NEDERLAND, Colorado – Owners of a historic gold and silver mine 25 minutes from the university town of Boulder are looking to revive the property's glory days of the late 1800s and early 1900s.
If I get the savvy on this, the principals have almost everything in place to see their Caribou Mining District, after 40 years and eight failed partnerships, become a reality. The one thing still on the table: an approximately $11 million debt tied to the property and publicly-held company Calais Resources (OTO: CAAUF, Stock Forum). Brigus Gold holds the three notes on the property (more just below on that).
When Thomas Hendricks, David Russell and David Young can eliminate that albatross, Calais for its investors likely will repeat what Comstock Mining (OTC:BB: LODE, Stock Forum) accomplished several months ago by reworking the debt via convertibles and an equity placement. Result: a quadrupled stock price and the cash needed to advance the alkaline vein system and its five miles of underground monzonite-embedded drift toward a first step of 100 tons per day of high-grade ore.
"We already know we are going to drill the Apache and Golconda veins underground after we reopen our Idaho Tunnel," says 61-year-old Tom Hendricks, who has three separate times owned and lost to bankruptcy the quartz calcite breccia pipes of these sprawling tunnels. Cheating the devil, Mr. Hendricks gained the properties back through loans, negotiating and just plain sweet talk.
I am just back from freaking freezing Colorado. Tom Hendricks bears an uncanny resemblance to actor Robert DeNiro and has been at this property since 1981. Others, including Robert Dun of Wall Street's Dun & Bradstreet, were assembling parcels in the Caribou District as far back as 1872. (Photo:Tom Hendricks with photo of original mining village at Caribou. – Thom Calandra photo)
Mr. Hendricks, since age 14 or so an underground miner and floatation/gravity mill operator, is somewhat hard of hearing. Yet those in many of the towns of the county and surrounding area, including the tranquil hippy town of Nederland and the rejuvenated casino downtown of historic Blackhawk, say he is good-will personified. "Tom gave me my first job when I was 16," doctor of geology and Evolving Gold (TSX: T.EVG, Stock Forum) consultant Quinton Hennigh of Colorado tells me. "My first boss."
As for the property, Dr. Hennigh, who toured the property about a year ago and worked there as a teen-ager, hazards a guess that the Caribou has no less than two million ounces of gold encrusted in its hard galena-laden tunnels and stopes. Historic data from decades of drilling is said to estimate gold grades as thick as a half-ounce of gold per metric ton in some veins and 10 ounces of silver. But none of that is yet Canada-compliant.
Mr. Russell, a founder and former CEO of Apollo Gold, now Brigus Gold (AMEX: BRD, Stock Forum), and a longtime financier and deep-vein miner, says an SRK Consulting team is reviewing data from some 53,000 meters of core drilling from the past 40-plus years. A press release on the compliant report is expected in about a week.
Folks, I am not a big believer in near-vertical veins, preferring the relative ease (and size potential) of high sulphidation and open-pits. (Please see our GGA article from Caballo Blanco tour.)
Certainly, I have researched and invested in veined systems: Candente Gold's El Oro (TSX: T.CDG, Stock Forum) in Mexico …. Great Basin Gold's (TSX: T.GBG, Stock Forum) bonanza-grade Hollister in Nevada. But as I have learned on several occasions, thin-vein, vertical mining is tricky the deeper you go … and can get expensive.
Yet this time, for risk-prone investors, Calais and its pending restructuring, along with that Canada-compliant review of the Caribou and Cross Mines' historic resources, are likely to return a sizeable profit to our subscribers at Ticker Trax and to our Stockhouse audience. Just as Comstock Mining's assembly of silver (and gold) parcels did for our audience in autumn 2010 before the Nevada stock pooped out.
It helps that Mr. Russell at age 54 has succeeded as an operator at deep-vein mines, including Coeur D'Alene's Galena and Coeur mines (CDE) in Idaho. Dave Russell also sits on several boards, including General Moly (GMO). He hails from Montana, where he studied engineering at Butte. His right-hand man, chief operating officer David Young, is 57 and started as a chemist at the Coors brewery down the freeway before switching to mining engineering at Colorado School of Mines.
