investor15
10 years ago
RRI – Riverside Resources is Being Proactive, Even in This Market
POSTED ON NOVEMBER 21, 2013
BY TRAVIS MCPHERSON
CEO.CA
RRI's team is heavily focused in Mexico as well as Arizona and BC
Dr. John-Mark Staude’s Riverside Resource (RRI:TSXV), the prospect generator with precious and base metal assets across some of North America’s most prolific mineral belts, announced initial exploration results from their Flute and Lennac projects in BC. The projects were identified as part of a three year alliance with Antofagasta, the Chilean copper giant, which ends in 2014 and saw Antofagasta invest $1.8 million in exploration. RRI recently inked a new $1.8 million deal with Antofagasta to explore for large copper porphyries in northwestern Mexico. They have a similar deal in Mexico with Hochschild Mining PLC for $2.25 million in exploration work for gold prospects in Sonora.
During this past year exploring on the Flute and Lennac projects, the companies completed reverse-circulation (RC) drilling, Ah-horizon soil sampling, induced polarization geophysical surveying, geological mapping and rock sampling and now believe they have identified solid drill ready targets for a potential 2014 drill campaign. RRI has generated new anomalous copper-gold targets with three new porphyry-style intrusive centres discovered. They are particularly interested in the new massive sulphide zone.
In broadly spaced sampling the company identified a 1.2km copper-in-soil anomaly over 120 parts per million copper at the Red Top target and remains open in three directions. The highlight from Red Top returned 0.19% copper and 70ppb gold.
Riverside's President/CEO John-Mark Staude
Riverside’s President and CEO, John-Mark Staude, commented: “The second year of exploration work at Flute and Lennac outlined more copper-gold and found the massive sulphide zone. Through the encouraging results from soils and RC drill holes, we are pleased to look toward spring 2014 to work with Antofagasta to now drill test these with core drilling to get into the heart of the systems. We look forward to further work and results in B.C., with the alliance now having three strong projects with the recently announced agreement for the Swift Katie copper project.”
The newly identified massive sulphide zone identified on the Flute project is adjacent to large magnetic feature which sits at the junction of a regional north-south and north-west trending faults. As a geologist friend of mine informed me last night: “good things happen at the intersections.”
Riverside has been active this fall, taking advantage of the current markets; picking up prospective projects and adding them to their substantial database of highly prospective, earlier-stage, prospects. On November 1st the company announced they, along with their alliance partner Antofagasta, would option to earn-in 80% of the Swift Katie copper project in BC from Valterra Resources. For this RRI and Antofagasta will commit to $5 million in exploration expenditures over four years. The project has had previous work done, almost 20,000m (70 holes) of drilling, which has identified 1.9km of strike length with 900m of width and 600m depth that remains open in most directions.
“We are excited by the exploration upside at the already established Swift Katie porphyry copper project,” states John-Mark.
La Herradura mine in Sonora hosts 7Moz and is operated by Fresnillo/Newmont
Then, a few days later, RRI announced they would be acquiring three new gold projects in the Sonora Megashear Gold Belt from Argonaut Gold (AR:TSX). John-Mark is most excited about the Bohemia project which is located 15km from the past producing La Choya mine (which Penoles is putting back into production) and the 7 million ounce La Herradura gold mine. Bohemia is comprised of high-grade gold found in veins, stockwork and wall rocks. RRI and its alliance partner, Hochschild, were able to pick these projects up on the cheap, only having to dish out $40,000 in cash and a 1% NSR of which half can be bought back for $500,000 at any time.
The Bohemia project looks amenable to a typical Mexican low cost, open-pit, heap leach gold mine, which remains a favorite of the majors given the low capital intensity and operating costs to produce gold at these types of projects. Ultimately, that is their model. They pick up projects on the cheap, option them out and let other companies spend money and earn into them. Then they either get the project back with more money spent on them, or they build a mine with their partner (usually predominately funded by the other party).
Riverside is tightly held, with over 30% of the outstanding shares being held by smart money as well as management. Shareholders include resource investing legends: Sprott Asset Management and Rick Rule as well as mining royalty such as Kinross Gold and Cliffs Natural Resources.
They have $5.5 million in cash with a minimal burn rate given they spend other companies’ money on exploration costs which, in this environment, should be attractive to any and all resource investors. The company is getting a combined $4 million in exploration work being done on a portfolio of projects over the next three years. RRI is moving their alliance partnership assets forward as well as moving their Sugarloaf and Penoles projects toward initial resource estimates.
Unlike most of its peers, Riverside is doing significant work on their early-stage projects which provides consistent news flow. They have five projects currently under joint venture and another nine which they are looking to option out. They are constantly evaluating new projects so acquisitions are always a possibility for these guys.
RRI has a market capitalization of $12.5 million, they have $5.5 million in cash and are expected to get a total of $6.5 million spent on their assets over 2013.
As Brent Cook of Exploration Insights put it: “although less exciting than a throw of the dice, the prospect generator model offers an intelligent and relatively lower risk alternative for speculating in the junior exploration market.”
Their corporate video gives a good 90 second overview:
Read: RIVERSIDE ANNOUNCES EXPLORATION RESULTS FROM THE FLUTE AND LENNAC PROJECT IN CENTRAL BRITISH COLUMBIA
Riverside Resources is a client. This is an opinion and not investment advice. Due your own due diligence.
inShare
http://ceo.ca/rri-riverside-resources-is-being-proactive-even-in-this-market/
investor15
11 years ago
Riverside Resources Receives Additional $300,000 in Target Definition Funding from Alliance Partner Hochschild Mining to Advance Riverside's Clemente Project, Sonora, Mexico
VANCOUVER, BRITISH COLUMBIA--(Marketwired - Sept. 9, 2013) - Riverside Resources Inc. ("Riverside" or the "Company") (TSX VENTURE:RRI) (RVSDF) (R99.F), is pleased to announce that an additional $300,000 has been received from its alliance partner, Hochschild Mining Plc ("Hochschild"), for target definition at the Company's Clemente project in Sonora, Mexico. The additional funds will be used to carry out further mapping, geochemistry and trenching work this fall to refine targets ahead of potential drill testing in early 2014. Target Definition funding will provide Riverside and Hochschild an opportunity to further evaluate and advance Alliance properties as potential Designated Projects (DP's) before entering the earn-in stage of the agreement. Once a project is selected as a DP, Hochschild can earn a 65% interest by spending $5M in exploration over four years and making a one-time cash payment to Riverside of $3M.
Riverside's President and CEO, John-Mark Staude stated, "Riverside is pleased to be forwarding the Clemente Project and following up on initial exploration work previously completed by Riverside geologists. Previous work identified strong gold and silver values and we are confident that this current target definition program will outline quality drill targets for future testing. This area of Sonora has good surface access, is readily workable year round, and is in sight of open pit gold mines."
Exploration Program Details:
There are several important structural intersections at Clemente which require detailed attention from mapping and sampling to understand the structural controls on mineralization. The current field program will include detailed mapping and rock chip sampling, which will quickly identify areas for soil sampling lines and ground mag geophysics. These will guide the placement of trenches to expose mineralized zones of interest. Detailed mapping of surface and trench exposures will include lithological, structural and alteration mapping to understand the character, distribution, and controls on mineralization. Drill targets will be developed based on the resulting data.
An image is available at the following address:
http://media3.marketwire.com/docs/896985_1.pdf.
About the Clemente Project:
The 100% Riverside-owned Clemente Project was identified and acquired using Riverside's 66,000 mineral location proprietary database. The Project is located in the heart of the Sonora Megashear and only 7 km from the Cerro Colorado Mine. Previous field work completed by Riverside discovered high-grade silver exceeding 2 kg/t (58 oz/t) in outcrops.
The previous work program (News release September, 28, 2010) consisted of 152 rock chip samples and returned silver assay values from
Qualified Person and QA/QC:
The scientific and technical data contained in this news release pertaining to the Clemente Project was reviewed by Riverside's Chief Geologist, David S. Smith, MS, MBA, CPG, a non-independent qualified person to Riverside Resources who is responsible for ensuring that the geologic information provided in this news release is accurate and acts as a "qualified person" under National Instrument 43-101 Standards of Disclosure for Mineral Projects.
About Riverside Resources Inc.:
Riverside is a well-funded prospect generation team of focused, proactive gold discoverers with the breadth of knowledge to dig much deeper. The Company currently has more than $5,000,000 in the treasury and 37,000,000 shares outstanding. The Company's model of growth through partnerships and exploration uses the prospect generation business approach to own resources, while partners share in de-risking projects on route to discovery. Riverside has additional properties available for option with more information available on the Company's website at www.rivres.com.
ON BEHALF OF RIVERSIDE RESOURCES INC.
Dr. John-Mark Staude, President & CEO
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Contact:
Riverside Resources Inc.
John-Mark Staude
President & CEO
(778) 327-6675
(778) 327-6671
info@rivres.com
www.rivres.com
Riverside Resources Inc.
