Brent Cook is editor of the Exploration Insights newsletter. His focus is on junior mining stocks and commodities.
Virginia has been a long time holding of mine since it was spun out of Virginia Gold, when Goldcorp purchased the 8-million-ounce Elenore gold deposit in Quebec. Virginia Mines retained a variable royalty on Elenore of between 2.2% and 3.5%, which currently pays $100,000 per month and should kick in around $35-million annually at $1,500 gold when in production in late 2015. The royalty alone is worth more than the company, plus there are a number of exploration projects that are demonstrating economic potential.
Lydian completed a feasibility study on the 3-million-ounce Amulsar gold deposit in Armenia earlier this month. The study looked at mining 2.3 million ounces and showed a pretax net present value at $1,500 gold of $1.05-billion and internal rate of return of 38%. The company is currently being valued at $270-million. Amulsar is a low capital and operating cost deposit that should be a priority acquisition target for a mid-tier gold producer.
Duluth Metals is developing the massive Twin Metal copper/nickel/platinum group metals deposit in Minnesota in a joint venture with Antofagasta plc. They are carried 60% through feasibility and have the option of financing their portion of capital via a call option to Antofagasta on DM stock. They are currently testing a deep, very high potential high-grade “feeder” target that if successful could be worth multiples of their current share price. The Twin Metals resource more than accounts for their current valuation and the exploration target is essentially free.
Past Picks: Sept. 15, 2011
Alderon Resource Corp.
Total return: -44.44%
Total return: -15.14%
Total return: -10.00%
Total Return Average: -23.19%
A global rush toward currency debasement suggests precious metal prices are more likely to rise than fall over the foreseeable future. Fortunately, debasing gold via new discoveries and production is a very slow process as evidenced by the decrease in gold discoveries over the past decade, in spite of higher prices. This lack of economic discoveries means the very few new high margin deposits will be extremely valuable to mining companies that are finding it difficult to replace their production over the long term. Although there is good money to be made investing in profitable mining companies as their share prices catch up with the gold price, the real money will be made in recognizing and investing in the select few junior explorers that find the deposits to feed the larger mining companies. That I believe will be the story for 2013.
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