We’ll be updating this and all subsequent Mining News Review posts on a more-or-less daily basis. We will add to this review chronologically with the most recent updates appearing at the bottom. If there appears to be a significant news release that we have not discussed, please feel free to bring it to our attention in the comments section (subscribers only please) and we’ll make an effort to add it to the discussion if warranted.
Silver Wheaton (NYSE/TSX: SLW)
Silver Mining is for Suckers – December 31, 2010
Overall this short little article is fine, but Matt Badiali’s simplistic valuation technique as applied to Silver Wheaton is probably best ignored. Indeed, we find it quite ironic that Matt is trying to convince investors to be smart and own Silver Wheaton rather than a sucker and own the typical exploration and development miner, all the while relying on his audience to be suckers or else they would take such amateurish analysis with a large grain of salt. In our opinion, a much more appropriate and robust method of valuing Silver Wheaton would be through through a discounted cash flow analysis of its silver streams as we have done in our recent Royalty Company report.
Mr. Badiali closes with the following:
Today, silver sells for nearly $30 per ounce, and Silver Wheaton shares are $39. Our fair-value calculation says at the current silver price, Silver Wheaton should be closer to $57. That means we can buy shares well below fair value right now.
Good luck to anyone who’s relying on that advice. In our opinion Silver Wheaton is fully valued. We’d be buying if the price were right, but at present the risk/reward equation does not look favorable through our spectacles. [Zurbo]
International Minerals (TSX: IMZ)
IMZ Signs Definitive Agreement with Hochschild to Fast Track Production at Inmaculada Property, Peru – December 28, 2010
This doesn’t change the fact that IMZ’s valuation is still heavily reliant upon its earlier stage development projects in Ecuador, but we found this part of the joint venture agreement with Hochschild particularly interesting:
If Hochschild fails to achieve the process capacity at Inmaculada by December 2013 (subject to any force majeure delays), then Hochschild must make quarterly prepayments to IMZ during the period of any delay based on the parties’ joint estimate of IMZ’s 40% share of cash flows that would have been generated if production had started on schedule.
International Minerals did have had to give up 30% of the project for clauses like the above, and at current metal prices we estimate that the cost of this joint venture to IMZ was about $150 million. Not cheap, but it significantly lowers the development risk of the project and generally we think it’s a fair deal. [Zurbo]
Disclaimer: We may own shares in several of the companies mentioned in this analysis (Metal Augmentor subscribers know which ones), but no compensation has been received from any of the companies mentioned. This is not investment advice; should you seek investment advice we recommend you discuss the company with a licensed investment advisor or broker.
Just a quick note that I’ve added several entries to the Mining News Review for the Weeks of December 6th, 13th, 20th, and 27th.
Specifically:
For December 6th: Comments on Victoria Gold. See: http://www.metalaugmentor.com/eforum/?p=5426.
For December 13th: Comments on Supatcha Resources, Golden Predator/Silver Predator, Molybdenum Market (incl. General Moly and Moly Mines), New Gold, United Mines, Benton Resources, and Starcore. See: http://www.metalaugmentor.com/eforum/?p=5626.
For December 20th: Comments on Endeavour Silver/Cream Minerals, Amazon Mining, Franco-Nevada/Gold Wheaton Warrant, Tanzanian Royalty, Mines Management, and Baja Mining. See: http://www.metalaugmentor.com/eforum/?p=5752.
For December 27th: Comments on Article by Matt Badiali (focused on Silver Wheaton) and International Minerals. See: http://www.metalaugmentor.com/eforum/?p=5808.
Zurbo, anyway we can get a separate section just for news up top next to > Current Port Focus > , and just add the latest news to the top. I’ve missed quite a few write ups when they are added to previously posts like above. Just a suggestions.
