My original premise was SHARING my investment success with other frustrated retail investors fed up with excess hype from newsletter writers asking too much for their research, and mostly stocks priced higher than my limited capital would allow. My intention was “putting my money where my mouth is” by sharing my buys and sells with you my subscribers. Hopefully some of you have more capital than I do and can BUY higher priced stocks than I can while still staying within a prudent and conservative investment profile of no more than 2-5% of your capital in any one stock. What I am finding is that there are simply more worthy stocks than I have capital to buy, SO, since I am almost finished with my total portfolio review and categorizing of my over 200 stocks into appropriate sector portfolios, I expect to cull laggards in favour of new and grossly under valued stocks I am learning about during this downturn, and portfolio review.
I have 3 such stocks identified for April and haven’t yet decided whether to send out one per remaining week, or send all three so I can concentrate on getting the portfolio work finished and uploaded to the website? It has been an enlightening exercise and I am confident, will make me an even better investor going forward. There are always lessons to be learned and changing circumstances that requires adjustment of strategy. Given the market selloff in 2011 I believe financing will become more difficult for juniors going forward so there are two things I will be more focussed on; 1) companies that are well financed to carry out their objectives and do not have to go back to the market for a year or more, and 2) I will be paying much more attention to the number of shares out and the potential for further dilution.
That being said, this first one may seem as if I am breaking my own statement, but i have taken it into consideration based on the current market sentiment as noted in my presentation.
Dozens of junior explorers have historic resources that need to be brought up to current 43-101 standards. The old saying holds true here; “the best place to look for a mine is near a previously existing one” and indeed many mines around the world were closed decades ago due to low prices that made it difficult to turn a profit and have never been extensively explored with modern methods.
I was inspired to offer up this profile based on an on-line discussion of an opportunity with a company that most would reject as having very high “country risk” just one of many considerations when evaluating a junior mining stock. I published this profile on another website in response, so I want to share it with subscribers to my website even though I may not be in a position to buy it without selling some of my existing holdings. I DO intend to rebalance my portfolio with LESS pure explorers and MORE near term producers.
I believe this stock like dozens since the 20111 selloff is grossly undervalued considering its assets and potential based on historical information. With significant assets, 20,000 Hectares in a prominent Greenstone belt near Lynn Lake Manitoba Canada that hosts 3 former producing mines and 29 historically known and drilled sattelite deposits to the main MacLellan mine, with resource expansion underway. This well financed company with $5M in the till is focussing on 4 targets for 2012 with a 70,000 metre combined drill program, (very high for the average junior) that should produce a combined prefeasibility study by well respected engineering firm, TETRA TECH Wardrop Engineering before the end of the year.
The MacLellan mine itself produced 142,000 oz. gold from 970,000 tons of ore at a grade of 5.6 g/t and after a 45,000 metre drill program in 2011 is estimated to support a 9000 t/d production for 10 years producing up to 170,000 oz. gold equivalent per year. With a silver/gold ratio of 3:X 1 at an average grade of 1.9 g/t gold and 4.4 g/t silver the resource is estimated to be 1.7 M oz. M&I above a 400 metre depth. I note in passing that many current explorers are looking for LARGE open pit projects with LOW grades but huge tonnage, high grade projects are harder to find.
MacLellan is only one of 3 mines with historical production. Another project, (Lost Hope) had a 1992 estimate of 880,000 tons at a grade of 9.4 g/t or 270,000 oz. but since this was prior to 43-101 standards, cannot be relied upon, so an additional 15,000 metres are being drilled by June/July to bring it up to 43-101 standards for a 3rd Qtr. up to date resource estimate. The FARLEY LAKE project will also have a 43-101 compliant resource estimate in the 3rd Qtr. and is scheduled for 25,000 metres of additional drilling starting this month (Apr.) This was also a previously producing mine, (210,000 oz. @ a grade of 4.2 g/t) with significant potential for expansion of historical estimates of 290,000 oz. by drilling at greater depth and along strike. Add all 3 together and you have a viable regional asset of merit.
My one concern is a seemingly high level of shares @ 201.5M F/D, but considering that the market is valuing the known in ground oz. at only $20. per oz. while PEERS I am familiar with have in ground oz’s valued as high as $90. per oz. there is no doubt in my mind that any positive drill results over summer, let alone a positive change in market sentiment will quickly see its stock revalued upward. With good drill results that are highly probable based on historic area production and currently known resources at shallow depths, a market valuation of say even .80 an ounce would mean you could have a 4 X 1 stock split and still have a stock price of under a dollar with a very reasonable 50M shares. That would not be at all out of line with other companies with lesser resources and potential.
CARLISLE GOLDFIELDS CGJ-V / CGJCF/OTCQX has a 52 wk. range of .13 to .355 so at a current .23 has a compelling under valuation with good potential for upward movement as this well financed junior carries out it’s 2012 drill program of 70,000 metres in a greenstone belt with historic production of very high grade resources. I certainly intend to buy some shares well BEFORE drilling results start coming in, but you do your own due diligence, and make up your own mind, I am just sharing my personal research on which I base my buying decisions.
SAVE 35% ON A MARKET OVERREACTION.
Given the current market negativity towards junior miners in particular, but the entire precious metals sector in total, it is not surprising that what is perceived as negative news results in a viable stock dropping .77 on an announcement which most investors will react on in a knee jerk fashion without getting the FACTS before acting. Their loss can be your gain. What I am talking about is ORKO Silver OK-V (long term portfolio holding) announcing that they have regained from their J/V partner, 100% interest in their PRECIOSA Silver project from Pan American Silver who have spent $18M on the project in the past 3 years. The first reaction by investors is that there must be poor results for a major like Pan American to throw in the towel on a project in which they have invested heavily, but for a big company it is all about priorities.
ORKO on the other hand is delighted, and with $12M in cash is quite prepared to continue on with development of the project on their own. They believe based on a previous PEA in 2011 that the project has excellent economics that can be further improved by further drilling and engineering work. They have therefore hired AMEC Americas to complete an updated PEA based on the previous one that showed an NPV of $315M and an AFTER TAX IRR of 24.3% that ORKO believes can be substantially improved with more work. With the cost of finding and developing an economical resource into a profitable mine, and the odds of finding a viable resource in the first place, Pan Americans $18.M expenditure should be considered a “GIFT” and if you act quickly before the market comes to its senses, this can be a gift for you, remember the objective is to buy low, and ORKO being well financed is hardly a high risk play at these currently ridiculously low prices. While the stock has been free trading for me for over a year, at these prices I intend to buy more as quickly as I can generate some free capital. For this reason I am sending this out immediately so you won’t miss out on this opportunity because I am slow in getting the information out. The other 2 bargains will be sent out separately for next weeks premier BUYS. so reserve some capital for more stock profiles of undervalued juniors.