Joness Lang
Manager, Corporate Development
(778) 327-6675
(800) RIV-RES1
jlang@rivres.com
www.rivres.com
http://finance.yahoo.com/news/riverside-resources-receives-additional-300-154500124.html
investor15
11 years ago
Riverside Resources Signs US$1,800,000 Three Year Strategic Alliance With Antofagasta for Copper Exploration in Eastern Sonora, Mexico
VANCOUVER, BRITISH COLUMBIA--(Marketwired - Jul 22, 2013) - Riverside Resources Inc. ("Riverside" or the "Company") (TSX VENTURE:RRI)(RVSDF)(R99.F) is pleased to announce the signing of a three year, US$1.8M strategic exploration alliance (the "Alliance") with a wholly-owned subsidiary of Antofagasta Plc ("Antofagasta") for generative exploration in the major copper belt of northwestern Mexico in the eastern part of the state of Sonora. The Alliance will focus on finding and developing new large copper deposits using Riverside's extensive technical knowledge of copper systems and strong generative exploration team strategically based in Hermosillo, Sonora, Mexico.
Antofagasta will fund US$600,000 on an annual basis for three (3) years of generative grass-roots exploration within a defined exploration area covering eastern Sonora and parts of western Chihuahua and northern Sinaloa. The exploration area being explored by Antofagasta and Riverside is a continuation of the same belt that hosts more than 25 known deposits and mines north of the border in Arizona, and is also host to one of the world's top 10 (and lowest cash cost) copper producers in Grupo Mexico.(1) Properties that are identified and deemed to be of interest will become Designated Properties whereby Antofagasta will have the opportunity to earn a 65% interest by completing a four year, US$5,000,000 work program. Once earn-in on a Designated Project (DP) is completed, a one-time payment of US$3,000,000 will be made to Riverside and the property will then be advanced under a joint venture agreement (65%-35%).
The Alliance will target properties containing primarily Cu with possible minor amounts of Au, Ag, Mo, Pb, Zn, Ni and PGM. All properties identified by Riverside under the Alliance that are not jointly pursued will then be available for Riverside to pursue on its own should Antofagasta decide it does not fit their strategic interests. All decisions relating to the Alliance will be made jointly by the Technical Committee with Antofagasta holding a tie-breaking vote while sole funding. Unless otherwise specified, Riverside will be the designated operator for all exploration activities of the Alliance. All property acquisitions will be in the name of Riverside's wholly owned subsidiary and transferred to a jointly held company once selected as a DP.
"Riverside and Antofagasta have built a strong relationship during our work together in British Columbia, and we now look forward to applying a similar partnership framework to our joint exploration efforts within the prolific Laramide copper belt of northwestern Mexico, which is the continuation of the many large copper mines in Arizona and extends southward into Sonora where this Alliance will focus."
-John-Mark Staude, President & CEO of Riverside Resources Inc.
Antofagasta and Riverside are already working in a generative grass roots exploration alliance in British Columbia where drilling is again set to commence in the second year of the BC Alliance. The Mexico Alliance with Antofagasta will draw from the vast databases, technical experience and Riverside's exploration team and infrastructure already in place to rapidly deliver potential Designated Properties to Antofagasta for their evaluation for additional funding and advancement. Further details on the Riverside-Antofagasta Mexico Alliance will be available on the Company's website shortly.
Key Designated Project Alliance Terms:
Projects selected as Designated Project's will have deemed ownership of 51% and 49% for Antofagasta and Riverside respectively. Antofagasta would then have to spend a minimum of US$5,000,000 within four (4) years from the date the DP is chosen, with minimum annual expenditures as follows:
(i) US$500,000 on or before the first anniversary of the Effective Date;
(ii) an additional US$700,000 on or before the second anniversary of the Effective Date (for a cumulative amount of US$1,200,000);
(iii) an additional $1,500,000 on or before the third anniversary of the Effective Date (for a cumulative amount of US$2,700,000); and
(iv) an additional US$2,300,000 on or before the fourth anniversary of the Effective Date (for a cumulative amount of US$5,000,000); and
Once Antofagasta has completed the earn-in requirements, Riverside would be entitled to receive a Success Fee of US$3,000,000 from Antofagasta within 90 days. The Designated Project would then be advanced with Antofagasta and Riverside holding 65% and 35% interest respectively. If Riverside's interest in a Designated Project is ever reduced to 10% or less this interest will be converted to a 2% NSR.
About Riverside Resources Inc.:
Riverside is a well-funded prospect generation team of focused, proactive gold discoverers with the breadth of knowledge to dig much deeper. The Company currently has approximately $6,000,000 in the treasury and 37,000,000 shares outstanding. The Company's model of growth through partnerships and exploration looks to use the prospect generation business approach to own resources, while partners share in de-risking projects on route to discovery. Riverside has additional properties available for option with more information available on the Company's website at www.rivres.com.
About Antofagasta:
Antofagasta plc is a Chile-based copper mining group with interests in energy, transport and water distribution. It is listed on the London Stock Exchange and is a constituent of the FTSE 100 index. Antofagasta's mining activities are primarily concentrated in Chile where it owns and operates four copper mines, which in 2012 produced 709,600 tonnes of copper, 12,200 tonnes of molybdenum and 299,900 ounces of gold. Antofagasta also has mining exploration, evaluation and/or feasibility programs in North America, Latin America, Europe, Asia, Australia, and Africa.
ON BEHALF OF RIVERSIDE RESOURCES INC.
Dr. John-Mark Staude, President & CEO
Certain statements in this press release may be considered forward-looking information. These statements can be identified by the use of forward looking terminology (e.g., "expect"," estimates", "intends", "anticipates", "believes", "plans"). Such information involves known and unknown risks -- including the availability of funds, the results of financing and exploration activities, the interpretation of exploration results and other geological data, or unanticipated costs and expenses and other risks identified by Riverside in its public securities filings that may cause actual events to differ materially from current expectations. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release.
(
1) (Basov, 2013)
Contact:
Riverside Resources Inc.
John-Mark Staude
President & CEO
(778) 327-6671
(778) 327-6675
info@rivres.com
www.rivres.com
Riverside Resources Inc.
Joness Lang
Manager, Corporate Development
(800) RIV-RES1
(778) 327-6675
jlang@rivres.com
www.rivres.com
http://finance.yahoo.com/news/riverside-resources-signs-us-1-130000317.html
investor15
11 years ago
Mangled financing market puts shine on strategic exploration alliances
There's more to a strategic alliance than mere shared costs.
Author: Kip Keen
Posted: Wednesday , 17 Apr 2013
HALIFAX, NS (MINEWEB) -
There's one good reason for explorers not to want to touch strategic alliances with a major. You have to share. You have to share potential projects that you generate and you may even have to share projects you have already generated, as in a regular earn-in agreement. This has been one of the traditional reasons to forego such deals for mineral explorers - it lessens the gain in a potential discovery.
But there's also one good reason to flock to strategic alliances. They distribute - even negate - exploration costs, and this for a typically non-cash-generating mineral exploration company can be crucial point - especially now.
Indeed, I think this is a fascinating time to watch for strategic alliances as much as for their potential to generate new discoveries - the key outcome for speculators - as what they say about management at this moment in the mineral exploration sector suffering a protracted lull in readily-available financing. And there is no doubt of this state of affairs - depressing data in a moment.
Maybe we haven't reached the nadir of this financing famine. Maybe that's still to come. Maybe we will never wholly recover. Who knows. But, regardless, it's safe to say this market is totally and completely mangled and unrecognizable. Money is not flowing into the hands of mineral explorers for a variety of reasons. Among them, investor have spurned the sector due to lack of major discoveries in the past few years. But the cause is not the subject here. The effect is and the latest data on financings beat the point to a bloody truth.
The chart below compares mining sector financings in January and February on the TSX and TSXV - typically decent months for getting funding - for the past three years based on data from Oreninc and quoted by Reuters. It's an uncomplicated picture. It says financings have atrophied. And the reality is probably worse for mineral explorers proper as the data below also encompasses miners and developers - yet if one sector has been ignored the most it is the mineral explorers.
Now coming back to the main thread: mangled financings and those companies striking strategic alliances, with a couple points to make. First: mineral explorers are now far more willing than in recent years to strike them. The easy money is gone, removing an extreme incentive to undergo a reasonable measure of dilution via equity to fund a project all by yourself. Now partnerships, if they can be found, are in.
Over the past couple days I spoke with the heads of three mineral exploration companies that struck strategic alliances in recent weeks. They weighed in on the subject and they all agreed there was no doubt that strategic alliances, and other like partnerships, have become far more attractive as an option to underpin an exploration program during this ever worsening drought in financings. This may come as a “duh” like insight, but it's worth remembering this is a recent reversal.
First I spoke with Erdene Resource Development President and CEO Peter Akerley. He was frank about how the changing financing market played into its decision to sign with a larger partner, in its case Teck, to help fund exploration on a portion of its properties in Mongolia and also to generate new projects. “I don't think there is any question,” he said of being nudged to partner up in Mongolia given a lack of decent financing options. He noted that up until recently equity was easy to come by and for the likes of Erdene, during better days for financing, a partnership was not the preferred route to fund exploration. As Akerley put it, “Why would you give up an interest if you could go to the market and easily raise cash with low dilution?”
Next I turned to Jean-Mark Staude, president and CEO of Riverside Resources, which recently brought Hochschild Mining on board a strategic alliance, the aim of which is to come up with new projects in Sonora state, Mexico. Staude noted that whereas during the fat days of financing strategic alliances were less popular to potential shareholders, perhaps even eschewed by them as unattractive in comparison to wholly-owned projects, in the past year or so they were starting to view them as an advantage.
