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THE CALANDRA REPORT
By Thom Calandra
www.thomcalandra.com
A-Team companies will outpace gains of Class B companies as metals equities upgrade from their current "garbage" status.
The challenge ahead, as soon as this coming week, is to determine what an A-Team metals equity is, or is perceived to be.
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I was discussing A-Team examples with Hermann Maurer, whose German group EurAsia Holdings was one of the earliest Osisko Mining shareholders; that was well before Osisko’s Malartic Gold Project and mill in Quebec was even a pipedream.
Hermann and I got to know one another recently in Portugal. This week, we were sharing examples of metals equities with spark-plug movement during autumn 2012.
“Look at the following companies. They all came out with good results, the share price rose, although the market is bad,” he said from his office near Frankfurt.
Herr Maurer’s überlist shows prospectors (and producers) with one-day and two-day gains as great as 50 percent. The list also features equities that doubled or more in the span of a month after executives published, or press-released, an event.
Copper prospector Reservoir Minerals, a Cameroon explorer, saw its shares rise sixfold after sturdy drilling assays. Spark-plug movement.
The metal stocks' price gains followed corporate events such as mineral assays, fresh or revised 43-101 resource reports, property purchases, tax law updates, permitting news, record gold production, among other things.
A year ago, a typical list of "event-driven" price gains with spark-plug movement was 1) a lot shorter than Mr. Maurer's überlist of 15 companies; 2) lacking much of the percentage "spark"; and 3) plugged by short-lived gains -- in some cases as short as a day.
Mr. Maurer's late September to mid-November list included Reservoir Minerals, Corvus Gold, Primero Mining, Balmoral Resources and Dynacor Gold Mines.
Also: acquisitive Argonaut Gold, and a company that achieved net profit in its most recent quarter on gold and silver sales, Allied Nevada.
“Last week, Freegold opened 40 percent higher after releasing a 43-101 report,” says Herr Maurer. (I own none of these shares and receive zero compensation from any of them, in any way.)
I looked at the list and seeing Freegold Ventures, recalled I had met J. Kristina Walcott, CEO, at a European or U.K. airport about a year ago. At the time, Ms. Walcott was jacked about what the tiny company was building in Alaska.
Short story: her company's shares, following November 2011 assay reports of 1 gram/tonne gold across 200 meters at Freegold's Golden Summit property, rose sharply following news that occurred in December 2011: a 43-101 compliant report for the property, near Fairbanks. This resource report showed 1.47 million ounces gold in indicated and inferred categories at a 0.3 gram cutoff.
No garbage there. Still, most of Freegold's gains had gone poof!, like a microwaved poodle, by March or April 2012.
Now it is star date 1 year later.
Deja-über-vu. After Freegold's resource expansion program and revised compliant report for the same Golden Summit, Kristina Walcott's Alaska-centric shares again rose sharply. This time, the spark plug was a drilling program that produced 6 million ounces of gold in both indicated and inferred categories. Star date: October 31, 2o12.
Ms. Walcott and her team had to be patient as all heck, and methodical, to perform their follow-on drilling. Plus, her board of directors had to approve the millions of dollars it would cost for that additional 2012 drilling.
Why? Well, they had to still be smarting, those directors. Our smelly garbage market for metals equities had beaten Freegold shares back into the packed earth and ice of Alaska in the first half of 2012.
Any board member could ask in all fairness: How will more results help us create shareholder value?
Uber movers
"Immediately following the (2012) resource update we moved to $1.08, a gain of 59%, and we closed Friday at $0.85. That is still giving a 40% lift," Kristina tells me this weekend from her Vancouver, Canada, headquarters. "It's a definite testament to our shareholder base."
"It" also testifies to executives and staff who stick with their program in the face of dumpster market behavior. The end product of corporate patience, in this case, produced a deposit of enormous size: 6 million ounces, or more than 3 times what Freegold had on its resource books a year ago.
As for hope, let's face it, hope never springs eternal from metals equities. Prospectors and producers of all size withstand, or try to withstand, insane cycles.
Still, I take it, after covering prospectors and producers for most of my reporting career, that the current "garbage" market is showing signs of sanitation.
Hermann Maurer's list of movers since September 2012 is about four times as large as catalogs of companies that made similar 'fundamental' announcements a year ago. This is an eyeballing-it calculation.
The überlist bodes well for companies that have assays, updates, economic evaluations, even channel samples -- ready to go in the closing weeks of 2012 and in the opening weeks of 2013.
There are no guarantees. Overall, the metals equities are so hammered, it is a challenge to see the bright side. (Our net worth here at home is down about 40 percent since March 2011, when paper hit fan for nearly all metals equities.)
Yet A-Team companies in any market reversal always, and I mean always, gain the most at the fastest pace in the first stage of a recovery. (Not just metals equities, either. This über kick in the pants happened in early 2000, after Internet and technology stock had been hammered for many months.)
“You have to stick with the A Team. The market right now just cares about the biggest deposits and the highest grades for the exploration companies, and with the producers the ones with the cheapest operating costs and dividends,” a Ghana country manager tells me.
That is his definition of A Team. Most of us, as investors and executives, geologists and engineers and base camp chefs, have our special criteria.
For me, to keep this so simple as to be almost forgettable, I say, again: executives and boards that stick to their internal strategies stand a very good chance of creating fresh shareholder value.
We all can nit-pick our own and others' criteria to pieces. Yet market odds and history favor what shapes up in November 2012 as a roaring renewal of the metals rally that stalled in March 2011.
Everyone I know who controls more than $5 million (all the way up to $4 billion) of investor funds are starting to finance or support Class A prospectors (and producers). It started in July 2012, I believe.
So: steady as they go. Steady on strategy. Steady on drilling programs. Steady on engineering, on metallurgical diligence, on targeting models.
Nit-pickers who wish to screen their looming überlists further have no shortage of check-boxes: concessions must be in place and granted -- this is becoming a BIG regulatory issue in Colombia and Peru and Argentina. Drilling permits, water permits also must be in place and drilling either under way or imminent.
A-Team companies need have deep community ties and commitments personal, professional and emotional -- to the folks closest to them: on the ground at the project, within the company and within the village/town/hamlet.
On that end, I will add Pilot Gold, one of my own uber movers of autumn 2012. Pilot runs a tidy shop at projects in Nevada and Turkey and is at the moment, defying dumpster gravity. This is good because 1. I own it; and 2) It is one of six anointed TCR investments.
I think that's enough for today. Except to state the one trait that executives, staff and investors must share in equal measure, and that is patience.
The day of über commodities renewal, I believe, already is upon us. We all can endure the apathy and the garbage a wee bit longer. Go A Team, go?
Thom Calandra
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