North America’s grizzled metals pros and seen-it-all financiers are astonished at price gains for miners packing drill results and other verifiable events.
“This is an atypical summer for junior valuations,” says Paul Zweng, a former mining CEO and Honolulu asset manager who searches for gold, silver and copper prospects using rigorous valuation criteria.
Zweng follows and invests in East Asia Minerals (TSX: V.EAS), a “junior” that caught fire this summer after CEO Michael Hawkins reported off-the-scale gold grades (4.25 grams per tonne) for rocks strewn across 27 meters of the company’s Northern Sumatra project in Indonesia.
“If the results are verifiable and properly footnoted,” says Mr. Zweng, who holds advanced degrees in geology and minerals economics, “investors are much more comfortable supporting the shares.”
East Asia Minerals’ shares more than doubled in late July when it revealed assays for its first two drill-holes at the Miwah Gold Project. Mr. Zweng, speaking to me from Honolulu at the time, guessed the Canada-traded shares of Mr. Hawkins’ Asian exploration entity almost surely would rise another 50% in short order.
The EAS shares did just that, reaching $3 Canadian or so a share. The company now sports a market worth (capitalization) of $160 million or so fully diluted.
Those who invest in metals explorers are seeing almost daily “melt-UPS” in market value. Market-moving events include drill-hole results that indicate marked increases in possible, probable, indicated and/or inferred resources.
Armenia’s Lydian International (TSX: T.LYD), after revealing a potent set of gold assays, and select other junior explorers are benefiting from tremendous reversals of investor sentiment.
Lydian is a relevant example. Shares of the tiny company, after scoring a 100% gain in a single day last week, continue to rise. Even Monday, as most speculation-miners dropped into ditches, Lydian was rising another 5% to a fresh high.
Sometimes, the speculation is deserved. Lydian and East Asia Minerals have been working their respective flagship projects for years.
Yet other times, in the case of specialty metals, the intense price gains are perched on secular events such as brokerage-engineered reports of commodities shortages. Most tantalizing of all has been speculation taking place in the areas of technology-related metals such as lithium, chromium, rhenium, tantalum, molybdenum and so on.
Among the so-called “lithiums,” talk of Japan and China ramping up production of lithium-powered battery vehicles has goosed shares of Canada Lithium (TSX: V.CLQ), Western Lithium (TSX: V.WLC) and many others.
New CEO Kerry J. Knoll of Canada Lithium has no explanation for his Toronto company’s 12-fold increase in share price this year … except that investors are warming to specialty metals companies with mine-capable resources going out three years or fewer. (See our continued coverage of Canada Lithium inTicker Traxfor subscribers and in Thom Calandra’s occasionalStockhouse articles.)
Not that everyone in mining is thrilled this summer. Financiers, brokers, merchant bankers and other financial professionals say raisin
g fresh money for large clients in natural resources – market caps of $500 million or more -- is still iffy, at best.
“It is very quiet (equity and debt private placements) and the market is still unsure of desire for risk,” CEO Gordon Keep of merchant bank Endeavour Financial (TSX: T.EDV) tells me from Vancouver. Mr. Keep and his Endeavour Financial, with the aid of independent Fiore Capital, look to launch a private partnership that wields several hundred million dollars in pursuit of combining neglected yet producing gold miners.
Targets for such combos include mines and tracts in Colombia, in parts of Africa, across all of silver-friendly Mexico and swaths of Canada. Prospects for mergers and transactions also include friendly American mining states Nevada, Wyoming, Alaska, Idaho and Montana.
Few can argue that the summer story thus far is all about the tiniest exploration companies – the ones that can quadruple investors’ money with the realities of mineral-rights wins and extended resource estimates.
Such companies – market caps below $50 million – are locating individuals and small asset managers willing to spread their millions across a crop of private equity placements. The willing equity investors must like what they are seeing on their Stockstreams: bright burst of flashing green, junior stocks evolving 50% higher in a day.
“I was really busy this summer,” says banker David Kearnes of Canaccord Capital in Vancouver. “I think it was an unusually busy summer for juniors. More PPs than usual and some great action in a few stocks I follow, like EGV, CUM, UW.” Mr. Kearnes specializes in raising $3 million and more for the likes of Copper Mountain (TSX: T.CUM) and other explorers with market values of less than $80 million.
“I think knowing which countries are ripe to look at, and when to appeal for funding, is critical,” boutique banker and Oremex Resources (TSX: V.ORM) principal Grant Hall tells me from Colombia. “Things here in (the city of) Medellin are hopping right now.” Mr. Hall and Oremex are searching for fresh silver and gold prospects in Mexico and in Colombia.
For investors, sizing up the next triple-decker or quad-buster, as always, requires diligence, bravery and a little luck. Aside from Colombia and Mexico, hot spots now in the dicey world of gold and silver drilling include Ghana, Tanzania, Botswana and the DRC (Congo) – all in Africa. Other land grabs appear to be taking place in Armenia, Alaska, Indonesia and Nicaragua.