"If you had to pay for all of this, the four levels of tunnels, the equipment, a drill rig we own, the buildings, three winterized core sheds (with spectacularly arrayed samples from scores of holes), well, we are talking maybe $50 million or more," says Mr. Young, another Apollo Gold operator and alumnus.
Mr. Hendricks, rock hard and still playing ice hockey in a Colorado league, takes us through these pristine and mineral-rich tunnels beneath the property. The first veins to be mined, he says, are no more than several hundred feet below surface. "And there are well more than a hundred, most of them still without names. We have true widths of three feet to more than 20 feet on many of them."
The plan, for now, is to send ore to a Leadville mill some 90 miles' easy drive from here. Mr. Young and Mr. Hendricks say the zinc sulphide, calco-pyrite and other minerals in this rock exclude the use of cyanide and require instead a crush-grind and flotation circuit for processing. Ultimately, Calais wants to process ore on site.
These are a few of the hot-button themes for Calais, which will undergo a name change:
-
The property is permitted for 200 metric tons of ore per day.
-
Calais also owns the White Caps mine operation in Manhattan, Nevada.
-
Using in part calculations made by visiting money managers and researchers, I see as much as 25,000 ounces of gold yearly by 2012 and 200,000-plus ounces silver. That's if all proceeds smoothly with the paper shuffling of the equity and debt and investors' acceptance of the long-mothballed project.
-
The highest point on the property is Caribou Hill at approximately 10,200 feet. The flagship mesothermal vein, for now, is the No-Name Vein, which is as long as 10,000 feet "on strike."
-
Calais shares in 1997 or so rose as high as $14, says Mr. Hendricks. "That was after we did some more drilling and a bunch of Hemlo geologists came to see the property." Tom H. says he never sold a share; he was "locked up" by company agreement.
-
David Russell is the largest shareholder. David's father, Bob, was a pioneer in mining. Now 81, the elder Mr. Russell took over the Sunshine Mine in Idaho and worked at Indonesia's expansive copper and gold Grasberg in Indonesia (FCX).
We'll see. I already have told Ticker Trax subscribers that CAAUF shares, right now on the USA's Pink Sheet system, are probably fair value at 50 cents each in this first quarter of 2011 … a rise from their current 20 cents. Once again, that is anticipating a favourable 43-101 survey of historic resources at Caribou in addition to progress on those three loan notes that Brigus Gold holds. (Mr. Russell says there will be an equity placement at some point, but not until the shares gain ground.)
For more on market caps, cross sections, stockpiling plans and comparables, including in a moment of what some might think is Mr. Russell's hyperbole, Goldcorp's (GG) 700,000-ounce-plus gold producer Red Lake and its deep veins in Ontario, please keep tuned to subscriber report Ticker Trax. (Photo:That's Mr. Russell picking away at a spot where both the Apache and Golconda veins appear to line up for 5,000 feet of "strike." – TC photo)
Please seeour coverage at Stockhouse and at our password-secure Ticker Trax Library. I do not own shares of Calais and do not intend to purchase them. But Ticker Trax subscribers already have. Calais paid for my airfare to Denver from San Francisco.
Ticker Trax™Please see tickertrax.com to learn more about the subscriber service. For an index of free Thom Calandra articles, please click here. For an explanation of our strategies, research methods and disclosure procedures regarding of Ticker Trax and our Stockhouse reports, please visit our readily available Stockhouse articles at Stockhouse.com. Please see: Stockhouse articles – Core Box Revealed. Companies whose site tours I attend for research purposes pay part or all of my airfare and hotel. For the password-protected Ticker Traxlibrary, please see: www.tickertrax.com/Login.aspx.
HOLDINGS: Thom's holdings are listed for Stockhouse members at www.Stockhouse.com under the "portfolio setting" for user TCALANDRA. It is public and free to view. He owns shares of about 30 companies.
THOM CALANDRA of Ticker Trax helps his audience find value in a quagmire of investment choices. Thom was founding editor of MarketWatch, CBS MarketWatch and FT MarketWatch. He was the voice of Thom Calandra's StockWatch and The Calandra Report. Thom has been covering life-sciences and natural resources since 1988.