From scrap heap to a goldmine
Redundancy is a terrible thing, emotionally, as well as, in most cases, financially. Instead of going to the track to absorb your pain, you might consider throwing some of your hard-earned and well-deserved payout at a couple of mining explorers.
After all, the payoffs can be bigger than anything you might make at the track. A close friend put $70,000 into Bolnisi Gold - a silver and gold miner with operations in Mexico. He invested at 9¢ and below between December 1996 and October 2003. Less than four years later the company merged with Coeur d'Alene Mines and is now the world's largest-listed primary silver producer. Its stock rose to $3.27 by June 2007, making him more than $3 million.
Under the Radar spoke to two gold experts, David Coates and Blue Ocean Equities' Trent Allen, to find out which explorers they think could be the next Bolnisi. Coates likes the look of London-listed SolGold (SOLG.L) and Indochine Mining (IDC).
It must be said that since mid-May, SolGold's shares have climbed from just above 1 pence (1.7¢) to 9.8 pence, having hit a high of 15 pence at the start of the month.
The mining minnow, run by an ex-Colonial First State fund manager Alan Martin, has started drilling on a copper and gold porphyry rock at its Cascabel project in Ecuador. The early indications are that it could be on to something big. Porphyry is a type of igneous rock that hosts many of the world's giant copper and gold mines.
"The early surface work, the trenching and sampling has delivered some very good assay results," Coates says. "From a technical point of view what it has found in exploration fits a textbook copper-gold porphyry geological model." After some delays, drilling has commenced and, from reports, the company is pulling the first core samples out of the holes. The share price moves indicate there will be many sweating on the outcome of the assay analysis.
Indochine Mining is exploring for gold in Mount Kare in Papua New Guinea. The site is next door to the Porgera Gold Mine, which is considered by many to be the richest gold deposit on the planet.
Mining analysts aren't often considered romantic, but Trent Allen's choices, YTC Resources (YTC) and Peel Mining (PEX), have some romance about them, being based in Cobar, in central-western NSW. YTC has two mines, Hera, named after the Greek goddess, and Nymagee, which is also home to Banjo Patterson's Clancy of the Overflow.
What attracts Allen isn't romance, but the dollars that could come from new exploration techniques such as electro-magnetic surveys that are breathing life into one of the oldest mining areas in Australia.
In the case of YTC, however, it is moving beyond pure exploration. "YTC is building a mine and will reach the first development phase in three months. It will be producing in the next 12 months, which is an amazing achievement," Allen says.
Its mines are forecast to produce 350,000 ounces of gold equivalent in metals within four years, which at current prices suggests a value before costs of $500 million. Not bad for a company with a market capitalisation of $68 million.
Richard Hemming edits the fortnightly newsletter Under the Radar Report: Small Caps.
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