One Year Older
One Year Wiser
Monday, December 31, 2007
Thursday, December 20, 2007
Geologix Has Ambitions To Rival Penasquito
Canadian listed Geologix Explorations does not believe in spreading its operations around the world so all its projects are in North and South America – specifically Nevada, Mexico and Peru. Its management is grounded in geology from its chairman Robert Willis who played a key role in founding and developing Manhattan Minerals. Under his direction, Manhattan explored many gold and silver projects in Mexico and most notably explored, developed, and financed into production the 2200 tonnes/day Moris open pit heap leach gold mine. He is supported by Dunham Craig, the chief executive who is also a geologist, and he was responsible for discovering 3 new deposits at the Golden Bear Mine for Wheaton River Minerals and subsequent development of the bankable feasibility mining program that lead to the profitable operations for Wheaton.
This caucus is rounded off by Sig Weidner who spent 18 years with Rio Algom /Billiton/BHP Billiton where he was involved throughout the exploration cycle from greenfields exploration, through pre-feasibility to being manager of operations in North America and Europe. During that time he was awarded the Prospector of the Year (New Brunswick PDAC branch) award in 1993 and the international Bill Dennis (PDAC) Prospector of the Year award in 1998 for the discovery of the Spence Porphyry Copper deposit in Chile. A formidable team which knows what it is about and spends its money in the ground rather than mining the market. They are seeking gold deposits of size and have a balance of early and late stage projects.
San Agustin in Durango state, Mexico, is being acquired from Silver Standard. The deal is not the usual farm-in arrangement as Geologix has to carry out 15,000 metres of drilling before estimating a resource over an agreed area. It can then buy the resource for US$15/ oz gold and US$1/ oz silver provided the price of gold is below US$750/oz and silver below US$20/oz. Above these two price bases, the costs rise to US$20/oz gold and US$1.50/oz silver. No charge is made for any zinc or lead discovered and Geologix also pays nothing for any discovery outside the defined drill plan, though it has to give Silver Standard a 2.5 per cent net smelter royalty.
As a starting point when the deal was agreed last summer the inferred resource amounted to 436,000 ozs gold equivalent. Since then the company has carried out 6 kms of trenching, more than 8,000 metres of drilling and has another 10,000 metres to complete. Two recent announcements confirm that there is a new and significant target area of mineralization on the property which should add to the existing drill defined targets as it has all the signatures of the other zones on the property. Early this month a couple more 150 metre drill holes extended the mineralization even further on the northern edge of the Zone 2 area and grades of gold, silver and zinc increased at depth with the holes ending in mineralization As Dunham Craig pointed out, "our drilling continues to discover additional high grade in both Zones 2 and 4. These zones of increased grade greatly enhance the project's future economics when considering a large bulk mineable polymetallic deposit.
The interesting thing about San Agustin is that the deposit appears to consist of two different types of mineralization. Northeast of the historical resource it is primarily in higher grade gold-silver structures, whereas to the south west of the historical resource there seems to be an extensive system of gold-silver-zinc-lead mineralization Comparisons were made by Sig Weidner, when he was in London recently, with the Penasquito mine, also in Mexico, where Goldcorp intends to expand production to around 1.7 million ounces of gold equivalent at a capital cost of US$1.49 million. If this comparison holds up Geologix will really be onto something and the resource calculation due next summer should reveal a lot.
The company also has a strategic alliance with Newmont in central Peru where first-pass regional geochemical evaluation consisting of Newmont's proprietary BLEG technique as well as stream-sediment and rock sampling of the Alliance's 11,000 square kilometres has now been completed. Over 14,800 samples have been collected within the alliance boundary that provide a comprehensive and compelling database for definition of anomalous areas. Follow-up geological investigation of numerous identified targets is underway and this will have priority over the other early stage projects in Peru which Geologix has a 100 per cent interest.
Its projects in Nevada are slightly more advanced and some are being considered for joint ventures to limit the company's exploration spend. Some drilling is taking place at the OZ project and the QC project will be drilled next summer. Most of the investment interest is, however, focused on San Agustin and the build-up to the resource estimate next year should be worth monitoring.
