Dear Readers,
There are certain time tested business models which have a high probability of leading to major rewards for early shareholders. But not everyone can do it. As a matter of fact, few people do.
That's why I am about to introduce a company whose management team was able to turn their $0.13 stock to a $3.00 buyout in less than 12 months - a potential return of 2215%.
A $10,000 investment could have returned you $221,500.
That same team is giving investors another opportunity. Only this time they are even bigger...and better.
Their newly formed company now owns one of the largest land positions in the Abitibi - home to the second largest accumulation of gold in the world.
They continue to hit high grades everywhere and are right next to what will become Canada's largest gold mine.
I have no doubt they will soon be a prime takeover target - especially considering that one of Canada's most significant mining events is about to take place right beside them.
That's why analysts are calling this company the next potential takeover target and have 12-month target prices fetching more than 150% from where they trade today.
More on this story in a bit.
Gold Stocks Set to Explode
Many junior and mid-tier explorers watched their companies bleed market value alongside continued market uncertainty and global volatility in 2011. Despite having record growth and strong growth prospects, many of the gold mining shares are now trading at or near 52- week lows.
We're in a period where the market has become extremely irrational and shares of strong quality gold miners and explorers are falling every day, despite record gold prices and strong outlook. But if you look at history - especially the 1973/1974 bear market - you will know that fundamentals will eventually win.
A Scary Similarity
What's happening now is eerily reminiscence of what happened nearly 40 years ago: Devaluation of the Dollar, extreme rise in oil prices, UK in a recession, real GDP growth decline, rise in inflation, and money printing (as a result of converting the dollar into a full fiat currency backed by nothing more than a promise by the government.) In the year prior to the 1973 crash, stocks were doing incredibly well with the DJIA gaining 15% in twelve months.
We're seeing the same thing now.
As stock markets peaked in 1972, the bears kicked in and stocks fell dramatically during that time. While stock markets rebounded eventually, the recovery was a slow process. The United States didn't see the same level in real terms until August 1993: over twenty years after the 1973-74 crash began.
While stocks lost nearly half their value during that time, many gold mining shares easily quadrupled in value - some of them far more than that. The surge in the gold and silver sector was dramatic and it changed the lives of the investors who took the risk to participate when no one else would.
Recent market events are pointing to a major surge in gold mining stocks in the next few years and as a result, this year may be one of the best opportunities in the last decade to own them.
And that's what makes the next company I am about to introduce so special.
One of the Biggest and Best
Balmoral Resources Ltd.
(TSX-V: BAR)
(OTC: BALMF)
Let me tell you why.
Balmoral Resources (TSX-V: BAR) (OTC: BALMF) currently owns one of the largest land packages in a belt which hosts one of the largest accumulations of gold in the world. That gives it one of the biggest and best land packages on the planet.
The Abitibi Greenstone Belt
Outside the Witwatersrand Basin in South Africa no other area on Earth has produced more gold than the Abitibi Greenstone Belt of Quebec and Ontario, Canada.
The belt has been home to more than 100 mines producing over 180 million ounces of gold. It's no wonder that new exploration tools, new geological understanding and new investment capital is starting to produce even greater results in this prolific area.
But lots of gold isn't the only thing that makes the Abitibi so special. It's the extremely high grades it produces.
The average historic grade of gold deposits of the Abitibi is more than 8 g/t - that's more than 8 times the average grade of the current gold reserves of the world's major gold producers.
Over the past 5 years a number of major gold discoveries in the Abitibi have made investors hundreds of millions of dollars. These include Osisko Mining, Detour Gold, Lake Shore Gold, Virginia Gold, and none other than West Timmins Mining - the company Balmoral's team sold less than two and a half years ago for a potential return of 2215% in less than a year.
Balmoral's management has a great chance of doing it again.
A Second Opportunity
Not only does Balmoral own one of the largest land packages in the Abitibi with over 82km to explore, it owns almost all of it right beside what will become Canada's largest gold mine next year: Detour Gold's 15.6 million ounce Detour Lake Mine.
