The Speculator

Black Mountain Resources is on track, with promising silver/gold prospects in the US.

PORTFOLIO POINT: Black Mountain Resources targets first production from its silver/gold project in the USA during the forthcoming quarter.

I added Black Mountain Resources (BMZ) to my portfolio in mid-April of this year and have since seen them slide in line with the rest of the resources market, to a closing low last week of 23c.

The company’s objectives appear to be on target, however, with the announced aim of first production in Q4 of 2012 from its silver/gold mines and prospects in the north-west US states of Montana and Idaho.

Until late last year, Black Mountain was just another junior prospector scratching around Western Australia looking for gold, nickel and uranium mineralisation within 187 square kilometres of exploration tenements near Leonora.

Then, in August 2011, it was offered an opportunity to buy control of a group of dormant silver/gold mines and prospects in the US.

Perth-based corporate lawyer Peter Landau was appointed an executive director (now executive chairman) and the company entered into heads of agreement to acquire a 70% interest in three silver/gold projects linked with former rich, producing mines.

At that time Black Mountain had 27.8 million issued shares plus just short of $3 million cash.

In January of this year, shareholders approved a deal to:

  • Acquire 70% of ABM Mining Corporation, with the remaining 30% retained by the vendor Abot Mining Corporation of Idaho,
  • Issue 25 million BMZ shares to the vendor, escrowed from trade until February 2013,
  • Spend $US1.5 million on each of the three projects (total $US4.5 million within three years); and
  • Issue 25 million BMZ shares to the vendors after the expenditure commitment was satisfied and production of not less than 2000oz of gold or gold/silver equivalent was achieved on any one of the projects.

Black Mountain’s issued ordinary share capital now stands at 75.32 million, of which 47.85 million are listed for trading and the balance are escrowed until various dates in February 2013.

At last week’s closing price of 23c, that gives the company a market capitalisation of $17.32 million. Last week a placement of 6.55 million shares in the London market (where the company also has an AIM board listing) was confirmed to raise $2.3 million.  

The three projects being acquired have historically significant production from high-grade ores and ready access to targeted resources. They have been in the hands of a private investor since the 1990s, when mining production ceased as the silver price slumped to historic lows of around $US5/oz. The price is now around $US32/oz.

The first two projects targeted for re-opening are the Conjecture silver mine in Idaho and the New Departure in Montana.

The Conjecture mine, contained within 310 hectares of mining claims in Idaho, lays claim to a yet-to-be verified proven resource of 326,000 tonnes grading 366g/t silver, 0.9g/t gold, 3% zinc and 0.5% lead, plus a probable resource of 370,000 tonnes of 369g/t silver and 1.4g/t gold.

The New Departure mine in adjoining Montana had an historic resource of 3.9 million ounces ranging around 50oz/tonne. The company previously reported it contains six undeveloped ore blocks, from which it believes it may extract annual production of 1.4 million oz (from just two blocks) over the first three years at a cash cost (including toll treatment) of just $US6-8/oz.

At the company’s January meeting, American mining engineer John Ryan was appointed an executive director and now chief executive. Ryan is a native of Wallace, Idaho, in the heart of the world-famous Coeur d’Alene mining district, which has yielded 1.2 billion ounces of silver in its long history since the 19th century.

He is a mining engineering graduate from the University of Idaho, and has had 25 years’ operating experience in North America, with a specific focus on silver mining projects.

A geophystical survey and follow-up diamond core drilling is under way or planned to delineate extensions to historic workings and the discovery of new ore bodies adjoining existing underground developments.

The new funds recently raised will complete the acquisition of the Lakeview Mill, which has a capacity to treat 300 tonnes of ore a day, is located 3.5 kilometres from the Conjecture mine.

Black Mountain has traded up from a low of 17.5c last year to a high of 33c earlier this year before closing on a week’s low of 23c last week on a modest week’s turnover of just 218,400 shares.

I notice the institutional investor SFG Australia Ltd (controlling Mosiac Portfolio Advisors Ltd) acquired an initial 100,000 BMZ shares (5.35%in April and lifted the holding thereafter to expand its equity in early August to 1,287,544 shares of 7.96%).

David Haselhurst writes a monthly column for Money magazine. Please note that he is not able to provide personal replies to emails.

The Speculator portfolio (as at September 12, 2012)

CompanyCodeNo of sharesBoughtPurchase priceCurrent priceCurrent value
Image ResourcesIMA*15,00031/12/2010* 0.362 av$0.310$4,650
Robust ResourcesROL6,00031/12/2010*$1.49 av$0.600$3,600
Scotgold ResourcesSGZ27,50031/12/2010*5.5 av$0.064$1,760
GoConnect LtdGCN250,00031/12/2010*0.034 av$0.016$4,000
Minemakers MAK20,00025/01/2011*0.425 av$0.130$2,600
Broken Hill ProspectingBPL30,00022/02/2011*0.132 av$0.100$3,000
Austpac ResourcesAPG40,0002/03/2011*$0.060$0.031$1,240
Potash West PWN11,05030/03/2011*$0.220$0.195$2,155
Cortona Resources CRC25,00013/04/2011*0.146 av$0.085$2,125
Golden Gate Petroleum GGP408,50020/04/2011*0.0145 av$0.009$3,677
TNT MinesTNT4,44022/07/2011*$0.000$0.250$1,110
Quickstep HoldingsQHL20,00023/11/2011*$0.185$0.165$3,300
Orpheus EnergyOEG19,25017/08/2011*0.164 av$0.077$1,482
Black Mountain ResourcesBMZ10,00017/04/2012$0.300$0.230$2,300
Chesser ResourcesCHZ12,00027/08/2012$0.360$0.435$5,220
Total value of portfolio$51,497
Owe the bank-$10,570
Portfolio change since January 3, 2012 (started with $50,000)-18.15%
All Ordinaries change since January 3 2012 (then 4155.22)4.65%
All Ordinaries close 11 September 20124348.3

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