@zurbo
updating to note Benton Resources ‘Benton Resources (TSX-V: BTC; Pink Sheets: BNRJF)
Benton Sells Bermuda Property to Stillwater Mining for $14 Million – December 16, 2010
With this latest transaction we welcome our newest “Cash King”. Benton Resources is now trading slightly below the combined value of its cash and investments. [Zurbo]‘
This is a good one folks. I stumbled onto it a few months ago while dd’ing coro mining; bought; and have added more recently. Check it out.
Re:Golden Predator and NR just out:
http://tinyurl.com/4mxnuls
yunno, I can’t help but think that this guy, Mike George, has had a front row seat to all the co’s with projects in the Yukon and what they’re doing and what they’ve got. I surmise also that this guy has a pretty useful and marketable CV; and, as he chooses to now leave his gov’t job for a private sector job, there would probably have been lots of takers for his services.
I’m choosing to frame his decision to work for GPD.v as another endorsement of this company and its prospects.
Talking my book here, as I have owned gpd.v for a while.
Here’s some talk for my book:
http://finance.yahoo.com/news/Rubicon-Reports-New-High-prnews-144722371.html?x=0&.v=3
New results confirm extension into new target areas south of the 9X target area.
Several drill holes have extended gold mineralization south of the 9X target area, confirming that the F2 Gold System is present over at least a 600 metre (1970 feet) vertical extent in this area down to a depth of 1357 metres (4452 feet) below surface where it has been drill-tested to date. Signficant results include 2.07 oz/ton gold over 11.5 feet (70.9 g/t gold over 3.5 metres) in hole F2-108 and 39.43 oz/ton gold over 3.6 feet (1351.8 g/t gold over 1.1 metres) in hole F2-108-W1.
These latest holes are significant because they demonstrate that the F2 Gold System geology extends south of the original 9X target area over a considerable vertical extent and that the F2 Gold System continues to be open in all directions for further drilling. A previously reported intercept, located approximately 250 metres below surface (hole PR-10-18 returned 102.7 g/t gold over 0.6 metres), also south of the 9X target area, suggests that the vertical extent of the F2 Gold System could be significant in this area.
What do you guys think of this breaking Taseko news concerning their Aley property http://articles.moneycentral.msn.com/news/article.aspx?Feed=PR&Date=20110110&ID=12585678&Symbol=TGB
PC Gold drills 0.70 g/t Au over 137.5 m at Pickle Crow
Thanks fw. I think I need to make the %gain column for my Feb C5 options wider!
But also I think that there are a lot of sellers waiting to get out from pre-Prosperity (hah) prices so I’m taking my cost out now and will probably sell the rest soon if we don’t see more strength today. As for the C7.5s, I can do you a good deal on them!
HNY to oldies and the new names I see, I hope.
Dave, I had a GTC sell in for 5.32(long shares) and just happened to notice the after hours rally last evening and canceled it. Lucky, lucky. Regarding your 7.5 calls, at least there’s a .05 bid :>)….my 10.0 calls look dismal in comparison.
Looks like we might have got our shakeout in silver as weak as it was. Support at a couple of bucks higher than I was hoping for. Daily chart sure looked enthusiastic today. I guess we’ll know for sure within a week or two.
Hi Zurbo, What do you think on TGB after their new niobium discovery? Also prosperity can be given a second chance?
@Pal
Tough call. The company still looks undervalued based on Gibraltar, but that’s with $4+ copper and we aren’t exactly itching for more copper exposure. Tom and I will talk it over and perhaps have more to say in an upcoming portfolio allocation update, but this is a public post so don’t want to get too specific.
Zurbo, I was thinking about buying some East Asia Minerals shares on the continuing selloff after the Jan, 11 drill results. Were the results that disappointing? I’m not sure what a good entry point would be now. Thanks
Some mining news left unreviewed of the last weeks. Since this is a public post I prefer not to mention news about companies in the MA portfolios anyway.
Jan. 25, 2011 – Marketwire.
Western Lithium Commences Pre-Feasibility Study
“The work will commence this week with completion targeted for mid-year 2011″
Jan. 18, 2011 – Marketwire.