Finally, I asked Tom Schroeter, president and CEO of Fjordland Exploration which recently struck a BC-focused partnership with a Canadian-based subsidiary of Sumitomo - Sumac - about his view on strategic alliances. He rendered doing such deals down to necessity, something for all juniors to at least consider with cash having dried up. “Many juniors are in survival mode,” Schroeter said. “If you can't see ahead a few months, you're in trouble. It behooves juniors to do whatever they can to keep their companies going.” Schroeter, who has been exploring BC for minerals for over four decades, also gave a dire assessment of the current state of the financing markets for juniors. “I've never seen anything like it,” he said.
To the second and final point: It's a valuable moment to be watching mineral explorers for what they can do during one of the worst junior markets in living memory. Strategic alliances - and who can do them - are revealing in this respect. Whether they're struck because a financing isn't possible or attractive or they're the business model anyway, those that consummate them at this time are putting the richness of their contact base to work and displaying the depth of their expertise in a particular region or deposit model. They show they can sell or promote something to the toughest, most circumspect buyers in the market - majors that might otherwise just build an in-country/region team and property portfolio themselves if they thought it any easier.
Quick inspection of Akerley, Staude and Schroeter and the companies they head reveals commonalities to help explain why majors have, in their cases, have chosen to team up. All are geologists. All have operated in their respective region of focus - Mongolia, Mexico, and BC - for over a decade, if not quite a bit more. All have a history of working with majors in the past. All have their own, fairly extensive project portfolio in said countries, including projects that haven't been farmed out.
In this, being able to sell more than properties but also expertise, there is clearly safety during these dog days of financing. If risk investors have crawled into holes to hide, not so majors who need new discoveries. Some of the juniors that opt - and succeed - in doing strategic alliances (and not all need or want to, it's worth emphasizing) are showing they can do exploration during some of the harshest financing conditions in recent decades. They stave off a fate many will not. Schroeter declared simply, “Otherwise you'll run of money and go belly up.”
Guts of three recent strategic alliances
Riverside Resources (operator): Hochschild to spend C$750,000 a year, or C$2.25 million over three years on new Sonora, Mexico, projects. Hochschild gets 65 percent interest after C$5 million work program per property. On earn-in, C$3 million lump sum payment, then joint venture. To note, the strategic alliance does not include any existing projects, so this is very much new ground being broken at Hochschild's expense.
Fjordland (operator): Sumac to get 51 percent of Dillard property in BC after $3.5 million over three years on exploration. It will also consider new projects within a 20 km radius, on ground mostly staked by others. Fjordland lead on potential expansion of Dillard to nearby targets. Dillard includes past drilling from 1990s, with as much as 187 metres @ 0.24 percent copper. Schroeter noted Sumac has been active in BC since late 1950s, but has not done a lot of deals with juniors. Best known for work on Kutcho project (now Capstone's) and also the Bethlehem copper mine.
Erdene (operator): $1 million private placement, most to be spent on its Khuvyn Khar copper project in Mongolia. Teck gets can earn 75% interest on project, and Trans Altai area project, if it spends up to C$10 million on its Khuvyn Khar copper project and C$5 million on other projects. Up to C$3 million in financing being considered, or up to 19.9 percent of the company, but this is subject to Teck getting clarity on Mongolian government's position on exploration and mining sector. Akerley noted it was election year and expected rhetoric over royalties etc. to die down after the election this summer. Further, he suggested staking system, closed since to 2008, may open up again. The strategic alliance, in this regard, may reflect Teck's desire to get in on the ground with a knowledgeable team.
Management
Schroeter - well acquainted with porphyry targets in BC as BC government district geologist early in career and in recent years as the head of Fjordland. Back in the 2007 Fjordland discovered and subsequently spun out its Woodjam copper project, in the Quesnel Trough, into Consolidated Woodjam Copper, part of which is now under a joint venture with Gold Fields, which can earn up to 70 percent of the core project. Over the years there have been some telling intercepts from Woodjam with as much as 359 metres @ 0.69 percent copper and 0.27 g/t gold.
Akerley - longtime president and CEO of Erdene, which is best known for its Mongolian projects and what was until recently its 25-percent stake in the Donkin coal project (75-percent Xstrata) in NS, Canada. Erdene accomplishments include a resource at Zuun Mod moly-copper deposit, as well as advancing its Khuvyn Khar copper porphyry project with early stage drilling. Most recently it discovered interesting - some very high - grades of gold at its Altan Nar project, an epithermal system. Erdene also spun out Donkin into Morien Resources, which is looking at options to consolidate ownership of Donkin. Erdene has been in Mongolia since early 2000s.
Staude - head of Riverside Resources for about a decade now. Focus has been in Mexico, where since the mid-2000s Riverside has driven a variety of projects on its own and under joint venture, both early and more advanced stage deposits. It has worked, and continues to work, with several majors such as Cliffs and Antofagasta to generate new projects. Hochschild is the latest miner to engage it.
Other, proven, partnership-loving juniors: Mirasol Resources (mostly south America), Altius Minerals (mostly Newfoundland & Labrador), Calibre Mining (mostly Central America), Lara Resources (mostly South America). Not on this far from comprehensive list but think you should be? Contact reporter kip[at]mineweb.com.
http://www.mineweb.com/mineweb/content/en/mineweb-junior-mining?oid=186423&sn=Detail
investor15
11 years ago
Fatal Flaws and Opportunities in Gold Investing: Brent Cook
Source: Brian Sylvester of The Gold Report (3/28/12)
Brent Cook, editor of Exploration Insights, describes the past 15 years of change in gold, copper and iron. In this exclusive interview with The Gold Report, he shares what he sees as the fatal flaws and opportunities in this complex industry, details the most important factors he looks for before investing, and names companies he believes have the right stuff.
The Gold Report: In the late 1990s, when the gold price was falling steadily lower, you vetted companies for Rick Rule's company, Global Resource Investments. Could you give us a comparison of what this space was like then versus what it's like now?
Brent Cook: During 1997–2002, we were probably in the most unloved sector in the whole investment world. Gold had collapsed to less than $250/ounce (oz), copper was under $0.85/pound (lb) and anything that didn't have a dot-com to its name didn't get much respect. The idea of blowing up rocks to make metal out of them was an archaic concept clung to by the remnants of the industrial revolution; it was a brave new world. By contrast, today gold is over $1,600/oz, copper is $3.80/lb and iron ore has gone from $12/ton (t), to $140/t; we're in the 10th year of a commodities boom. Back then, it was very difficult for mining companies to raise money.
Working with Rick, I was fortunate. He'd put together two funds of about $14 million (M), so we had some money. We were pretty much alone in the sector, hence we were able to put some money into really good projects and people. So in retrospect, that was one of the best times of all to be investing, but at the time, it felt horrible in that we'd invest in these companies that we thought were a good value and see the share price continue to fall for a year or so. We were able to buy a company like Virginia Gold Mines Inc. [now Virginia Mines Inc. (VGQ:TSX)] for nearly cash in the bank yet watch it fall to a 20% discount to that cash, and this was a company run by one of the top guys in the industry, Andre Gaumond. Today, however, you have a lot of money chasing everything in this sector, and it's subsequently tougher to get real bargains on projects or people. It's important to recognize that because this is such a risky investment sector that to make money at it consistently, you need to buy companies when they are cheap based on legitimate valuation metrics.
TGR: Is it more difficult for a retail investor to make money today in small-cap mining equities or was it more difficult then?
BC: Both time frames have their challenges. It's always been about finding quality, high-margin mining projects at any stage and buying those at less than what they're worth. A high-margin deposit is one whose cost of production is in the bottom third of the total production costs curve for that metal. Say the average cash cost to produce one ounce of gold is $700—ideally you want to own properties that can produce substantially below that cost.
There have been periods in this sector where all the turkeys flew and everybody made money, but we're back to a period where it's going to be tougher for retail investors to make money if they're not very selective and knowledgeable about what they're buying. The big difference between the late 1990s to early 2000s and now is there's so much more information immediately available to anyone interested, therefore, investors have to research and understand the details of a mineral project before they buy. They need to know why they're buying it, what they expect, what it could be worth and what the fatal flaws might be. This level of due diligence is critical because we know that most mineral projects are eventually going to fail. That's a fact of nature and the Earth's evolution. So, in a way, it's a bit tougher now, because you need to be so much more educated on what it is you're actually buying. Following the stuff that comes in the mailbox doesn't work anymore.
TGR: What are the most typical fatal, or tragic, flaws that are going to lower a share price?
BC: More often than not, it's the realization that after the first few good drill holes into a project you start putting it together and the geology or the continuity doesn't hang together. Bear in mind that it costs money to mine waste and a mine is a terrible thing to waste.
Another typical flaw is metallurgy or metal recovery. You want to find out as much as you can about the metallurgy as soon as you can because that factors heavily into what your production costs are going to be. For instance, is the ore oxidize, sulfide, carbonaceous, refractory etc.? If you're dealing with Carlin-style sulfide gold mineralization, you immediately know that somehow the sulfide has to be broken down to allow recovery of the gold. That's going to take a roaster or an autoclave of some sort, which is extremely expensive to build and consumes considerable energy. If the project is in the Yukon, an investor has to think about the cost of building an autoclave or roaster. That means the grade has to be quite high to cover the capital expenditures (capex) and power costs. However, in Nevada there is excess capacity for refractory ores, you don't have to factor in the cost of an autoclave.
TGR: You were recently at the annual Prospectors & Developers Association of Canada mining conference in Toronto. More than 600 companies had booths at that event. What are some trends you noticed?
