The Speculator

Australia’s Orinoco Gold has hit some promising pay dirt in Brazil.

PORTFOLIO POINT: Orinoco Gold’s share price has risen almost five-fold in the past year, with a Brazilian acquisition yielding some promising assay results.

Few readers will remember the unsuccessful gold prospector Strickland Resources Ltd (STK), whose shares fell to a 12-month low of 9.9c after disappointing results from an exploration play out of Leonora, Western Australia.

But in August its luck began to change. A team of Australian-educated mining technocrats from Brazil convinced the company to buy a majority interest in an emerging but unlisted Brazilian gold miner.

On October 30 Strickland was reborn on the Australian Securities Exchange as Orinoco Gold Ltd (OGX) after acquiring 100% of the Brazilian company, which in turn held 70% of the high-grade Curral de Pedra gold project in central Brazil, about 250 kilometres from the capital Brasilia. (The other 30% of the project is owned by a company reputed to be the second-largest drilling contractor in Brazil.)

The purchase was settled through an issue of 20 million Orinoco Gold shares to the vendors followed by a capital raising at 15c a share to raise $2.7 million to fund future exploration.

Perth-based Trafford Resources (TRF), which has starred frequently in this column in the past, underwrote $1.5 million of the capital raising and now holds 18% of Orinoco’s 62 million shares.

As part of the deal, the Brazilian company’s management team came with it – managing director Mark Papendieck and two Brazilian geologists, Dr Marcelo de Carvalho (country manager and head of exploration) and Dr Klaus Petersen (technical executive and alternate director). Perhaps remarkably, although both the Brazilians won their first degrees in geology in Brazil, they won their doctorates under a sponsorship scheme at the University of Western Australia.

The other three board members are chairman John Hannaford, and non-executive directors are Brian Thomas and Ian Finch, Trafford’s managing director.

As well as the present issued and listed capital of 62 million shares, another 15 million unlisted performance shares may yet be quoted – 5 million shares if and when the company proves up a JORC-inferred resource of 500,000 ounces of gold, then 10 million shares if such a resource reaches one million ounces.

Last week, as the company prepared to deliver a paper at Sydney’s Rising Stars talk fest, Orinoco’s shares traded up from a low of 36c to a high of 42c – and today they moved to 46.5c.

Papendieck reminded the crowd that although the Portuguese had mined gold in Brazil as long as 350 years ago, many old workings had been forgotten or were never subjected to modern exploration methods. He saw significant potential to define near-surface, high-margin deposits.

The company now holds 23.5 square kilometres of concessions and applications in the Fiana Greenstone belt in Goias State, central Brazil (see map).

The initial focus is the high-grade Cascaval target, a 420m by 620m mineralised zone open in all directions on the Curral de Pedra project area. A 1 tonne bulk sample averaged 22.1 grams a tonne of gold, and recoveries from a gravity circuit yielded 86% gold.

I took a modest initial position of 2000 shares at 40c last week, when 2.035 million Orinoco shares went through the market at prices ranging from 36c to 41.5c. When I reorganise the year’s portfolio I may well lift my holding as serious field work gets under way.

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 December 4, 2012)

CompanyCodeNo of sharesBoughtPurchase priceCurrent priceCurrent value
Image ResourcesIMA*20,00031/12/2010* $0.338 av$0.185$3,700
Robust ResourcesROL6,00031/12/2010*$1.49 av$0.470$2,820
Scotgold ResourcesSGZ27,50031/12/2010*5.5 av$0.060$1,650
GoConnect LtdGCN250,00031/12/2010*0.034 av$0.012$3,000
Broken Hill ProspectingBPL30,00022/02/2011*0.132 av$0.100$3,000
Austpac ResourcesAPG40,0002/03/2011*$0.060$0.033$1,320
Potash West PWN11,05030/03/2011*$0.220$0.250$2,763
Cortona Resources CRC25,00013/04/2011*0.146 av$0.096$2,400
Golden Gate Petroleum GGP408,50020/04/2011*0.0145 av$0.007$2,860
TNT MinesTNT4,44022/07/2011*$0.000$0.250$1,110
Quickstep HoldingsQHL20,00023/11/2011*$0.185$0.170$3,400
Orpheus EnergyOEG19,25017/08/2011*0.164 av$0.061$1,174
Black Mountain ResourcesBMZ10,00017/04/2012$0.300$0.210$2,100
Chesser ResourcesCHZ12,00027/08/2012$0.360$0.370$4,440
Orinoco GoldOGX2,00030/11/2012$0.400$0.450$900
Total value of portfolio$47,675
Owe the bank-$9,655
Portfolio change since January 3, 2012 (started with $50,000)-23.96%
All Ordinaries change since January 3 2012 (then 4155.22)8.58%
All Ordinaries close 4 December 20124511.76

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