“In a commodities-hungry world, it is somewhat less stressful seeking to prove out a resource,” says James Longshore, CEO of Ghana-active Xtra Gold Resources (XTGR).
Mr. Longshore hopes to unveil assays from 40 drill-holes he and Xtra Gold are plotting this summer along the Kibi Gold Trend in Ghana. Several assays already are in the bag.
I hope to look at several companies with events that might produce dramatic one-day, one-week and one-month valuation increases. The Melt-UP propositions are all high-risk and high-reward. One of them might be Mr. Longshore’s project, which the 44-year-old CEO says could produce a 10-million-ounce gold resource one day. 
Mr. Zweng, managing several million dollars from his Honolulu office, says not so fast. One way to reduce risk is to dig deep. Into the numbers, that is.
“Is there an understanding of the economics of the project, for instance – net present value, internal rates of return,” says Zweng, a geologist and earth sciences Ph.D who ran and then sold Mongolia’s QGX Ltd.
“How do you value this if it isn’t there? Or said another way,” says Stanford University-trained Mr. Zweng, who appears to be on a roll with several blooming candidates this summer, “why do you think the stock still has a lot of share-price appreciation left in it?”
Sentiment: See Bernie Schaeffer’s second issue of Sentiment magazine, just out. My article on gold sentiment is on Page Zero.
Active Trading: David Banister’s Active Trading Partners is now live at www.activetradingpartners.com. We at Stockhouse’s Ticker Trax are discussing collaborating with the New Englander’s trading service.
New Orleans: When October rolls around,my calendar slots inNew Orleans as one of North America’s most diversified investment conferences. The New Orleans Investment Conference in previous years has given me great satisfaction meeting colleagues, subscribers and real miners, scientists and alternative economists/technicians – and making money.
I’ll be presenting a down-and-dirty workshop at this year’s gathering; I hope some of you can join me. Brien Lundin of The Gold Newsletter produces the conference, whichruns Oct. 8-11. Many of my trusted colleagues and investment sources attend the show. This year will bring an excellent crop of counter-clockwise and contrary thinkers in the areas of mining, emerging markets, commodities and life sciences.
The tradition of the New Orleans conference goes back to the mid-1970s, when gold was just catching wind at its back from ordinary investors, people in garage lofts who had little idea they could buy gold and silver.
Just as good are the select companies that decide to stake out Brien Lundin’s show with their executives. Several dozen companies in all, nearly all natural resources and about half of them worth reviewing.
If you are interested in a discounted rate, please visit this link for registration. The last New Orleans show I went to, and spoke at, gave me at least two leads that changed my portfolio life.
Ticker Trax™
Please see tickertrax.comto learn more about this wealth service and its eight Planetary Prospects. Subscribers, please click here for password-secure Ticker Trax.
HOLDINGS: Thom’s holdings are listed for all Stockhouse members on www.Stockhouse.com under the “portfolio setting” for user TCALANDRA. It is public and free to view. He and his family own recently minted gold and silver coins. He owns all eight Planetary Prospects. He owns neither Canada Lithium nor Xtra Gold Resources but is researching them on behalf of Ticker Trax. Mr. Calandra and his family, however, do own Endeavour Financial, one of Ticker Trax’s eight Planetary Prospects.
THOM CALANDRA of Ticker Traxhelps his audience find value in a quagmire of investment choices. Thom co-founded CBS MarketWatch andMarketWatch.com. As the voice of Thom Calandra's StockWatch and The Calandra Report, Thom pegged $300-ounce gold as a long-term hold.
Ticker Trax™ is published by Stockgroup Media Inc. Ticker Trax is an information service for subscribers and neither Stockhouse nor Thom Calandra is a broker or an investment advisor. None of the information contained therein constitutes a recommendation by Mr. Calandra or Stockhouse/Stockgroup Media that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. Ticker Trax does not purport to tell or suggest the investment securities subscribers or readers should buy or sell for themselves. Subscribers and readers of Ticker Trax should conduct their own research and due diligence and obtain professional advice before making any investment decisions. Ticker Trax will not be liable for any loss or damage caused by a reader’s reliance on information obtained in the reports. Subscribers and readers are solely responsible for their own investment decisions. Opinions expressed in Ticker Trax are based on sources believed to be reliable and are written in good faith, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. All information contained in Ticker Trax should be independently verified. The editor and publisher are not responsible for errors or omissions or responsible for keeping information up to date or for correcting any past information. Ticker Trax does not receive compensation of any kind from any companies that may be mentioned in the report. Any opinions expressed are subject to change without notice. Owners, employees and writers may hold positions in the securities that are discussed in Ticker Trax. PLEASE DO NOT EMAIL THOM SEEKING PERSONALIZED INVESTMENT ADVICE, WHICH HE CANNOT PROVIDE. Copyright 2009 all rights reserved.