BC: Companies are starting to recognize that it's not so much about size as quality of mineral deposits. Grade, or more succinctly margin, is getting more and more important. There are a lot of very large, low-grade deposits out there, and the majors aren't buying these. That's a real issue and you have to question why. If the majors don't buy them, these junior companies with these large, low-grade, low-margin deposits are then doomed to build. I think it's going to be tough to raise the money, or at least the debt portion, to do that. So I think one trend is toward smaller, higher grade, higher margin deposits.
There are still people out there trying to raise money on new deals, new projects as they move from one busted company to the next one. Unfortunately, for companies with average properties, the music has stopped and they are facing terrible share dilution to fund the exploration on their average projects. As I said earlier, average ain't going to cut it this year.
There is also a severe shortage of technically qualified people—resource estimators, mining engineers, geologists—to do the work. Company presidents and VPs of exploration are in strong demand. Because there is more work than qualified people, I'm seeing a lot of sloppy preliminary economic analysis (PEAs) and resource reports. That's a serious and financially dangerous trend. You can no longer blindly rely on a company's scoping study or its PEA. You need to look at the details. I could tell you some pretty scary stories in this regard.
TGR: What are some of the sloppy things that you're noticing?
BC: In resource estimates, there is a tendency toward plugging it all into a computer and generating a model without going through the time and detail it takes to fit the model to the geology and structural controls. So grade is being put out into an area of the deposit where there isn't actually that grade. If these mines eventually go into production or they get down to the very detailed work, these resource estimates are going to be cut back significantly because the model is not honoring the geology or the geostatistics. That's a serious issue I'm seeing. To quote a friend of mine who does resource estimates, these are "faith-based estimates."
TGR: Do you think that sort of shoddy work is responsible for some of these one-mine or two-mine operations not performing as well as expected?
BC: Definitely, although we have to bear in mind that they are called estimates for a reason. It's rare these days that a company goes into production and its production costs are what they were supposed to be according to their PEA and the literature they used to raise money. Nevsun Resources Ltd. (NSU:TSX; NSU:NYSE.A) at its Bisha mine in Eritrea had to cut its gold reserves by about one-third because of a mistake in the resource estimate that related to how poor core recovery was handled in the estimate. Remember, in a resource estimate we are extrapolating a small amount of data, basically a 3-inch tube of core, across hundreds of feet of complex rock and assuming that we can know the grade of that rock. There’s bound to be some uncertainty.
TGR: While you were in Toronto, you made an appearance on BNN where you discussed the lack of big discoveries over the last 17 years. One chart that you used showed that in 1992, the mining industry discovered roughly 100 million ounces (Moz) gold in both copper-gold and primary gold deposits but by 2009 that amount had dropped to about 23 Moz in both types of deposits despite the fact that the industry was spending almost $5 billion (B) annually on exploration. Tell us about that.
BC: That data was put out by Barrick Gold Corp. (ABX:TSX; ABX:NYSE), so it's pretty good data that pertains to economic deposits. It shows that over time we are discovering fewer large deposits. Basically, we are mining about 83 Moz gold annually yet only finding in the order of 20–30 Moz a year. So there's a serious gap between production and discovery that we're not filling.
It's getting harder and harder to find quality deposits—and we're talking economic deposits here, not resources that will never make it. Explorationists have pretty well explored most of the Earth's surface and then some. Therefore, it's also getting more expensive because we're going into blind areas and drilling deeper into more complex geologic settings. That is why it's getting tougher to find these big deposits. Then add to the increased geological difficulty the fact that social, political and environmental realities are pushing way out the time to permit and build a mine and it becomes pretty easy to understand the decreased discovery rate. I don't see that changing.
The net result of this discovery gap is that when a company, let's hope it's a junior company, finds a legitimate, high-margin economic deposit, it is going to be worth a lot more money than you would normally expect. The dearth of new discoveries means that those of us who invested early in a company that proves up an economic deposit stand to make some serious change. So now I'm focusing, as best I can, on high-margin deposits, or at least mineral systems that show the potential to produce those deposits and mostly avoiding geologic setting that don't offer that shot at a home run.
TGR: Another reason for the lack of discoveries is the high cost of mining, which has gone up dramatically over the last four or five years, given fuel costs and labor costs.
BC: Yes. In 2004, the capex to build Cerro Casale was $1.4B. In 2011, it's $6B. That's a huge increase in capital costs that throws a lot of uncertainty onto any big capex project a company is considering. That's happening across the board. Your average cash cost to produce one ounce of gold 10 years ago was on the order of $340/oz. Today, cash costs alone are closer to $740/oz and your all-in costs, according to a Randgold Resources Ltd. presentation (GOLD:NASDAQ), are closer to $1,200/oz. Cash costs are just what it costs to produce at the mine. They don't include exploration, depreciation, amortization, royalties, G&A etc.; so it's gotten a lot more expensive to produce all metals.
TGR: How would you respond to someone who says it's easier said than done to find early-stage companies with drill results that hint at the potential for high-margin, multimillion-ounce deposits that majors want to buy?
BC: I agree 100%. It is hard to find projects in an early stage that offer the potential of coming up with a major deposit that shows the profit margins and the size that a major company needs to buy. That's just a function of geology. As the Earth evolves it changes and those changes are recorded as anomalies in the earth's surface. A volcano forms, erupts a few times, cools down and is covered by the next volcano, over and over again. This process is responsible for millions of geochemical and geophysical anomalies that provide the stories the Vancouver resource market is founded upon. However, very few of these anomalies combine the right geological, geochemical and hydrological characteristics to produce a concentration of metal that has the tons, grade and metallurgy located near surface in a favorable jurisdiction to form an economic deposit.
TGR: If there aren't enough early-stage, potentially high-margin deposits, won't companies take the large, low-grade deposits just because that's what's available, and they'd bank on rising metal prices to make those deposits worthwhile?
BC: That's a valid point and investment strategy. It's a different investment thesis than I go with, but certainly there are a lot of these large, low-grade deposits that are marginally economic at $1,500/oz gold. If your gold price assumption is $3,000/oz, then these are the things to buy. In my personal portfolio, I don't need 100 companies—I need 10 that have something that I think is of a high enough margin to be economic today.
Lydian International Ltd. (LYD:TSX) is a company that I've owned since I first visited the property. At that time, it was $0.76/share. It's now about $2.45/share. Lydian owns a nice, simple, high-margin deposit in Armenia. Once the world starts to recognize that Armenia is a good place to do business, then this gets bought by a midtier company. It has about 3 Moz. I reckon its cash costs are about $500/oz. The capex isn't too bad. So that's a deposit that I see out there that offers the margin that a company needs to make money on, and it's selling at a discount today.
Atna Resources Ltd. (ATN:TSX) looks like an interesting company, as well. Its Pinson mine is a good grade deposit, and it should be able to produce at a decent price. So you have a decent, high-margin deposit there. Its capital costs are virtually nil because the infrastructure is there and there are a number of options to ship the ore to, so its capex is minor.
Altius Minerals Corporation (ALS:TSX.V) is a great prospect-generating company that's been incredibly successful. It owns about 32% of Alderon Iron Ore Corp. (ADV:TSX; AXX:NYSE.A; ALDFF:OTCQX); at a cost basis of about $2M, it's now worth about $100M. Alderon owns an iron deposit in Newfoundland that is a good high-margin deposit. Again, the infrastructure costs are low because it is right in an iron-mining district. I think Alderon has a deposit that somebody else will either buy one day or work out a favorable offtake agreement. So you can buy Altius at a slight discount to its cash, royalties and equity holdings and get a management team that has grown a $20M micro-cap company to about $340M with virtually no share dilution. You're paying nothing for the upside in Altius, which sort of reminds me of the good old days in the late '90s.
One way to better your odds at finding a true deposit is to invest in the prospect-generator companies. These are tiny exploration companies that recognize the long odds at success and structure their business models accordingly. They're very good at generating ideas for mineral deposits, but at the point it's time to start spending big dollars on drilling, they bring in somebody else to spend the money. So your financial risk is cut down quite a bit, and the high-risk, high-dollar part of it is covered by somebody else. These companies go on and generate new ideas and new targets and bring in new partners, thereby providing shareholders with many more shots at a discovery for your buck. One of the companies doing that quite well now is called Riverside Resources Inc. (RRI:TSX).
TGR: It has an agreement with Chile's Antofagasta Plc (ANTO:LSE) in British Columbia and one with a steelmaker, Cliffs Natural Resources Inc. (CLF:NYSE) in Mexico.
BC: Exactly. And it has other projects being worked by smaller partners. It has on the order of $10M in the bank plus about $2–3M in equities. Again, $12M has been spent on its properties this year, and its market cap is on the order of $30M.
TGR: In those companies, you need above-average management teams because you have to foster all these different relationships and manage all these different relationships.
BC: Exactly. Eurasian Minerals Inc. (EMX:TSX.V) is another company that has done an exceptional job with that. It has on the order of $35M in the bank. It just bought a royalty that's going to bring it $7M/year, and it has projects in Turkey, Scandinavia, western U.S., Haiti and Australia that are being worked by major companies, including Freeport-McMoRan Copper & Gold Inc. (FCX:NYSE), Newmont Mining Corp. (NEM:NYSE) and Centamin Plc (CEE:TSX; CEY:LSE)—companies that are looking for major deposits.