This caucus is rounded off by Sig Weidner who spent 18 years with Rio Algom /Billiton/BHP Billiton where he was involved throughout the exploration cycle from greenfields exploration, through pre-feasibility to being manager of operations in North America and Europe. During that time he was awarded the Prospector of the Year (New Brunswick PDAC branch) award in 1993 and the international Bill Dennis (PDAC) Prospector of the Year award in 1998 for the discovery of the Spence Porphyry Copper deposit in Chile. A formidable team which knows what it is about and spends its money in the ground rather than mining the market. They are seeking gold deposits of size and have a balance of early and late stage projects.
San Agustin in Durango state, Mexico, is being acquired from Silver Standard. The deal is not the usual farm-in arrangement as Geologix has to carry out 15,000 metres of drilling before estimating a resource over an agreed area. It can then buy the resource for US$15/ oz gold and US$1/ oz silver provided the price of gold is below US$750/oz and silver below US$20/oz. Above these two price bases, the costs rise to US$20/oz gold and US$1.50/oz silver. No charge is made for any zinc or lead discovered and Geologix also pays nothing for any discovery outside the defined drill plan, though it has to give Silver Standard a 2.5 per cent net smelter royalty.
As a starting point when the deal was agreed last summer the inferred resource amounted to 436,000 ozs gold equivalent. Since then the company has carried out 6 kms of trenching, more than 8,000 metres of drilling and has another 10,000 metres to complete. Two recent announcements confirm that there is a new and significant target area of mineralization on the property which should add to the existing drill defined targets as it has all the signatures of the other zones on the property. Early this month a couple more 150 metre drill holes extended the mineralization even further on the northern edge of the Zone 2 area and grades of gold, silver and zinc increased at depth with the holes ending in mineralization As Dunham Craig pointed out, "our drilling continues to discover additional high grade in both Zones 2 and 4. These zones of increased grade greatly enhance the project's future economics when considering a large bulk mineable polymetallic deposit.
The interesting thing about San Agustin is that the deposit appears to consist of two different types of mineralization. Northeast of the historical resource it is primarily in higher grade gold-silver structures, whereas to the south west of the historical resource there seems to be an extensive system of gold-silver-zinc-lead mineralization Comparisons were made by Sig Weidner, when he was in London recently, with the Penasquito mine, also in Mexico, where Goldcorp intends to expand production to around 1.7 million ounces of gold equivalent at a capital cost of US$1.49 million. If this comparison holds up Geologix will really be onto something and the resource calculation due next summer should reveal a lot.
The company also has a strategic alliance with Newmont in central Peru where first-pass regional geochemical evaluation consisting of Newmont's proprietary BLEG technique as well as stream-sediment and rock sampling of the Alliance's 11,000 square kilometres has now been completed. Over 14,800 samples have been collected within the alliance boundary that provide a comprehensive and compelling database for definition of anomalous areas. Follow-up geological investigation of numerous identified targets is underway and this will have priority over the other early stage projects in Peru which Geologix has a 100 per cent interest.
Its projects in Nevada are slightly more advanced and some are being considered for joint ventures to limit the company's exploration spend. Some drilling is taking place at the OZ project and the QC project will be drilled next summer. Most of the investment interest is, however, focused on San Agustin and the build-up to the resource estimate next year should be worth monitoring.
Tuesday, December 18, 2007
Citigroup's prediction on Gold and Copper
GOLD
Citigroup observed that "gold is oscillating around $800/oz as speculators have locked in profits. We view the outlook favorable for a test of $1,000."
The analysts said they see precious metals "as well-positioned given the inherently re-flationary implication of Fed and Central Bank action. We would expect strong safe-haven demand in the event of U.S. recession." However, the analysts also noted that gold equities have been underperforming bullion in the fourth quarter "as investment demand has slackened.
Meanwhile, "the IMF is taking measures (e.g. job cuts) aimed at convincing the U.S. and Europe to allow 400 tonnes of gold sales," according to the analysts.
Hill and Wark indicated that "gold shares have finally delivered, after languishing due to the [investment] ‘physical bypass' and high relative multiples compared to FCF-rich [free cash flow-rich] bulk/base miners." They even forecast that "the market is also likely to be shocked at how much cash the major golds generate at $800/oz.'
COPPER
The analysts said they favor copper "as the most defensive, yet aggressively pro-cyclical, China-centric industrial metal." While noting that copper spot prices have fallen below $3/lb., Hill and Wark also affirmed that "medium/long-term dated futures have rallied, suggesting: 1) Metals traders believe a U.S. recession will be shallow, with little spillover to China or 2009/10; and 2) Replacement cost is $2.50/lb."