Rockgate Significantly Increases Uranium/Silver Resource Size and Grade; adds Copper resource at Falea Project, Mali, West Africa.
“Overall, 37.0% increase in pounds of U3O8 and 29.5% increase in U3O8 grade at 0.03% cut-off grade over 2009 estimate (uncapped).
Overall, 28.6% increase in ounces and 22.5% increase in Ag grade over 2009 estimate (uncapped).”
January 19, 2011 – Marketwire Canada.
Golden Goliath Resources Ltd.: Drilling Below Las Bolas Tunnel Level Hits 1.235m of 3,735 g/t (119.9 Oz) Silver.
- – - – - – -
My comment: when translated into gold eq. grammeters the news is not such impressive, but the market rewarded it with a daily + 70% (then half eaten back)
January 13, 2011 – Marketwire Canada.
Robex Resources Inc./Impressive Results at Nampala: 1.74 g/t Over 44 Meters, Including 8 Meters at 4.18 g/t.
Robex’s President and CEO, Mr. Andre Gagne, comments: “these latest results are very encouraging as they bring us closer to our goal of 350 000 ounces of gold in the oxide portion of the Nampala deposit. We are very pleased with these results and remain very confident as the project moves forward.”
January 13, 2011 – Business Wire.
Orosur Mining Inc. Announces Positive Results for the Second Quarter Ended November 30, 2010.
“Cashflow from operations at San Gregorio was US$ 5.1 million this quarter”.
- – - – - – -
My comment: The EV of the company is at 60 million cad, so it is quite robust an annual cash flow of 20 million, isn’t it?
December 09, 2010 – Marketwire Canada.
Jayden Resources Intersects 3.2 g/t Gold Over 15.2m and 1.7 g/t Gold Over 33.5m and Extends Gold Mineralization 160m to the North at Silver Coin.
- – - – - – -
My comment: there was a time M.A. had this company in the watchlist, do you like current developments?
zurbo,
Matt Badiali’s approach might be overly simplistic but i have to say that right now observing the silver and gold market action, the last couple of months, investors clearly have a bias towards royalties play. Even the best DCF analysis (and yours most often is among the best there is) fails to put a value on a perceived safety of royalties when you compare them to pure explorers. the market is wiling to pay more for something tangible.
In this case buying slw is like buying silver on steroids. As long as market trending up (which i think by the way is about to happen for the next couple of weeks) it will do exceptionally well. Otherwise you are better with junior explorations plays who present what might be better risk reward characteristics.
@Giuseppe
We will be doing a monthly update for January as we are transitioning to a different and hopefully much better way to do these mining news reviews. Thanks for noting a few of the more important pieces of news! Regarding Jayden, this is a boring development road they are traveling but let’s not fall asleep and miss the exciting part that should eventually come as I think the higher grade drilling will give confidence to progress toward mine development.
@forwill
I think this same question may have been answered on another post but basically we feel a price that comes down toward $5 is the place to really be buying. We got sub-$6 over the past few days and right now we are a bit north of there so one could still do some nibbling here but I would still save any big dollar buying as close to $5 as your patience will allow you to wait. Recent news has been of only moderate interest and there is some risk that drilling over the next few months will not be very exciting as they poke around the edges of Miwah with some hit-and-miss holes as well as do some infill drilling that isn’t going to provide too much excitement unless they can go deeper (they only have one deep drill on site). The resource estimate later this spring or early summer could be interesting, I need to study a bit more to determine whether it is likely to fall short, meet or exceed market expectations. My guess at the moment is that it could be on the fall short to meet end of the scale. Longer term we still think $12-$15 is a realistic level for the big cash register ringing to take place but we will re-evaluate the position if conditions change.
@Avi
SLW has really been the only royalty play to get a big premium from the market, the rest have not been gaining much leverage to metal prices. That could change but I would consider SLW as a “market darling” more than a royalty play and I would certainly ascribe most of the big gains to the former quality rather than the latter.