TGR: Having a paying royalty often is key, too. When you were on BNN, you talked about Virginia Mines Inc.; its royalty on the Eleanore mine is being developed by Goldcorp Inc. (G:TSX; GG:NYSE). Does Riverside have a royalty that could start paying in the near future?
BC: Riverside does have a callback to a royalty on its projects but, at present, none of them is producing any money. The company does, however, make money in many of the deals it structures by way of shares and management contracts. This income covers a fair portion of its general and administrative expenses. So it makes money back on these deals by working the project. Really smart.
TGR: What about Gold Standard Ventures Corp. (GV:TSX.V; GDVXF:OTCQX)?
BC: We're going back to high-margin deposits, or at least high-margin potential. Gold Standard's property is on the Carlin Trend and is a major, very large, Carlin-style gold system. The key to making a big deposit is having a big system—a simple concept that is all too often ignored. Gold Standard's most recent drill hole intercepted potentially economic mineralization over 43 meters. If it's successful, this is a deposit that is big enough and high margin enough to attract the attention of Newmont Mining or Barrick or anyone, for that matter.
This is the important part about why I bought Gold Standard. It's not because of the next few drill holes. It's because we recognize we're into a system that's large enough to produce a mineral deposit, and we know now that this geologic system can produce the grades we need to see. So, it's still going to be a hit-and-miss exercise until the geologists can do the science well enough to find the exact core of the deposit, if it's there. The next results might be fantastic; they might be just encouraging. But we know we're into a big system. You stick with big systems.
TGR: Do you have any parting thoughts for us, in terms of what retail investors should be on the lookout for throughout the rest of this year?
BC: It's going to be, in general, a tough market to make money in if you're just throwing darts. You really have to have a handle on what a company's looking for in terms of deposit type and what that deposit is worth in terms of a net present value on the deposit, if it is successful. Too many companies are out there exploring projects that even if they're successful, the real values aren't worth the risk it took looking for it. So stick with intelligent management looking for high-margin or large deposits. The junior mining and exploration business is such a technical and complex science and industry populated by paid touts, scam artists and people of dubious character, that it is well worth the effort to get good, honest advice. And be very selective in what you buy.
TGR: That sounds like great advice. Thank you.
Read Rick Rule's strategy for taking advantage of volatile precious metals markets here.
Brent Cook brings more than 30 years of experience to his role as a geologist, consultant and investment adviser. His knowledge spans all areas of the mining business, from the conceptual stage through detailed technical and financial modeling related to mine development and production. Cook's weekly Exploration Insights newsletter focuses on early discovery, high-reward opportunities, primarily among junior mining and exploration companies.
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DISCLOSURE:
1) Brian Sylvester of The Gold Report conducted this interview. He personally and/or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Gold Report: Lydian International Ltd., Alderon Iron Ore Corp., Riverside Resources Inc., Goldcorp Inc., Gold Standard Ventures Corp. Streetwise Reports does not accept stock in exchange for services.
3) Brent Cook: I personally and/or my family own shares of the following companies mentioned in this interview: Lydian International Ltd., Riverside Resources Inc., Virginia Mines Inc., Gold Standard Venture Corp., Atna Resources Ltd., Eurasian Minerals Inc., Altius Minerals Corp. Alderon Iron Ore Corp. I personally and/or my family am paid by the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this story.
http://www.theaureport.com/pub/na/12931
investor15
11 years ago
Equities Will Catch Up to Higher Gold Price: Matt Badiali
Source: Brian Sylvester of The Gold Report (4/25/12)
Ongoing inflation pressures and China's investments in the African gold supply chain point to a higher gold price, according to Matt Badiali of Stansberry & Associates. Bullion in all its forms belongs in every portfolio and when it comes to equities, investors have their choice of business models—dividend payers, prospect generators and royalty companies. In this exclusive Gold Report interview, Badiali outlines companies whose equities should catch up to the higher gold price.
The Gold Report: Matt, in the February 2012 edition of Stansberry's Investment Advisory, Porter Stansberry predicted gold would hit $9,600 an ounce (oz) someday. How should investors protect themselves from this coming crisis?
Matt Badiali: In general, I agree with Porter's thesis. Bullion—gold, silver coins or bars—should be part of everyone's portfolio. It is one of the best anchors against inflation. Gold and gold stocks also are important holdings because as the value of paper money falls, the value of gold rises.
TGR: Stock prices have not gone up as much as the gold price. Will that trend continue?
MB: We have been in an odd scenario. If gold miners were T-shirt makers and the price of T-shirts went up, the market would buy the company to match the earnings. That has not happened for gold stocks.
Last year, the Market Vectors Gold Miners ETF (GDX:NYSE.A) was down 25% while the price of gold was up 15%. Looking at just the last three years, stocks were up 40% while the gold price rose 90%. So, in the short term, the Gold Miners ETF has underperformed gold.
Gold miners' earnings have climbed dramatically, but their share prices have not followed suit. I believe gold miners will outperform the metal just because they have to rebalance.
TGR: What does the volatility in gold tell us?
MB: Generally speaking, the market wants a stable U.S. dollar. It rallies to dollars for all sorts of reasons. I think that is false faith.
So many new dollars have been printed that the value of all tangible things has to increase in response. For example, we all think $110/barrel oil is crazy expensive. But, relative to gold, oil has been less expensive over the last couple of years. The price of oil is falling in terms of real money, but going up in terms of dollars. That is a good indicator of how much new paper money has been printed.
TGR: What effect would higher interest rates have on junior miners? Can the increase in the gold price offset the greater cost of raising capital?
MB: Raising interest rates immediately strengthen the dollar, and a strong dollar is hard on all real assets. They rein in inflation, and inflation is why the price of real things like gold and oil go up. Therefore, if rates increase, the price of gold will probably fall.
Many companies have already adapted their plans to a higher gold price. Recently, I have seen development plans based on $1,000/oz and $1,200/oz gold. If the dollar were to strengthen and the gold price fall, it would negatively affect the gold mining industry.
TGR: How does the price of oil affect the operating expenses of gold mining companies?
MB: A gold mine is essentially a commodity swap. A company uses fuel, diesel, gasoline, electricity, concrete and steel to build out a mine and recover gold. As long as the commodities you put in cost less than the commodity you take out, the mine is in business.
Over the last 10 years, the commodity cost to build mines has increased. In any business, when your costs rise as quickly as your revenue, your earnings stay pretty much the same.
TGR: On the earnings side, some large precious metals producers are offering dividends. Is that working?
MB: Newmont Mining Corp. (NEM:NYSE) pays a 2.9% dividend, tied to the price of gold. That is a spectacular idea if your operating costs are well enough in hand to support it.
The thesis is that the Federal Reserve will continue to stimulate the economy by adding money to the system, thereby driving up the gold price. If you trust that thesis, buying a dividend-issuing gold company now when they are relatively inexpensive will lock in your yield at a lower price.
Newmont's profit went from $4.7 billion (B) in 2009 to almost $6.5B in 2011. The rising price of gold contributes heavily to its bottom line. Investors who get in now stand to see a 5–7% yield in a couple of years.
TGR: Can that same business model work for smaller companies?
MB: It depends. There are some opportunities out there, but there have also been some spectacular failures. For example, I thought the silver miner Hecla Mining Co. (HL:NYSE) would be a great company over the long term, but it had a problem with its Lucky Friday mine and the company tanked.
TGR: But that was a resource problem, not the business model.
MB: Sure, but the point is the dividend model works for the big miners like Newmont, Barrick Gold Corp. (ABX:TSX; ABX:NYSE) or Goldcorp Inc. (G:TSX; GG:NYSE). Companies that can diversify their revenue stream over many mines on many continents mitigate risk. They can absorb more hits and continue to pay dividends. If a company generates most of its revenue and income from one mine and that mine takes a hit, that company is done.
Our first rule is never take a big loss. I typically use a 30% trailing stop on mining companies, which means that if it falls 30% from the highest point reached during my investment period, I sell.
If a mining company falls 30%, there is a fundamental flaw. Either the market has changed or the company has a problem. We limit ourselves to 30% losses because we can recover that. A loss of 50% or 80% is hard to recover.
TGR: What about dividends for royalty equity companies?
MB: I love them. Royalty companies are my favorite. The really big, safe ones are the best: Silver Wheaton Corp. (SLW:TSX; SLW:NYSE), Franco-Nevada Corp. (FNV:TSX) and Royal Gold Inc. (RGLD:NASDAQ; RGL:TSX). These companies have 50 to 80 royalty streams. If their royalty stream on one mine ends, it is just a dimple in their revenue stream. Most of these royalty companies could survive 10 losses with only a modest hit to their revenue.
The other great thing about these royalty companies is they have none of the carrying costs of mines. Because they take such a small piece of a lot of mines—typically 2–5% of production—they have very diluted political and mine-specific risk.
TGR: Does the dividend model work there?
MB: Typically, they pay a very modest or no dividend because they reinvest their capital.
Right now, mining companies are coming to these royalty companies for cash to develop their mines. In return for $5 million (M) of its cash, the royalty company gets 2% of the gold produced over a mine's 15- or 20-year lifespan. I would rather see the company reinvest because mining is so cyclical and there are so many opportunities now.
TGR: In February, you produced a report, "How to be an Investor in China's Fort Knox." What is its investment thesis?
MB: We have been watching China's investments in Africa for a while now. China is spending billions of dollars in Africa in very specific ways: financing power plants, building railroads and developing other infrastructure plays.