Other factors highlighted in the Citigroup analysis of copper revealed that November imports were up in China, while Shanghai inventories have declined 57% from October peaks. Smelter TC/RCs are settling low even though there is more available spot concentrate. China Minmet and Jiangxi Copper have agreed to buy out Northern Peru to access resources in Peru. Finally, the cancellation of the Galore Creek project development by NovaGold and Teck Cominco illustrates "the difficulty of developing large, low-grade deposits in remote locations," according to the analysts.
Hill and Wark found that metals futures have been more durable than spot. "This explains why the equities have been insulated and defies headline fears of falling demand from development economies."
Meanwhile, "the futures market suggests the mean expectation is for copper to remain above $2.60/lb ($5,700/T) for the next five years," Citigroup said, adding that "new copper projects probably require $2.00 - $2.50/lb., depending on views of political risk.
Citigroup observed that "gold is oscillating around $800/oz as speculators have locked in profits. We view the outlook favorable for a test of $1,000."
The analysts said they see precious metals "as well-positioned given the inherently re-flationary implication of Fed and Central Bank action. We would expect strong safe-haven demand in the event of U.S. recession." However, the analysts also noted that gold equities have been underperforming bullion in the fourth quarter "as investment demand has slackened.
Meanwhile, "the IMF is taking measures (e.g. job cuts) aimed at convincing the U.S. and Europe to allow 400 tonnes of gold sales," according to the analysts.
Hill and Wark indicated that "gold shares have finally delivered, after languishing due to the [investment] ‘physical bypass' and high relative multiples compared to FCF-rich [free cash flow-rich] bulk/base miners." They even forecast that "the market is also likely to be shocked at how much cash the major golds generate at $800/oz.'
COPPER
The analysts said they favor copper "as the most defensive, yet aggressively pro-cyclical, China-centric industrial metal." While noting that copper spot prices have fallen below $3/lb., Hill and Wark also affirmed that "medium/long-term dated futures have rallied, suggesting: 1) Metals traders believe a U.S. recession will be shallow, with little spillover to China or 2009/10; and 2) Replacement cost is $2.50/lb."
Other factors highlighted in the Citigroup analysis of copper revealed that November imports were up in China, while Shanghai inventories have declined 57% from October peaks. Smelter TC/RCs are settling low even though there is more available spot concentrate. China Minmet and Jiangxi Copper have agreed to buy out Northern Peru to access resources in Peru. Finally, the cancellation of the Galore Creek project development by NovaGold and Teck Cominco illustrates "the difficulty of developing large, low-grade deposits in remote locations," according to the analysts.
Hill and Wark found that metals futures have been more durable than spot. "This explains why the equities have been insulated and defies headline fears of falling demand from development economies."
Meanwhile, "the futures market suggests the mean expectation is for copper to remain above $2.60/lb ($5,700/T) for the next five years," Citigroup said, adding that "new copper projects probably require $2.00 - $2.50/lb., depending on views of political risk.
Tuesday, December 4, 2007
Too Young to die
Analyst Eric Hommelberg mentioned Goldman would be wrong again this time. Take a peek at the December 2005 peak in gold. Indeed very similar to the one we just witnessed in November 2007 right? Guess what gold prices Goldman Sachs were predicting in December 2005 for the following 12 months?
Well, their forecast concerned gold prices by end of 2006 in the $470 - $510 range. Needless to say they were wrong and they will be wrong this time again. It goes far beyound the scope to discuss Goldman’s hidden agenda for predicting lower gold prices but the bottom line is that predicting lower gold prices is predicting an appreciating dollar. An appreciating dollar however could be regarded as science fiction during times of severe financial stress in the US banking sector, current account deficits exceeding $800 billion per year, exploding costs of the middle east war (multiple trillion) and foreign countries looking for options to diversify out of the dollar.
Well, their forecast concerned gold prices by end of 2006 in the $470 - $510 range. Needless to say they were wrong and they will be wrong this time again. It goes far beyound the scope to discuss Goldman’s hidden agenda for predicting lower gold prices but the bottom line is that predicting lower gold prices is predicting an appreciating dollar. An appreciating dollar however could be regarded as science fiction during times of severe financial stress in the US banking sector, current account deficits exceeding $800 billion per year, exploding costs of the middle east war (multiple trillion) and foreign countries looking for options to diversify out of the dollar.
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