@silverax I don’t mind having a third of my holdings be long term bets as long as my entry point doesn’t leave me playing long term catch up. Thanks much for the buy target and the reaffirmation of where you think EAS is headed.
I checked it out again, I found the company has now an implied value in cash and shares of about 97 M $ vs market cap of about 80 M $ (assuming 1 us$ = 1 ca$).
Cash = 16 M $
Coro shares & warrants = 1.07 x 55374000 + 0.57 x 6250000 = 62.8 M $
Other shares = 18.3 M $
How much do you think should be the value per share of benton assets and net smelter royalties left Joey?
In the meantime, Coro Mining, which is the main value driver in Benton share price, announced “that the Interdisciplinary Commission for the Environmental Evaluation of Mining Projects (“CEIAM” in Spanish) of the Province of Mendoza has completed its compilation, collation and evaluation of the previously completed sectoral reviews; the outcome of the public hearing and public consultation process; and the results of additional hydrological studies completed earlier this year, and has recommended that the EIS be approved by the provincial government.”
I am monitoring this one to understand if it deserves a place in my portfolio, it would be of great help to know about the comparative valuation of COP.V vs other copper developers.
Coro will also be producing 39k oz Au per year, but it still is a primary copper play unfortunately.
Re Brigus Gold:
…and its dispute with GLR Resources…settlement.
http://tinyurl.com/5s4f48g
@Giuseppe
Re: Benton Resources:
‘How much do you think should be the value per share of benton assets and net smelter royalties left Joey?’
duhhh…valuing the net smelter royalties exceeds my analytical abilities. We’ll have to coax silverax and Zurbo into contributing that piece.
I’ll respond with more detail about my enthusiasm later; but will say now – agreed – that btc.v has been tracking cop.v (now transitioning to more slowly appreciating development stage). But I believe that btc.v will decouple as they have so much other stuff on the go. The most visible to track are btc’s interests in marathon gold moz.to and mineral mountain resources mmv.v (nearly 20%).
Later.
@joey
I’ve computed BTC minor interests in other companies than COP, and that was a value of 18 M $ at yesterday value of MOZ, MMV and PVS.
With all the trackable assets and cash there was an 97 M $ value vs the 80 M $ market cap.
What I couldn’t track is the value of the assets 100% owned by Benton, then the company still has got some minor NSRs on assets sold to other companies. Since I understand that you follow this company since more time than I do, I was wondering if you do have a rough estimate of the value (per share) that this stuff should be worth, assuming BTC only had that with no cash + shares.
So that I could sum this with the 1.3 $ per share of cash&shares and obtain a fair value: if there is a significant discount vs let’s say our base case valuation, I could then join you on the shareholders team. It would be great also to compute the base case value for Coro Mining instead of the current share price and obtain a different target price for BTC.
BTC is the only company with a negative EV I know of left in the market, but unfortunately it is a primary copper play, so I wouldn’t expect our friends Tom & David to deal with it for the time being.
@Giuseppe
@joey
You guys make a good case for us to look at this more carefully. It shouldn’t be difficult to model Coro and I know Otto has also looked at it so we’ll try to see what he had to say, which was positive as I recall. Benton might be a way to play Coro indirectly as well as have other exposure. I don’t know if we can model the royalties but typically these remnant royalties tend to be “worth” say in the range of no more than $1-3 million unless we are talking about multiple percent NSRs on major projects. I’ll speak with zurbo especially since we are likely to exit Cardero should it tilt north of $2 again and that would leave us without a “bank”. Thanks for the work guys!
Now just remember in the future to post this type of stuff in subscriber-only posts so the general public doesn’t get to see or hear so much about where we might be looking next!
I’ve got what might be another silly question that has already been answered…hope not!
When I visit the MA site, I often first visit the logon page, logon, then proceed. How can I tell what is public or subscriber only? I’ve looked above and below the commentary and can’t find anything to clue me in. Thanks
Sorry for the wasted post. I see now member only commentaries are clearly marked after the post date and public ones are not marked at all.