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The Wallace Street
Journal
Wallace, Idaho – What
does Goldcorp legend Rob McEwen know about junior
mining stocks that the markets haven’t figured out? Because
while the markets were busy eschewing junior exploration companies during the
recent rally, McEwen was buying.
The most recent news broke Wednesday: McEwen picked up a two-stage
private placement in Spokane, Washington-based Minera Andes (MNEAF.OB) worth C$10 million –
or about one-third of Minera’s
market cap before the obligatory trading halt on the news. We’ll spare
you the technical details of the deal; they can be found on Minera
Andes’ website. We were more interested in the whys.
“I’m bullish on the price of gold,” (and presumably
silver), McEwen said. “Goldcorp started as a
junior and I’ve always been a big believer in exploration.”
Indeed. McEwen took Goldcorp from a penny-stock
junior to a billion-dollar company, via means that defied the conventional
mining industry “wisdom.” His most outrageous stroke came in
2000. Goldcorp’s Red Lake gold mine in Ontario
was not performing to his expectations. To the horror of Goldcorp’s
own investors and geologists, McEwen posted all of Red Lake’s geologic data,
including all of Red Lake’s
dirty laundry, on the internet, and issued a half-million dollar challenge:
Be the guy who can tell me how this thing can make money, and the purse is yours.
A couple of Aussies from West Perth who’d never been to Red
Lake, never been to Ontario, never been to Canada, never been to the
Americas, downloaded and crunched Goldcorp’s
heretofore proprietary numbers, built a model, and told McEwen where to
drill. Bang! The first four holes the Aussies suggested hit the motherlode. Red Lake went
from an annual gold production rate of 53k-oz at $360/oz cost to 504k-oz at
$59/oz. Quite a nip. All on the internet, no holds barred. McEwen told
several e-magazines
at the time his ‘hang-it-all-out’ approach was inspired by Linus Torvalds’ open-source-code computer
operating system, Linux. Unlike the anal-retentive Microsoft, Torvalds wrote a PC computer
operating system that anybody could hack in to, and steal or improve as they
saw fit. The result, after nearly a decade, is a feature-rich OS that is much
cleaner, less buggy, less memory-intensive, and far more user-friendly than
Windows. And it’s free. McEwen figured that model could be transported
to the mining industry. He won.
You’d never know there was a billionaire on the other end of the
phone line. Rob McEwen is about as polite and gentle and unassuming as a Nanaimo
bartender. When, after several hostile proposals, Wheaton River merged with Goldcorp, with Goldcorp the
surviving entity, McEwen handed over Goldcorp’s
helm to Wheaton River’s
Ian Tefler. Rob remains
non-executive chairman of Goldcorp, but came to
regard himself by February 2005 as basically “unemployed.” He
walked away from hands-on management. There was a reason. After Goldcorp’s phenomenal performance earlier this
decade, McEwen wanted more.
“Goldcorp was a great early run, but
it was not making the growth curve I wanted. I tried all the variables,
looked at everything. Then one day I walked down the hall by a mirror, took a
good look, and I said, ‘Humph, there’s a variable I haven’t
looked at.’”
You get the sense, early on in a chat with Rob McEwen, that this is a
guy who gets bored easily. “I never intended to retire. “I wanted
to stay engaged and juniors are what I like, because they grow into majors
sometimes. I really think the seniors have disappointed investors. There was
suggestion that as gold goes up profits would go up, but now the profit
margins are smaller. In order for seniors to get their growth curves, they
have to buy new discoveries. I wanted to invest in the people that are good
in that. The market forgot about us from 2004 to today.”
Enter Minera Andes.
(Your correspondent must confess a certain favourable bias toward Minera, because their IR guy, Art Johnson, is a
fellow Cowles Publishing Co. ex-pat. Art wrote about mining for the old
Spokane Chronicle, till Cowles folded the Chron. I wrote about mining for the Spokane
Spokesman-Review until the powers-that-be decided Coeur d’Alene real estate markets were
more important, and rolled-up the Silver Valley
bureau. Art and I both found our ways into IR work for miners, Art for Coeur,
me for Sunshine, back in the late 1980s. If Art likes a mine, ipso facto so
do I. So take my word for it that you can take Art’s word for any
thing.)
Minera is partnered-up
with the Peru-based Hochschilds
in Argentina
at the San Jose property.
Nice crowd to run with. There are about 300 guys on the San Jose
right now, prepping up a world-class
silver and gold deposit whence mill construction begins next quarter.
Engineering and banakable
feasibility studies are in their final stages, all favorable.
At this point, Allen Ambrose, who is the CEO of Minera Andes, is about to burst, because he wants
to talk about mining opportunities in politically-stable Argentina,
So let’s let Allen talk: “Every time we’ve drilled
an anomaly we’ve hit veins. We have over 32 km of veins identified;
it’s truly a district-scale property. If this was in the States or Canada
you’d have three or four companies. In Argentina
you have the ability to make these discoveries at the surface because nothing
in that region has been explored. You’ve got a couple of producers down
there in that part of the world, that’s all. Our target is 5.3 million
oz of gold.”
Continues Mr. Ambrose: “What sets us apart is moving out of
exploration and into production. We’re close to that stage. As Rob
pointed out to me at our last meeting in Toronto,
you look at a profile of company moving from
exploration into production, they tend to get quiet, then
move into production. There’s value in growth.”
After five Nevada
gold company moves, why Argentina,
why Minera Andes, we
interrupt. Rob, why?
“I saw a company with a strong track record in a promising part
of the world. This looks at lot like Nevada,
and I’ve taken a recent interest in Nevada.
It’s even better than Nevada
because it’s 100 years behind Nevada.
They have the ingredients to build a good-sized company.”
Minera has enough bank
credit to get the San Jose on-line in
2007, now that McEwen has weighed in. Four mineralized systems over more than
30 kliks are known to
exist at San Jose. Of this
distance, only about 20 percent has been drill-tested for mineralization at
depth. The current resource, says their company literature, based on US$300
gold and $5 silver, is 700,000
ounces of gold equivalent. Using a cutoff grade of 100 grams per ton the Huevos Verdes
vein has an indicated resource of 1,058,000 tonnes with a silver grade of 266.8 g/t and gold
grade of 3.1 g/t, for a total of 9,075,300 ounces
of silver and 106,000
ounces of gold. The inferred resource is 1.541 million
tonnes with a silver
grade of 318.7 g/t and a gold grade of 3.5 g/t for a total of 15,789,700 ounces
fo silver and 173,000 ounces of
gold. (Equivalent figures are based on a 60:1 silver/gold ratio which does
not take into consideration possible differences in metal recoveries).
Fifteen million ounces of silver, 173 thousand
ounces of gold, for starters. Found by geophysics. Confirmed
with diamond drills. Operated by the Hoschilds.
That gets our attention.
McEwen is thinking ahead of the market. So is MinAndes. The best luck we ever had was the bad
luck that hit the juniors last time around. Want to play? Now’s
the time. Follow this guy.
By : David
Bond
Editor : The Silver
Valley Mining Journal
www.silverminers.com
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