/T silver.
Management reports that an induced polarization (IP) survey is currently underway in the El Manto area, which will overlap with the earlier IP work further east and help delineate follow-up targets for diamond drilling scheduled to begin in February 2007. The company searched unsuccessfully all of last year for a large diamond drill rig capable of testing the highly favorable Papacho Trend, which has given earlier, smaller drills technical difficulties. Hole B04-3 in the Papacho Trend became stuck but returned an intersection of 154.13 gm/T gold with 3.22 gm/T gold over 12.3 meters at the bottom of the hole. This intersection has not yet been followed up because it could not find a drill rig that could extend to the required 400-meter depth.
The El Manto intersections lie 400 vertical meters below the near-surface workings (Las Bolas, Gambusino, etc.) and the Arbolito shaft, where extremely high-grade sulfide mineralization has been found. Management believes this mineralization, which has been found in the adjacent mine dump, must have come from depth. Management reports they have now located a drill rig that can in fact extend down to 400 meters. So, we are looking forward to drill results from the first-ever deep drilling at Uruachic.
What investors need to keep in mind is that the Uruachic area was extremely prolific in the production of gold and silver by earlier Mexicans, but only now are modern technologies being used to systematically explore this area. There is no logical way, using primitive mining technologies, that all the gold and silver has been mined out of this area any more than all the gold has been mined out of other prolific gold-producing regions in the world (such as Nevada, Quebec, and Ontario) that many of our companies are focusing on. Indeed, some very impressive grades have been found in the Papacho Trend, like 2,000 ounces of silver per tonne. This is the kind of
material the old-timers are believed to have mined.
Current shallow drilling (less than 50 m depth) underway at San Timoteo and Las Trojas, some 5 kilometers north of Las Bolas, has also returned very encouraging results such as 5.30 meters grading 1.47 gm/T gold with 103.66 gm/T silver, 25.6 meters grading 0.24 gm/T gold with 69.79 gm/T silver, 30 meters grading 0.51 gm/T gold with 51.20 gm/T silver (including 4.5 m grading 1.08 gm/T gold with 79.33 gm/T silver, 4.5 m grading 0.38 gm/T gold with 77.33 gm/T silver, and 3.0 m grading 0.90 gm/T gold with 82.00 gm/T silver). Management has scheduled a deep drilling program for next month that will include deep follow-up holes in this area, with the aim of delineating the main producing structures in this area.
The current shallow San Timoteo and Las Trojas drilling has occurred at least 200 vertical meters above the old San Martin Mine. The old records state that the average production grade from San Martin was 7.8 gm gold/tonne and 1,038 gm silver/tonne. The records state that the structure is 2.2 meters wide and 1,000 meters long.
Golden Goliath is well financed, with about $1.3 million currently in the treasury. The company also has a very strong board of directors including Mr. Marc Legault, VP of project development for Agnico-Eagle Mines, who pointed out that the Uruachic mining camp has multiple, extensive, mineralized systems, with varying styles of mineralization over a wide area, which is a common theme in the largest precious metals camps throughout the world. GNG's board also includes Mr. Richard Hughes, one of Canada's famous mine finders.
SUMMARY & CONCLUSION
At its current price, this penny mining stock has a market cap of just over US$10 million. It has a huge number of gold exploration targets to shoot at. In my view, it isn't a matter of if but when some major gold and silver mineralization will be outlined. Therein lies one of the biggest risks for junior gold mining stocks, especially those that are pure exploration plays. How much time will you have to tie up your capital before you get the kind of return you anticipate? There is no way of knowing the answer to that question, but clearly, with much of the preliminary work completed, it could be any time. Some extremely good drill holes in 2007 could send this stock upward, toward and through that C$0.70 resistance level. With such a small market cap, it wouldn't take much to turn this stock from pennies to dollars. But the uncertainty of when this might happen again underscores the need not to allocate next week's grocery money or next month's rent to
these kinds of investments and why we always urge you not to allocate more than 5% of your portfolio to this or any other one stock.
Allocating a small amount of capital to a stock like GNG is prudent,
because in a portfolio of such stocks, 2007 will be the year for some but not all stocks in that portfolio. Will 2007 be GNG's year? It could be, and if you don't own the stock when/if good drill results are reported, it may be too late to enjoy the ride. The bottom line for this company at this time, however, is that with such a small market cap and with so much to shoot at, the odds favor that, sooner or later, GNG could provide a very big score for investors with the patience to ride out the boredom we have endured so far since we first recommended it in January 2003.