Why? If you want to build a mine, you need electric power. You need to be able to get ore from the mine to a port. China is laying the groundwork for mine development all over Africa.
Look also at what China is buying: one of the world's largest undeveloped uranium deposits, bullion and shares in African gold miners, from major mining companies to partnerships with juniors and exploration projects.
At the Mines and Money Conference in Hong Kong, I asked representatives of major Chinese investment banks and funds if gold is a major target for Chinese investment in Africa. Across the board, they all said yes.
TGR: How can people outside of China get involved in that?
MB: That was my next question. The best approach is to find companies where the Chinese government or government entities have already invested. I think serious investors who want to participate in mining—especially in Australia, Africa and China—need to understand the Chinese philosophy of resource investing.
When a company gets money from a Chinese bank, it gets far more than funds. It gets exposure to the entire Chinese system. The banker will help the company find a market for its goods or find a Chinese engineering firm to provide technical expertise.
Chinese banks protect their investments. Once a Chinese bank is involved in a mining program, the company typically can get more cash without problems.
TGR: You often emphasize the importance of diversity within the mining company and within portfolios. Where do precious metals fit into a good portfolio mix?
MB: There is a spectrum of risk in precious metals. Bullion is fairly low risk; it is limited to the commodity risk.
With major mining companies, your risk of a 50% loss is pretty low. For investors with low tolerance for risk, a senior mining company is the best place to be.
Mid-cap growth gold miners all have risk. For older investors looking toward retirement, I do not recommend putting a large portion of your portfolio at risk. If 5% of your portfolio is higher risk, some percentage of that can be in mining.
Junior miners are just little bundles of risk. They are not safe; 90% of them bomb. When I write about junior mining companies, I advise investing only if you can afford to lose 50%.
TGR: What do you look for to downplay risk?
MB: The first thing I look for is management. Imagine two junior mining companies, both listed on the Canadian TSX Venture Exchange. Company A is run by a lawyer and a serial stock promoter. Company B is run by a mine executive who worked 25 years for one of the majors. To reduce risk, I would choose B.
Company A is most likely what I call a "lifestyle company." Its high-rise offices have a spectacular view; management wines and dines you, all on the company's dime.
Company B, my ideal investment, has offices in a building where the elevator barely works. There are rocks stacked in the lobby and geologic maps on the walls. These guys are working; this company offers opportunity.
TGR: What are some examples of Company B?
MB: ATAC Resources Ltd. (ATC:TSX.V) is a great example. I know the CEO and the principals. I knew the area and spent a lot of time there. In 2008, after the company put out a press release on a discovery, we wrote it up and made 597% on the trade.
Another is Riverside Resources Inc. (RRI:TSX), led by Dr. John-Mark Staude, who has years of experience as an exploration geologist. This company uses the prospect generation business model, which means it uses other people's money to find projects. Cliffs Natural Resources Inc. (CLF:NYSE) funds Riverside's exploration and gets a first look at whether its projects are worth anything. Choice Gold Corp. (CHF:CNSX) is Riverside's partner on the Sugarloaf Peak project, a low-grade gold resource.
Typically, only 1 in 3,000 exploration projects becomes a mine down the road. John-Mark and his crew have generated more than 11 projects, most of them with partners.
TGR: Riverside seems to have lots of technical knowledge, a great database and great partners, including Antofagasta Plc (ANTO:LSE). But its stock is at $0.86. What catalyst could take it higher?
MB: With a prospect generator like Riverside, you have multiple shots on goal. Even though Riverside does not own 100% of Sugarloaf, 30% of a major gold discovery will take an $0.86 stock to the moon.
(Continued)...
http://www.theaureport.com/pub/na/13188
investor15
11 years ago
Lawrence Roulston Spots Gold Juniors with Bright Futures
Source: Peter Byrne of The Gold Report (8/22/12)
The Gold Report: You recently observed that there's $9 trillion of gold stashed away worldwide. Does this mean that short-term gold traders are setting the market price for gold?
Lawrence Roulston: Most of the gold in the world is held for the long term. Only a small portion of total gold holdings is actively traded. Short-term price fluctuations are largely the result of traders reacting to news. A long-term chart of the gold price tells the real story. Gold is trending higher and there are short-term fluctuations, but the long-term direction is obvious.
The important message is that the long-term outlook for gold remains extremely bullish. The gold producers have an ongoing need to replace reserves, and they want to grow their businesses. That's the basis for viewing the exploration and development companies. You're going to beat yourself up trying to figure out what the next short-term move is going to be in the gold price, but if you take this long-term uptrend seriously and look at the companies developing deposits that are likely to be taken over by the larger companies, that's a much better way to play the gold market.
TGR: In February, you told The Gold Report that for gold shares, "the worst is over." Do you still feel that way? Are there signs that a bottom for equities has been reached?
LR: That call was premature. There was a brief rally. It turned around when the gold price dropped. The U.S. dollar replaced gold as a safe haven as people fled from the uncertainty in Europe. At that time, I differentiated between the resource markets overall and the higher-quality junior companies. The message still applies. Better-quality companies with good assets, cash on hand and strong management are building strong bases in their share prices at this time. Some of these companies have come down to the bottom and are trading at cash value. There is not a lot of downside once they're trading at cash value.
We are in the midst of the summer doldrums. People aren't really paying attention to the junior markets. That's going to change in September when people come back from holidays. Investors are going to recognize that companies with good assets are trading for cash value or near that level, and that there is more upside potential than there is downside risk.
"The long-term outlook for gold remains extremely bullish."
The big factor that is really going to drive the markets is takeovers. We're seeing it now. For instance, Avion Gold Corp. (AVR:TSX; AVGCF:OTCQX) just received a takeover offer that was a 70% premium to its 20-day trading price. There are going to be a lot more offers like that, and that's going to make savvy investors pay attention.
TGR: In terms of companies trading at or near their current cash value, are there any firms that you think are a good deal for investors right now?
LR: Keegan Resources Inc. (KGN:TSX; KGN:NYSE.A) has $200 million (M) in the bank, and its market value is not a lot more than that. It has a 5 million ounce (Moz) good quality gold deposit in Ghana. That's an example of how irrational the valuations are in this market now.
TGR: Speaking of rationality, what specific political and economic trends are affecting the price of bullion and the price of gold equities?
LR: Short-term prices are impacted by news headlines, but headlines are not all that accurate. We hear constantly about the slowdown in China. In reality, China is the largest consumer of metal and its economy is growing at better than 7% a year. That's less than the 8–9% growth of recent periods, but it's still a phenomenal pace of growth for the second largest economy in the world.
TGR: What about the so-called euro dilemma?
LR: The situation in Europe is the most significant element impacting investor sentiment. Markets have pretty much discounted a complete collapse of the euro. Personally, I don't think we're going to see a complete collapse of the euro. I think a more practical outlook is that the powers in Europe are moving ever closer toward a wide-open monetary easing in the same way that the Americans used monetary policy to overcome the 2008 global financial crisis. And it worked very effectively in the U.S. The American economy is not booming yet, but it has certainly rebounded from a recession to a period of slow growth.
TGR: What would be the effect of quantitative easing in Europe on gold investors?
LR: Over time, it will be very positive for hard assets in general, and especially for gold, but also positive for the whole range of commodities. Monetary easing depresses the value of currencies. It's inflationary. Hard assets like gold and other metals are going to effectively hold their value in real terms as the value of currencies decline. In the long term, the easing could be very bullish for commodities in general.
TGR: Given that now is a good time to bargain hunt for junior mining stocks, what standards should investors use when evaluating whether a particular junior has a solid chance at making it through the next year or so and emerging as a contender?
LR: The biggest payoff for a junior exploration company comes with a new discovery. We saw that recently with GoldQuest Mining Corp. (GQC:TSX.V). In a period of three months, its stock price went from $0.05/share to $1.50/share. But, unfortunately, discoveries like that are not very common. Investors must balance risk and potential reward by buying companies that have a solid asset combined with a realistic prospect of a takeover. The value of a quality asset increases as the owner expands and upgrades the resource by conducting engineering studies and moving toward production. Companies with solid mining assets and good management teams that are advancing toward production provide the best balance.
"Better-quality companies with good assets, with cash on hand and with strong management are building strong bases in their share prices at this time."
It's hard for companies to raise money. Financings can be dilutive to the point where a company may never recover. But enterprises with cash in hand are in strong positions. And companies with good assets and strong management can still raise money. Pretium Resources Inc. (PVG:TSX; PVG:NYSE), for instance, is presently raising $18M in a flow-through financing that's priced at a 25% premium to market. To be a winner, a project has to have size and it has to have grade. It has to be well located with regard to infrastructure and jurisdiction. Now, having said that, the number of good jurisdictions is shrinking. The most recent downgrade came as Bolivia announced the takeover of a project from South American Silver Corp. (SAC:TSX; SOHAF:OTCBB). It's getting harder and harder to find good-quality assets in favorable jurisdcitions.
TGR: Is that good or bad for the junior investor?
LR: Long term, it's good. The value of the good-quality assets will appreciate. In decades gone by, there was a surplus of good-quality metal deposits available for development. When metal prices rose, a lot of new deposits came onstream and knocked back the metal prices. We saw that cycle repeated several times over the last few decades. But the situation has dramatically changed; there is no longer a surplus of good-quality assets. Finding large, high-grade deposits is getting harder. That means that when a company makes a discovery, the discovery is more likely to yield a high value for shareholders.
