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I. Volta Resources – Important New Gold Discovery & Land Expansion
II. Rodinia Lithium – Analysts reaffirm 90 cent target with stock at 27
I. Volta Resources Inc. (TSX: T.VTR, Stock Forum; $1.56)
www.voltaresources.com
Shares outstanding: 155 million
Working capital Sept 30th: $55 million
January 6th at 97 cents we presented Volta to free Stockhouse readers as an undervalued gold play in Africa.
https://stockhouse.com/Columnists/2012/Jan/6/Junior-miner-has-undervalued-gold-assets--Stockhou
The company was introduced as follows:
Further to the junior gold study we published on December 16th, here is one company from that list that stands out from the pack. That original table of gold stocks is available here if you have not seen it already.
https://stockhouse.com/Columnists/2011/Dec/16/Shockingly-Low-Gold-Ounce-Valuations-on-48-TSX
Based upon resource studies to date, Volta at the time of our report had an estimated 5.5 million ounces gold which, using our methodology was valued at approx. $23 per ounce (risked reserves). This excludes over 700 million pounds of copper.
In our original gold valuation study, the overall average was $56 per ounce. When we updated the report mid-January valuations had moved to $61per ounce.
https://stockhouse.com/Columnists/2012/Jan/20/Junior-golds-valuation-table-updated-Stockhouse-TT
On Friday February 24th we will be publishing our updated gold valuation table and it will be posted here by Friday afternoon. Some of the gold stocks have recovered nicely this past month but others remain stuck in neutral. What may have an impact is the fact we are pulling out Grayd because it was an older 2011 takeover valued at $238 per ounce. This was almost double 90% of the stocks included in the study and I personally believe carries little relevance this year.
With the recent increase in Volta’s share price, their valuation per ounce has now risen to $52. This is in-line with the low valuations we saw in December but still below the January average.
TWO IMPORTANT VOLTA DEVELOPMENTS THIS WEEK
1) On Tuesday the stock was halted to announce that an exploratory drill program had identified a new (shallow) high grade zone returning excellent gold grades – many holes terminating in high grade mineralization. They will move one of their six rigs to this new zone and test the lateral and depth extensions.
This is a very important development because the existing known gold resource still carries a low valuation by the market and now we should be looking at an increase in total resources and possibly a high grade extension that adds significantly to the overall economics of an open pit mine.
Kevin Bullock, Volta Resources' CEO, said, "These are remarkable results that reveal another dimension of the growing Kiaka project. Most impressive is that these high grade results are near surface, near existing resources, and that the mineralization remains open at depth. The close proximity of this new discovery to the existing deposit means that any significant mineralization will become part of the mine planning. Kiaka already hosts a robust resource but now we have the tantalizing potential of adding a high grade component that could have a powerful impact on the mine's economics. We are going to very aggressively explore this new discovery."
2) On Wednesday Volta also announced that they have done a property swap with Randgold that increases their core land position by a dramatic 800% - from 184 sq.km to 1,661 sq.km. This also covers the same region as the recent discovery holes.
With five rigs running in the main zone and now one committed to this new discovery, we should see plenty of news between now and summer. While the 60% short term gains are attractive, I am hoping this is only the start. If they begin to drill up tonnage on this new high grade zone, we could be looking at a price comfortably in excess of $2 to $3 by summer.
The current valuation is supported by the averages we have seen across the board in our gold valuation study, now it becomes a question of what else is there, how big, and how rich.
Even if that exploration came up empty-handed (which is unlikely but possible), the high gold price and continued low valuation of the junior gold companies, makes the risk manageable even after the recent share price increase.
II. Rodinia Lithium Inc. (TSX: V.RM, Stock Forum; V 27 cents)
www.rodinialithium.com
A quick update on Rodinia today as it was featured here on January 13th at 20 cents.
https://stockhouse.com/Columnists/2012/Jan/13/Lithium-junior-one-to-watch-closely--Stockhouse-Ti
The stock is up 30% in the past month but we will also follow this one into summer. The lithium sector remains rather boring but as I noted in the original report, RM has some very strong underlying fundamentals.
Dundee Capital Markets issued an update on the company February 16th. They maintained their 90 cent 12 month target price and also their Buy recommendation. Because this is a private report for their clients, I cannot post it here. However, I can summarize the more relevant facts that they base their valuation upon.
1) their resources should be upgraded along with pump and pilot tests that will be incorporated into a year-end feasibility study.
2) the company continues to trade at a deep discount to lithium brine-based peers who are one to two years further down the development path.
3) an important advantage to the company is having a major Chinese battery manufacturer as a strategic partner.
4) In the past two weeks they have announced that; (a) production well is being drilled (designed to fast track testing for commercial development of the project) and (b) construction of a pilot production facility is underway. The facility aims to produce battery-grade lithium carbonate on site, reflecting the operating conditions of a potential final production facility, including production of potash and boric acid.
Disclosure: Danny Deadlock owns 15,000 shares of Volta and 60,000 shares of Rodinia.