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Energy Investing
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Copper Never Corrected Like Oil or NG, but on a Roll Today...Solgold (SOLG)So BHP appears to be trying something more subtle with SOLG than Rio Tinto has been caught doing with Turquoise Hill, but fundamentally it's all about trying to get 70+% of world class deposits (and much better if it's 100%) as cheaply as possible. Some of you who are interested in copper will recall that while I advocate putting most copper money into strong intermediate producers like Taseko and Capstone (now Capstone-Mantos as of last week), I have moved a small part of my EV-hedging mining portfolio downmarket into positions in a couple of pure exploration juniors operating in politically stable, rightist Ecuador. And the two companies I've targeted are Solgold (SOLG) and Solaris (SLS). Both have world class deposits, with Solaris's Warintza getting more attention from thr market these days. However, SLS's deposit is currently "only" just under 200mt @.7% Cu equiv. (a polymetallic deposit with a fair amount of Au), but it is absolutely guaranteed to get a great deal bigger. And it's on surface with the attendant promise of cheaper open pit development. I think they could easily double Warintza's resource with the recent and current drilling results, at least once they pause and conduct an update. Very appealing and someone will buy them. They have $47m US cash in the kitty and 35m warrants that will bring in another $82m, so no immediate or medium term dilution issues, but 155m shares F.D. They have 4 or 5 other prospects up and down the Andes and Mexico, but aren't pursuing them too ardently at this point. Only downside is that they're already looking at a market capitalization of around $1.8b, so a fair amount of success is already discounted (but no doubt in my mind justified, my next comments are strictly relative). However, after riding SLS to $12.50, I believe I've bumped into something better. And that, of course, is SOLGOLD. They have lots of shares o/s, 2.3b, with a share price of $.40 CDN (so a MC of around $900m). Basically 1/2 that of SLS. And lots more cash ($87m US), so the ability to drill rapidly, which they are advancing, too. But that's where the comparisons diverge. SOLG has a profusion of Ecuadorian deposits that WILL become copper/gold mines. The biggest one is Alpapa in their Cascabel concession. It is truly world class, 2.7bt at .53% Cu Eq. A major mining house attention-gatherer of 19b# Cu and 22m oz. Au. So much so that BHP and Newcrest own 13.58% and 13.46%, respectively. And SOLG already has a gold royalty deal with Franco Nevada, who advanced them over $100m (does anyone now doubt that this will be a mine soon?) However, the amazing thing is that, unlike most minnows, they aren't madly advancing one singular property in fear of the proverbial M&A bogeyman. They have 3, so far. One, TAM, is a 2nd deposit on the Cascabel property, only 3 km. from Alpapa, and certainly will be part of the development of Alpapa. It is already 400mt @ .35 Cu Eq., not yet fully defined. But that's not what this post is about. Yesterday, SOLG news released a 3rd deposit, Porvenir, in southern Ecuador (Alpapa is northern). It looks like the real McCoy for the third time. Here are the highlights fom this release: Ø Drill holes 14 - 22 at Cacharposa have intersected further significant copper and gold mineralisation. Ø Hole 19 returned one of the best intersections to date with 722m @ 0.66% copper equivalent ("CuEq") [1] from surface. Ø Significant intersections include: · PDH-21-019: 722m @ 0.66% CuEq from surface including 118m @ 1.13% CuEq from 12m · PDH-21-018: 124m @ 0.76% CuEq from 478m · PDH-21-016: 140m @ 0.47% CuEq from 408m · PDH-21-014: 132m @ 0.44% CuEq from 756m Ø Recent drilling results continue to delineate a near surface, large, mineralised porphyry system at Cacharposa that remains open. Ø Work is advancing on a maiden Mineral Resource Estimate ("MRE") for the Cacharposa deposit that is expected later this month. Ø Drilling is ongoing at Porvenir with three drill rigs on site testing mineralisation at Cacharposa and surrounding targets. You'll notice several important things. #1, it's on surface. #2, it's very long (722m). And #3, it's considered high grade, .66% Cu Eq. (anything over .45% Cu these days is notable). Anyhow, lots to read about and learn if you're open to this kind of thing. Don't wait too long, BHP is monkeying around trying to gerrymander their BoD (not unlike Rio). They may end up stealing SOLG before all the promise is uncovered, but who knows, we might only make 25-??% in the next few to 18 months. Regards, Naamkat |
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