RE: sorry forgot link
Macanushi - your link related to a
March 2010 report by goldstockmania - below is the
September 2010 goldstockmania comment of why the market is saying WTF to Metanor's Ron Perry, following the 43-101 results announcement.
Yesterday, Metanor Resources [MTO, MEAOF] provided a news release on their much anticipated NI 43-101 report. Shortly after it was released, Metanor shares were literally pushed over a cliff. The share price fell almost 30%, thus giving many long term share holders a very nice hair cut and wondering WTF! Metanor’s VP Ron Perry in the news release below claims he does not understand why the market reacted so poorly to the NI 43-101 data. So in this post Ron, I would like to provide a few clues as to why share holders and the market is saying, “WTF.” There seems to be widespread disappointment with the results of the results of 43-101 and the market’s reaction to it.
Let’s look at a news release by the Canadian Press to get some firsthand commentary from Metanor’s Ron Perry on his reaction to the market’s reaction to the 43-101 data. After the news release, I will attempt to help Ron understand why people are pissed off!
Metanor stock gives up recent gains after resource data released
By The Canadian Press
VAL-D’OR, Que. – Shares in Metanor Resources Inc. (TSXV:MTO) plummeted almost 30 per cent in heavy trading Tuesday in a market gyration that left one company spokesman “at a loss” to explain after Metanor issued an upbeat resource calculation for one of its gold deposits.
The junior mining company saw its stock drop 20.5 cents, or 29.29 per cent, to close at 49.5 cents with just over 5.7 million shares traded on the TSX Venture Exchange. The drop more than erased gains achieved over the previous month.
The company said the latest independent evaluation of its Barry gold deposit estimates it contains 309,500 ounces of indicated resources and 471,950 ounces on an inferred basis.
The new estimates by SGS Canada Inc. are up substantially from a prior estimate of 35,500 ounces indicated and 67,600 ounces inferred.
“An announcement of a billion dollars in gold shouldn’t make a stock go down,” said vice-president Ron Perry, noting that gold had been trading at US$1,286 late Tuesday afternoon before finishing the day at US$1,274.30, down $6.50 from Monday’s record close.
“I’m at a loss,” added Perry. “The market is the market.”
Metanor said a major portion of the resources are at or near the surface and suitable for open-pit mining.
Both indicated and inferred resource estimates are generally considered too preliminary to begin building a new mine, but are used by development companies as a guide for further drilling and analysis of a property’s potential.
However, Perry said the final estimates aren’t expected to change for the Barry gold deposit, about 2 1/12 hours northeast of Val-d’Or in Quebec’s Abitibi region. Metanor bought the deposit in 2006.
“What we reported is just the beginning. We are going to do more drilling,” Perry said. “We see the potential for millions of ounces.”
The company announced in advance that it would be releasing new resource estimates in mid-September. The company’s stock hit a 52-week low of 40.5 cents on Aug. 23 and had been zigzagging upward until Tuesday’s drop.
Over the same period, gold futures have been trading at or near record highs, pushing shares of gold producers higher. Gold stocks were generally a drag on the Toronto Stock Exchange on Tuesday, with the sector down 1.1 per cent as the December bullion contract pulled back from its latest record high set Monday.
Metanor stock had closed Monday at 70 cents on heavy trading of more than 2.5 million shares. That was still below the 52-week high of 89 cents, established nearly a year ago in OnadianBusiness.com
I don’t think it’s that hard to understand why the market reacted so badly to the 43-101 data. Here’s the top reason’s why I think it did:
- Too much hype about the N 43-101 Barry report, results were very underwhelming.
- Low grades, low grades, and low grades. Oh yeah, low grades.
- Larger deposit was expected.
- Money spent on drilling Barry would have been better spent on Bachelor Lake.
The Bad
I am mostly disappointed with the overall strategy. I firmly believe that the Barry drilling could have waited and management should have never diverted money away from Bachelor Lake to Barry. Bachelor Lake has higher grades and should have remained the primary focus with the main objective of getting it into commercial production. Afterwards, profits from the gold production could have been used to fund a drilling campaign at Barry.
Now, management is talking about another drilling campaign and putting a concentrator at Barry. Which is great, but with what money? The choices as I see it is further dilution or going into debt. The management team took a gamble on Barry and came up short and has placed Metanor in a less desirable position.
The Good
Metanor will eventually get better positioned over time. But now it will take longer than I expected. I know some people are concerned about the lower grades at Barry, but I don’t think it will be an issue, especially with the rising price of gold these days and considering that most of the Barry gold is near the surface. If you are invested for the long term, then I would not be too concerned about the recent price activity and buy on dips.
Since the Barry pit is open in all directions, there is potential for much more gold to be discovered there. I’ve seen numbers around the 2-3 million ounce range being thrown around. However, I would highly advise management to focus first on Bachelor Lake and get it into full production before spending anymore time or money on Barry. What Metanor needs right now is to increase its income and that can be accomplished through Bachelor Lake. Ron Perry has recently estimated that Bachelor Lake can turn out about 100 K oz/yr just mining ore from Bachelor and Hewfran. He also stated that by adding an 8,000 ton concentrator at Barry can bring in another 50-100 K oz per year.
This would put Metanor at about 150 -200 K oz/yr, which is quite substantial. Couple that with a rising gold price and we are looking at mega profits in 2-3 years. As with all my stocks, I am a long term investor and will wait this one out and buy on dips.
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