TGR: Looking at the relative share prices of junior companies over a two-year window, we see some that are still holding value, despite some downturn in share price. For example, Newstrike Capital Inc. (NES:TSX.V) was $0.40/share in August 2010 and now it's $1.80/share despite having risen as high as $3.40/share in the interim. There are other firms with similar stories. Do you consider this type of comparison to be an indicator of company strength for the long term?
LR: Yes, those price ranges are good indicators of value in this market. There are several ways to explain undervaluation of high quality firms. Some individual investors are terrified and are selling across the board; they want out of all equities. Another huge component in the selling is investment funds, hedge funds and other institutional-type investors who came into the resource sector not really knowing what they were doing. Now they are looking to get whatever they can get for their positions. Consequently, sophisticated investors are picking up great bargains. That companies like Newstrike are still holding value indicates that they have tangible assets and solid management.
TGR: Are there other companies that you are looking at that are holding value comparable to Newstrike?
LR: GoldQuest is up from $0.05/share to $1.80/share in a period of months after a discovery. Where it will go from here, who knows? It will depend on the next drill results.
Pretium is up 2.5 times over the last couple of years.
Extorre Gold Mines Ltd. (XG:TSX; XG:NYSE.A; E1R:FSE) has doubled from two years ago; Sandstorm Gold Ltd. (SSL:TSX.V) has tripled.
These are all companies that have good management and solid assets, which are getting recognition from, in the case of Extorre, another mining company, and for the others, from investors who understand the sector.
TGR: Are some of these juniors with relatively low stock prices benefiting from joint ventures with seniors?
LR: Absolutely. I've always been a fan of the joint venture approach to exploration. It's a very high-risk business, and it's better to use other people's money for the early-stage exploration. For example, Millrock Resources Inc. (MRO:TSX.V) has held up better than some other companies because it benefits from senior companies that are funding the work on its projects. Another example of that synergy is Riverside Resources Inc. (RRI:TSX), which has held up well in a really tough market.
TGR: Can you be a little more specific about Riverside and what's going on there?
LR: Riverside is a prospect generator-type company that has initiated many exploration projects. A number of juniors and seniors are funding work on its projects. It's focused on North America, so it's in good political jurisdictions. It has two deals where it has entered into strategic alliances to conduct regional exploration programs, one in Mexico and another in British Columbia. That kind of business model is very effective, especially for a company like Riverside that is able to attract the big companies that can afford aggressive exploration programs.
(Cont...)
http://www.theaureport.com/pub/na/14178
investor15
11 years ago
Riverside Resources and Partner Sierra Madre Report High-Grade Silver in Trench and Drill Results from Jesus Maria Vein, Penoles District, Durango, Mexico
VANCOUVER, BRITISH COLUMBIA--(Marketwired - June 10, 2013) - Riverside Resources Inc. ("Riverside" or the "Company") (TSX VENTURE:RRI)(RVSDF)(R99.F) and its partner, Sierra Madre Developments Inc. ("Sierra Madre"), are pleased to provide new trench and drill results from the Jesus Maria Mine area at the Peñoles Project in Durango, Mexico. Highlighted results included Trench 11, which returned 15.4 metres (m) averaging 420.8 g/t silver (including a 2 m interval that assayed 2,152.2 g/t silver), and diamond drill hole JM DDH 13-06, which returned 11.85 m averaging 320.3 g/t silver including a 0.9 m interval that assayed 3,409.1 g/t silver. Diamond drill hole JM DDH 13-07 intersected a 2.1 m interval that returned 279.5 g/t silver and a 4.0 m interval that returned 532.9 g/t silver. The highlighted results are from a series of four new trenches and eight shallow drill holes that were completed during the most recent campaign to test the new exploration area east of the old workings along the Jesus Maria vein system.
Trenching on the Jesus Maria zone discovered that there is a much wider zone of mineralization than previously recognized, and revealed that there are two vein types. The first vein type is the previously known main silver-gold-zinc-lead, silica-rich Jesus Maria vein. The second, newly recognized, vein type lies structurally above the Jesus Maria vein exhibiting significant silver values with abundant carbonate in a wide vein zone. This increases the potential for a bulk mineable open pit mine, and provided new drill targets. Drilling intercepted this wider semi-parallel sequence of upper silver-carbonate veining as well as the main quartz-rich Ag-Zu-Pb-Zn Jesus Maria vein zone. Underground exploration and sampling of the old workings also found silver bearing carbonate veins, which prior to this recent work was not known to Riverside and demonstrates larger potential for the Jesus Maria vein system than previously recognized.
Riverside's President and CEO, John-Mark Staude stated, "Riverside is very pleased with the discovery of a wider vein system at Jesus Maria and looks forward to much more extensive drilling down dip and along the additional kilometer strike length. Every drill hole thus far has successfully hit silver-gold mineralization. With several other exposed vein targets with old workings, but no modern drill definition, we feel positive about the exploration potential of the system. The next round of drilling could include further holes at Jesus Maria, as well as drilling the semi-parallel vein system at San Rafael. In addition to all of the vein targets, Riverside and its partner have drilled at roughly 100-m spacing to prove up a consistent gold body at the still open gold zone at El Capitan. Overall the Peñoles District continues to be a high-quality exploration project progressing with multiple gold and silver bodies and is one of Riverside's core assets."
2013 Trench Program Details:
The Jesus Maria mineralized zone is not well exposed on surface and the historic underground mine workings have only recently been made accessible. The objectives of the trenching program were to assess the grade and continuity of mineralization around the old Jesus Maria shaft, as exploration work aims to expand on the known near-surface, high-grade mineralized zone. Previous trench results by Riverside announced May 5, 2011 from Jesus Maria included 8.3 metres averaging 1.68 g/t gold, 144 g/t silver, 2.4% lead, and 2.2% zinc and a second trench with 22 metres averaging 1.08 g/t gold, 224 g/t silver, 2.5% lead, and 1.7% zinc. Results of six additional trenches announced by Sierra Madre on November 16, 2011 identified high-grade mineralized intervals up to 13.4 metres in width (Trench 4) averaging 1.7 g/t gold, 309 g/t silver, 2.4% lead, and 0.6% zinc; this included a 6.9-meter interval that averaged 3.1 g/t gold, 552 g/t silver, 4.6% lead, and 0.6% zinc. These trench results indicate that surface exposures are much wider than the historic underground workings, as the historic work focused on only the highest grades in the main Jesus Maria silica vein.
The new trenching program undertaken in March and April 2013, consisted of four trenches, which have extended the Jesus Maria mineralized zone approximately 100 metres to the east of the previously reported Trench SMG No.1. The easternmost trench, SMG No.11, returned 15.4 metres averaging 0.15 g/t gold, 420.8 g/t silver, 0.42% lead, and 0.29% zinc, and included a 2.2-meter interval that returned 2,152.2 g/t silver. Significant trench results from the recently completed program are listed in the table below. The results indicate that there is much more potential for further exploration along the Jesus Maria vein system, which remains open to the west and at depth.
Table 1: Trench Results
Trench Length (m) Au (g/t) Ag (g/t) Pb (%) Zn (%)
8 15.8 0.16 129.8 0.07 0.18
9 8 0.31 294.6 0.19 0.29
10 6 0.13 152.9 0.24 0.29
2 0.49 288.6 0.08 0.07
11 15.4 0.15 420.8 0.42 0.29
2013 Drill Program Details:
The objective of the recent drill program was to systematically test the down-dip extent of the Jesus Maria mineralized zone below the trench results immediately around the historic mine workings. A total of eight drill holes were completed at inclinations between -45 and -90 degrees at approximately 50-meter intervals over a strike length of 330 metres. The drill holes encountered multiple mineralized zones, including the previously unrecognized high-grade silver-carbonate vein zone identified by the trenching program.
Highlights of the program included JM DDH 13-03, which encountered 7.85 metres averaging 0.04 g/t gold, 184.87 g/t silver, 0.9% lead, and 1.7% zinc; JM DDH 13-06, which intersected 11.85 metres averaging 0.17 g/t gold, 320.27 g/t silver, 1.2% lead, and 2.1% zinc; JM DDH 13-07, which intersected 4.0 metres averaging 0.16 g/t gold, 532.9 g/t silver, 0.25% lead, and 0.36% zinc; and JM DDH 13-09, which intersected a near-surface, 2.2-meter-wide interval averaging 0.44 g/t gold, 516.1 g/t silver, 0.12% lead, and 0.09% zinc within one of four mineralized zones ranging from 5.90 to 19.52 metres in thickness that returned silver grades ranging from 65.5 to 144.0 g/t. Significant drill results are listed in the table below.
