Great DLKM Review and other info for investorsI though it would be proper to share this review and a general commodity resource for investors, on what I'm hoping is the eve of an 8-K from DLKM, where we have received the first round of funds from the chinese.
This info was written by Toby Hansen who has been doing a quartley newsletter for commodity investor for quite awhile now. His newsletter has a vast amount of information related to commodities as well as suggested stocks, reader recommended stocks (there's over 900 readers), industry trends, a comprehensive resource review and a detail review of the precious metal market--to name a few.
He email is tobinator00@yahoo.com. If your interested of reading the full 65+ page PDF please drop him an email.
Douglas Lake Minerals (DLKM.OB): Has for the last few years assembled
a portfolio of several exploration properties in Tanzania. Their business plan was
to acquire rights to properties then have a second party provide the exploration
and development of resources. The year long meltdown in the exploration sector
and the lack of commitment by one of their partner’s resulted in Douglas heading
no where.
Douglas made a company saving acquisition recently on a property in South
Eastern Tanzania called Mbwemkuru (wem koo roo). Mbwemkuru has the
potential of being one of the largest alluvial gold deposit in the world. An alluvial
deposit is one in which the gold is located in loose sand and gravel. Essentially
gold is deposited over time as sediment in a lake or river bed. Douglas has
identified an area of high grade gold measuring 22 km by 2 km described as
beach sand. Local artisans are producing up to 200 ounces of gold per month
using burlap sacks, picks, shovels and pans. Douglas says that the area has
gold grades near the surface of 1 – 5 grams per ton. Going deeper, the grades go up to as high as 50 grams per ton. One huge plus of alluvial deposits is the gold is loose so grinding, milling and heap leach pads typical of hard rock operations are not required. You can be in production with a front end loader
and a sluice box virtually over night.
Having a property with huge potential is one thing but having the money is
another. Douglas Lake executed a memorandum of understanding with a
prestigious Chinese Mining Institute (TIGMR) last fall and invited them to
Mbwemkuru. They stayed longer than planned coming away very impressed. In
less than two months TIGMR decided to take a $6 million equity position in
Douglas Lake.
Douglas technical consultants say achieving 100,000 ounces production per year
would be fairly easy to do. I am not holding my breath for that level but if they
simply achieved 25,000 ounces early on, it would bring in over $20 million
revenue and enough cash flow to support active drilling of the property. It should
be noted that the sand/gravel gold rich zone is likely 10-20 meters deep as no
one has hit bedrock yet. Core drills likely don’t have to go to the depths of
traditional exploration plays such as several hundred meters through very hard
rock. This means Douglas could prove up reserves and resources much more
quickly than is industry standard.
One conclusion I have made is there’s a lot of gold on Mbwemkuru on the order
of 1 – 20 million ounces based upon what assumptions one uses. If the property
was in production, the fair value of the company would be between $150 million
to $3 billion or the share price being several times higher than today. While that
is very enticing, near term the stock is going to struggle.
Bob Moriarty of 321gold.com wrote an attack piece last week against the CEO of
the company in what appears to me a public attempt to remove someone he
does not like. His article reads as a smear campaign with generous references
to “scam” and “Bre-X” (a major mining fraud in the mid-1990’s). Bob brought up
some good points about the speed in which Douglas files official documents.
However, since his article appeared Douglas has showed several of his points to
be worthless. Despite Moriarty’s references to Bre-X, he does show that the
property is a very large gold find that can be easily mined.
One would think that a major article calling a company a scam etc. would have
devastated the stock. Douglas traded at $0.47 before the article and closed at
the end of the week at $0.40. What I believe is investors saw for what the article
was: a personal vendetta and confirmation of how potentially large the gold is on
the property. In the coming months, we should see progress being made on
exploring Mbwemkuru to prove up resources so they can begin to mine the
property. This stock is ultra-high risk/extreme reward stock for long term holders.
A cloud will hang over the stock until all of the points in Moriarty’s article are
addressed.