SHIRE, Ethiopia – Canaco Resources’ Ethiopia unit almost surely will trade publicly in coming weeks. Canaco, a Canadian company operating in Tanzania, is playing its China card.
The looming spinout of Tigray Resources in northern Ethiopia, near the Eritrea border, brings me this week to East Africa to view the prospector’s polymetallic prospect and observe its Beijing-spawned partner in action.
What I find is a chance for individuals to secure a bold investment at a reasonable even a bargain price. If I am correct, Canaco’s (TSX: V.CAN, Stock Forum) six Harvest Project concessions within Tigray will replicate the success of other recent stock distributions by their mother ships. These include Regulus Resources (TSX: V.REG, Stock Forum) from now-sold Antares Minerals of Peru; Extorre Gold Mines (TSX: T.XG, Stock Forum) in Argentina from mother ship Exeter Resources; and both now-sold Ventana in Colombia and Riva Gold (TSX: V.RIV, Stock Forum) in Guyana from mother ship Wildcat Silver (TSX: V.WS, Stock Forum).
China’s road to Ethiopia, a relatively little known gold jurisdiction, leads to one outfit in the Tigray region of the continent’s second most populated nation.
SinoTech Institute of Mineral Exploration via its Beijing Donia Resources is marking success in patches of the exploration world, notably Ethiopia with three gold, copper and silver projects and projects as well in Papua New Guinea and eight other nations.
“I think the partnership with SinoTech and the opportunities that will generate going forward is one of the most important catalysts for future opportunity for Canaco shareholders,” Canaco CEO, co-founder and geologist Andrew Lee Smith says. “It is a special situation that not many have noticed.”
Special situations, such as the ultra-grade success of Extorre Gold in Argentina, are about the only winners during this largely barren spring season for metals equities worldwide.
Canaco’s 2010 stock market success stems from its Tanzania project, Handeni and its heady Magambazi targets. We are off to see those today (Monday).
Thanks to a timely 2009 investment in Canaco at five cents a share, China’s SinoTech now owns 20.5 percent of the mother ship, down from 33 percent. SinoTech in March harvested $42 million Canadian in March by selling Canaco stock.
Eye of the Tigray
The appeal to individuals among our Stockhouse and Torrey Hills Capital audiences is that partially state-owned SinoTech with its growing crop of cash will harvest other mineral projects and deliver them to Canaco, resulting in further distributions to shareholders. Canaco as soon as this Friday at a meeting of shareholders will put the stamp of approval on distributing all of its shares in the 70 percent-owned Harvest concessions. An Ethiopia partner, Ezana Mining, has the other 30 percent of the venture.
The one share of Tigray that Canaco shareholders of record likely will receive for each five they hold as of June 28 (next week) conceivably could become as valuable as those in the $700 million (and once-$1 billion) mother ship. But first, Tigray, which is to trade under the symbol TIG in Canada, must show vibrant results from an 11,000-metre drilling program at the near-surface VMS deposit.
The 362-square-kilometer Harvest concessions already have shown respectable grades and intercepts of gold, silver, copper and zinc. One hole at the Terakimti concession here delivered 52 metres of 1.55-grams gold (per metric ton), 26 grams of silver and 4% copper.
“Different lenses here and there give us different enrichments of metals,” says Sandy Archibald, a doctorate geologist who completed Tigray’s Canada-compliant technical report under the employ of Ireland’s Aurum Exploration Services. (Mr. Archibald in photo above – Thom Calandra photo)
Tigray’s headline themes include:
- That accelerated drill program of 11,000 meters later this year.
- VMS mineralization (volcanogenic massive sulphides) that could resemble polymetallic “black smokers” discovered at Nevsun Resources’ (TSX: T.NSU, Stock Forum) Bisha some 300 kilometers northwest in Eritrea.
- Sunridge Gold’s (TSX: V.SGC, Stock Forum) Asmara, another comparable VMS polymetallic belt – some 200 kilometers northeast.
- A “bargain” valuation that could start as low as $20 million for freshly scrubbed TIG shares once they hit the Toronto venture market. (All bets, of course, are moving targets in this declining metals equities market – a decided plus for speculative investors in this case.)
- Canaco’s favoured partner status with ultra-active SinoTech and the China group’s worldwide geological and engineering teams. Let’s face it, with Tigray one is banking on a successful SinoTech project with Canaco managers; there likely are more in the works.
- SinoTech’s China executives, who have their Ethiopian act together, at least in my first-hand view. Jingbin Wang, Canaco chairman, is a doctor of geology, president of SinoTech and something of a polymetallic powerhouse in his country.
- A team of CEO Smith; Australian consultant and VMS aficionado Ian Groves and his vaunted father, Archean gold expert David Groves; Ethiopian Canadian Nejib Biya (who also is involved with a local potash prospector); VMS geologist Jeff Heidema and others. (Photo: Mr. Biya with Dr. Archibald on site at Terakimti – Thom Calandra photo)
Ethiopia in a breath: Big country (70 million citizens), friendly people, centuries of gold production. It has a strikingly pleasant capital city, Addis Ababa at 9,000 feet elevation. Visa on arrival: US$20 vs. $150 for Ghana. The so-called cradle of civilization has had 5% to 7% GDP expansion in the past 10 years. The nation also has great coffee. Stable mining regulations. A 30% corporate tax rate. Emerging potash producers. And so on.
As a writer and potential investor, I go to places such as Ethiopia if I think I can see and report about a property and its operators within an unknown or out-of-favor jurisdiction. Ethiopian efficiency compares favourably with my beloved Ghana and with West Africa’s Mali, both nations undergoing gold booms, along with Tanzania in East Africa.
A caveat for individuals is that Canaco’s CEO, Mr. Smith, arranged this tour and picked up most of my expenses. Accompanying me were a brilliant sell-side analyst from Toronto, a fund manager from Europe/Africa and Canaco’s investor outreach executive, Meghan Brown, formerly of Colombia’s Ventana Resources and current president of the British Columbia chapter of the Canadian Investor Relations Institute (Photo: Ms. Brown on site at Harvest in Ethiopia – Thom Calandra)
One more note: Canaco’s advisory board has Candente Gold (TSX: T.CDG, Stock Forum) and Copper’s Joanne Freeze on it. Ms. Freeze and Mr. Smith are among the least promotional geologists running companies today.
I’ll have more about the Tigray proposition and about Canaco’s Tanzania property at Handeni later this week. Right now, I can see the case for Canaco as a window into a China prospector, SinoTech, with polymetallic momentum in emerging jurisdictions. I don’t own Canaco shares, not yet anyway.
LONDON IN AUGUST: You have to watch this GATA video: It is a total gold rush. Who knew watching a crowd of trust-busters with bald patches on their noggins could be entertaining. I will be at the Gold Antitrust Action Committee’s August gathering at The Savoy in London.
Notes: I am in East Africa to view Canaco Resources properties in Ethiopia and Tanzania. I do not own shares of Canaco, nor do I represent the company for marketing and investor outreach. In early July I will view the Golden Valley Resources (TSX: V.GZZ, Stock Forum) venture with Osisko Mining at Val D’Or, Quebec.
Thom Steps Out: I am adding professional outreach for a select number of natural resources companies to my log. I will continue to write free articles such as this one for Stockhouseand its nearly one million users. Here is the press release: Thom & Torrey Hills Capital.
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