A June refresher in commodities-linked equities will be welcomed among investors, who have suffered since early April.
The market for junior miners and prospectors requires rejuvenating. “We thought we had good numbers,” one West Africa country manager said to me this week about drill assays, “but will anyone care?”
Well, I care, Mr. Jim.
Drill results and other progress reports must hold sway in the market, even a summer time market (northern hemisphere), if the concept of fair value based on underlying commodity prices is to level planetary gold fields. One thing is certain in my notebook: fair value always outs.
The best performers in any reversal from unfair value, in my view, are exploration companies “stepping out” for aggressive discoveries. In my log, those include Ingrid Hibbard’s Pelangio Exploration (TSX: V.PX, Stock Forum) at its lead gold project in Ghana; Kiska Metals (TSX: V.KSK, Stock Forum) at its Whistler copper and gold targets in Alaska; and Andy Smith’s Magambazi project in Tanzania for Canaco Resources (TSX: V.CAN, Stock Forum).
Stepouts, to be successful in a prospecting sense, must extend strike length of an existing deposit. They must be aggressive – that is, not merely twin legacy drill holes.
Stepouts must scale to the existing project. This is where the setting, the context, plays a part. Hard-nosed investors must look at stepouts as if they were bankers examining an economic feasibility study: how far along the flowchart of a potential mine do these data/locations/grades/drill angles move the project?
Magambazi: Canaco
Let’s look at Magambazi for Canaco Resources. Canaco is looking at a plunging shoot in a hanging wall west of its Magambazi main lode, among other things. The company’s descriptions of its step-out work are top-class in terms of detail and mapping. SeeMagambazidescription.
I think both broad and specific details Canaco provides in its press releases have helped the company stand out among Africa prospectors. That includes very good maps and a bulk-load of context. Canaco’s market cap of $730 million Canadian demonstrates that. (I have not seen Magambazi.)
There are a dozen or more contexts for stepouts. When I asked Brent Cook, the geologist, writer and consultant from Exploration Insights, for a general guide to “stepping out,” the first thing he asked me (this morning) was: What is the context?
“What is the purpose of the stepout against what is already known?” Brent asked me.
Mr. Cook, a successful geology consultant and researcher, continued, “The distance a company should step out from previous drill holes depends on the purpose of the drill program and geologic setting of the mineralization. If the intent is to chase a structure, you want to go far enough out to add some useful data points. If the intent is to define the shape and grade of a structure, the drill spacing should be tight enough to allow a resource estimator the level of confidence needed to include it in a resource estimate. That spacing then depends on the grade variability and continuity of the mineralization.”
So, stepping out can be all over the figurative map.
R. Edward Flood, a Nevada geologist associated with several projects in Mongolia and North America, always asks me, when I come back from tours, such as this most recent one in Ghana, Sierra Leone and Mali: “Did you feel the rock in your feet?” That’s a touchy-feely way of asking, “What can you tell us that you can’t get from a press release.”
I am not a geologist. So I think I need both: looking at the data, preferably on location and surrounded by a crowd of geologists, bankers and hungry investors. And walking the project. That second one, for most of us, is not always possible. (I do not own any of the companies cited above. I do own one of the ones below.)
ACTIONABLE NOTES: I had it in my head that Edgewater Exploration (TSX: V.EDW, Stock Forum)is largely Spain in terms of jurisdiction. So it clipped me on the cheek when I saw the company does Ghana, too. Edgewater is showing some promise at its Enchi gold prospect in the West Africa nation. That’s just after four holes. Sounds a bit like Keegan Resources (TSX: T.KGN, Stock Forum) in its first-hole mind-blower at Esaase a few years ago, also in Ghana. This is theEdgewater data. Like many Ghana (and Colombia and Mali and Peru and on and on …) explorers, Edgewater is waiting for drill assays from more than 20 additional holes. It’s busy out there in lab-land. The work continues. You see, someone cares. (I own neither Edgewater nor Keegan.)
TALKING MY OWN BOOK: Finally,of companies that I have covered and visited and whose shares I own, this one, African Gold Group (TSX: V.AGG, Stock Forum), just reported stepouts in the southern zone of its Mali project. See release.And a robust intercept map. (One section, 190E, pictured here, just below.)
I was just at Kobada a week ago. The heavy rains were just starting. This latest stepout within the oxide material of the rock extends the known gold zone at Kobada by about 200 meters. I am biased here, as I own the stock and have been to Kobada twice. AGG is also a client of the investor outreach firm I am associated with (see below).
The thing about AGG’s intent in its stepping out at 740,000-ounce Kobada is how focused the team there is on one goal. Pierre Lalande and Kevin Downing, the two lead geologists there, have drilled one thing into my noggin. “This is all about showing that we have a resource here of at least two million ounces gold,” Dr. Downing, trained in England, told me last week in a tour. Kevin Downing and Pierre Lalande’s trenching, drilling, auguring and geophysical workout on the vast property, including Leachwell bottle-rolls and termite-mounding, are intensive. (See photo here of Kevin Downing at recent trench – Thom Calandra photo)
The work at Kobada is advanced, as they say in the prospecting business. I am down about 50 percent on the price I paid for my AGG shares in February and March. Based on these current assays, all reverse-circulation, I hope to purchase more shares. So you see, I still care.
Thom Steps Out: I am adding professional outreach for natural resources companies to my log. I will continue to write free articles like this one for Stockhouseand its nearly one million users. Here is the press release about my new gambit: Thom & Torrey Hills Capital.
VANCOUVER: IWILL BE SPEAKING AT Joe Martin’s Cambridge House showthis coming weekend. My talk is on Monday June 6 at 8:30 a.m. I’ll be looking at West Africa ideas and images.
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