Table 2: Drill Results
Drill hole
Inclination
From / To (m) Interval
(m) Au
(g/t) Ag
(g/t) Pb
(%) Zn
(%)
JM_DDH_13_02 -45 79.00-91.25 12.25 0.16 70.1 0.25 0.41
JM_DDH_13_03 -89 152.95-172.40 13.9 0.04 121.2 0.59 1.09
Including 164.55-172.40 7.85 0.04 184.9 0.95 1.73
Including 168.40-170.15 1.75 0.01 364.8 1.87 4.16
JM_DDH_13_04 -45 29.65-30.60 0.95 0.73 260.5 0.14 0.13
49.20-51.10 1.90 0.20 120.9 0.04 0.08
71.90-79.00 7.10 0.11 47.6 0.38 0.62
JM_DDH_13_05 -45 26.70-30.95 4.25 0.14 131.9 0.14 0.20
62.60-68.30 5.70 0.37 75.1 0.98 1.10
JM_DDH_13_06 -65 20.35-30.80 10.45 0.14 85.3 0.05 0.21
68.45-80.30 11.85 0.17 320.3 1.30 2.26
Including 79.40-80.30 0.90 0.36 3409.1 3.42 7.12
JM_DDH_13_07 -89 100.70-102.80 2.10 0.21 279.5 4.09 7.57
114.70-118.70 4.00 0.16 533.0 0.25 0.36
JM_DDH_13_08 -90 22.30-28.30 6.00 0.39 74.4 0.06 0.10
42.30-43.40 1.10 0.05 138.7 0.02 0.05
62.45-68.65 6.20 0.06 50.8 0.07 0.10
70.20-79.70 9.50 0.79 40.5 0.70 1.35
JM_DDH_13_09 -90 10.25-19.60 9.35 0.16 144.0 0.07 0.14
Including 10.25-12.45 2.20 0.44 516.1 0.07 0.09
True widths of the mineralized zones have not yet been determined. Reported core lengths of mineralization represent approximately 70 to 95% of the true widths depending on the inclination of each hole. A map showing the location of each of the 2013 trenches and drill holes will be available on the company's website, www.rivres.com.
About the Peñoles Project:
The Peñoles Project is a significant historic silver mining district in the Durango Silver Belt that has had relatively little modern exploration. Published historical accounts indicate that Compania Minera Industrias Peñoles operated several vein-type, underground silver mines at Peñoles from 1887 to 1908, however production records are limited and potential extensions of the mines have never been properly tested. The only other landholder in the Peñoles District is Minera La Parrena, a wholly owned subsidiary of the original mining company, Minera Industrias Peñoles.
The Riverside controlled Peñoles Project covers over 360 km² thus giving extensive upside area for exploration. The project includes the two largest historic mines (Jesus Maria and San Rafael), a partially defined, bulk tonnage oxide gold prospect (referred to as El Capitan, or "Capitan"), and numerous exploration targets.
Riverside's Peñoles Project is currently under option to Sierra Madre Developments Inc. Sierra Madre can earn an initial 51% (and up to 65%) interest in the Project by completing further exploration work expenditures and cash and share payments as outlined in a press release dated March 4, 2013.
Qualified Person and QA/QC:
The scientific and technical data contained in this news release pertaining to the Peñoles Project was reviewed by Riverside's Chief Geologist, David S. Smith, MS, MBA, CPG, a non-independent qualified person to Riverside Resources who is responsible for ensuring that the geologic information provided in this news release is accurate and acts as a "qualified person" under National Instrument 43-101 Standards of Disclosure for Mineral Projects.
According to Sierra Madre, all trench and drill samples were sealed in numbered plastic bags and transported to Inspectorate Assay labs facility in Durango City, a laboratory certified for the provision of assays and geochemical analysis (ISO:9001-2008). All drill cores were placed in numbered boxes and transported to Sierra Madre's secure core facilities by the drill contractor. Following detailed core logging all core was split using a diamond bladed core saw under the direct supervision of Sierra Madre's Geologic staff with half of the core kept on site in the original core boxes. Samples were transported to Inspectorate's facilities in Durango, Mexico for prep work and analyzed at their facilities in Reno, Nevada. All samples were prepared using standard industry prep methods followed by fire assay analysis and aqua regia digest for trace elements. All samples with greater than 10 g/t Au or 100 g/t silver were additionally tested by fire assay with a gravimetric finish. Sierra Madre has included appropriate industry certified standards and blanks within the drill core sample stream, in addition to standards and duplicates as part of the Inspectorate QA/QC program.
About Riverside Resources Inc.:
Riverside is a well-funded prospect generation team of focused, proactive gold discoverers with the breadth of knowledge to dig much deeper. The Company currently has approximately $6,000,000 in the treasury and 37,000,000 shares outstanding. The Company's model of growth through partnerships and exploration looks to use the prospect generation business approach to own resources, while partners share in de-risking projects on route to discovery. Riverside has additional properties available for option with more information available on the Company's website at www.rivres.com.
ON BEHALF OF RIVERSIDE RESOURCES INC.
Dr. John-Mark Staude, President & CEO
Contact:
Riverside Resources Inc.
John-Mark Staude
President & CEO
(778) 327-6675
(778) 327-6671
info@rivres.com
www.rivres.com
Riverside Resources Inc.
Joness Lang
Manager, Corporate Development
(778) 327-6675
(800) RIV-RES1
jlang@rivres.com
www.rivres.com
http://finance.yahoo.com/news/riverside-resources-partner-sierra-madre-121500272.html
investor15
11 years ago
Riverside Resources Signs $2.25m Three Year Strategic Alliance With Hochschild Mining for Gold-Silver Exploration in Western Sonora, Mexico
VANCOUVER, BRITISH COLUMBIA--(Marketwired - April 15, 2013) - Riverside Resources Inc. ("Riverside" or the "Company") (TSX VENTURE:RRI)(RVSDF)(R99.F) is pleased to announce the signing of a three year, C$2.25M strategic exploration alliance (the "Alliance") with Hochschild Mining Holdings Limited ("Hochschild"), for generative exploration throughout the prolific Mega-shear Gold Belt in western Sonora, Mexico. The Alliance will focus on identifying potential new large precious metal deposits using Riverside's extensive technical knowledge and experience in Sonora. Hochschild will fund C$750,000 on an annual basis (C$2.25M over three years) for generative exploration and Riverside will be the operator for all exploration activities of the Alliance, while all decisions relating to the Alliance will be made jointly through a Technical Committee ("TC") comprising two (2) representatives from each of Riverside and Hochschild similar in structure to other exploration alliances that Riverside is currently operating in Canada and Mexico.
Properties that are identified and deemed to be of interest will become Designated Properties whereby Hochschild will have the opportunity to earn a 65% interest by completing a four year, C$5,000,000 work program per property. As per the Agreement, once earn-in on a Designated Property is completed, Hochschild would make a one-time payment to Riverside of C$3,000,000 and the property would then be advanced under a joint venture agreement.
Riverside's President and CEO, John-Mark Staude, stated, "Riverside has tremendous exploration and technical strength in Sonora, and this strategic partnership brings capital and operating experience to further strengthen and accelerate exploration efforts in the region." Staude added, "We are excited to get going with Hochschild and already have a number of high priority targets to pursue immediately. We look forward to building a solid relationship with Hochschild and are confident this partnership will add significant value to both organizations."
Hochschild's CEO, Ignacio Bustamante, commented, "'We are looking forward to working with Riverside and are confident that the significant exploration and technical knowledge and experience their team brings to this strategic alliance will prove beneficial for both Companies."
Key Alliance Terms:
The Alliance will focus on gold deposits but will include deposits that may have elements ancillary and in addition to gold, including but not limited to silver, copper, and molybdenum. Unless otherwise specified, Riverside will be the designated operator for all exploration activities of the Alliance. All property acquisitions will be in the name of Riverside until earn-in is completed.
Projects designated for further advancement will enter the earn-in phase of the Agreement. To complete the earn-in, Hochschild must spend a minimum of $5,000,000 in exploration expenses with respect to the property within four (4) years from the date the property becomes a Designated Project, with a minimum expenditure of $1,000,000 in each of the first year and the second year (collectively the "Milestone"). If Hochschild fails to meet the Milestone, Riverside would have the right but not the obligation to acquire 100% ownership of the Designated Project. At any time after the completion of the Milestone, Hochschild can elect to enter into a formal joint venture agreement with Riverside (incorporated or unincorporated), provided that it makes a one-time cash payment to Riverside of $3,000,000 and has completed the minimum work investment. If Riverside's interest in a Designated Project is reduced to 10% or less, its interest will be converted to a 2% NSR.
For further information on the Hochschild-Riverside Strategic Alliance, please contact our investor relations team at 778-327-6671 or toll-free in North America at 1-877-RIV-RES1. Further details on the Alliance can also be found on the Company website at www.rivres.com.
About Hochschild Mining plc:
Hochschild Mining plc is a leading precious metals company listed on the London Stock Exchange (HOCM.L / HOC LN) with a primary focus on the exploration, mining, processing and sale of silver and gold. Hochschild has almost fifty years' experience in the mining of precious metal epithermal vein deposits and currently operates four underground epithermal vein mines, three located in southern Peru and one in southern Argentina. Hochschild also has numerous long-term projects throughout the Americas.
About Riverside Resources Inc.:
Riverside is a well-funded prospect generation team of focused, proactive gold discoverers with the breadth of knowledge to dig much deeper. The Company currently has approximately $6,500,000 in the treasury and 37,000,000 shares outstanding. The Company's model of growth through partnerships and exploration looks to use the prospect generation business approach to own resources, while partners share in de-risking projects on route to discovery. Additional property information can be found on the Company's website at www.rivres.com.
ON BEHALF OF RIVERSIDE RESOURCES INC.
Dr. John-Mark Staude, President & CEO
Contact:
Riverside Resources Inc.
John-Mark Staude
President & CEO
(778) 327-6675
(778) 327-6671
info@rivres.com
Riverside Resources Inc.
Joness Lang
Manager, Corporate Development
(778) 327-6675
(800) RIV-RES1
jlang@rivres.com
www.rivres.com
http://finance.yahoo.com/news/riverside-resources-signs-2-25m-110000567.html
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