Literally, Balmoral is right next door.
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Yellow Zones are Balmoral's Properties |
Click Here to Watch Balmoral's Corporate Video
When you consider that the Abitibi is already one of the largest producers of gold, that's a big deal. But a large land package isn't enough. It takes great drill results and a team that knows how to expand and market their story to the right people.
Balmoral is consistently hitting even higher grades than their next door neighbour Detour Gold, so you can bet they are telling the story to everyone in the area - not just the market. If you're in the mining space, you know what that means...
It's no wonder why analysts are calling for such a high price target on Balmoral.
But that's not all. I think these target prices will soon have to be raised.
First let's go back to how Balmoral started so you can see why I am placing a large bet on these guys.
How it All Began
The Balmoral story begins a few years back when it's management team, led by CEO Darin Wagner, were part of the discovery of the high-grade Thunder Creek gold deposit in Timmins.
As a result their company West Timmins Mining was acquired by Lake Shore Gold Inc. in a deal valued at $424 million, making a wealth of money for their shareholders.
(As I mentioned earlier, their management team took their $0.13 stock when the market crashed in 2008 to over $3.00 in 2009 when it was finally bought out. This all happened in less than 12 months.)
Balmoral's shares fetched a premium when they first started as a result of their management's success and replicated business model. But with recent market conditions waning, Balmoral's shares fell and have lingered at these levels for some time.
But that now makes it an extremely attractive investment proposition for me.
When management and CEO Darin Wagner first started Balmoral, they started by doing exactly what they did with West Timmins - they built a company based on the premise of, "Who will buy their project?"
The West Timmins Success
The West Timmins management team quickly recognized significance of a high-grade discovery made by Lake Shore in west end of the Timmins camp - an area which had always been a bit of a dog with a big fault separating it from the main part of the 71 million ounces Timmins camp.
The Timmins mine discovery by Lake Shore was the first in the West Timmins area of significance.
Shortly after Lake Shore Gold announced their discovery, and with Goldcorp moving into Timmins and beginning to make it their camp Darin and his team saw opportunity. This new discovery of Lake Shore was such high grade that it would be stupid not to build a company around it.
So Darin moved in and put together a district scale land position immediately surrounding Lake Shore, making Lake Shore's land position a hole in West Timmin's donut.
His logic was simple: Either Goldcorp will take over Lake Shore - and swallow them in the process - or Lake Shore will want to grow and the only way will be to buy West Timmins.
Darin and his team were putting together a project that someone was going to want. It was that simple.
When West Timmins had acquired all the land, it also took Thunder Creek - the discovery that would soon be the prime focus of their success.
In mid 2007 (in a scenario very similar to Balmoral's) in joint venture with Lake Shore they drilled the first discovery hole at Thunder Creek. For nearly two years, Darin and his management team tried to convince the market that they had something really special - something that both Lake Shore or Goldcorp would want.
But the market didn't care. Up until the bottom of 2008, West Timmins shares did nothing but go backwards, falling to a low of $0.13 in November 2008 - despite hitting significant grades over and over again.
(As I mentioned last week, the best time to buy stocks is when sentiment is negative and fundamentals are astoundingly positive.)
Still Darin and his team knew what they had and wouldn't quit. They weren't about to let Lake Shore bully them out of the joint venture. So they kept drilling and marketing their story.
Their result?
West Timmins outperformed Lake Shore shares on a percentage basis on every news release for a year coming out of the 2008 crash.
As a result of their persistent efforts, it was one of the first companies out of the bottom in 2009. While many companies hid in the sand, they didn't.
From that point, it's shares never looked back.
Why is this important?
Practically the same thing is happening to Balmoral right now. The similarities between the West Timmins story and Balmoral are so vivid, they're scary.
Balmoral has a very significant high grade system discovery at their Martiniere site that is very similar to what management was seeing early on in the West Timmins story with Lake Shore. It has a potential buyer in Detour, or any of a number of other nearby Quebec gold producers, who has already publicly announced - even in their AGM - that their number one desire is high grade within 50km of their new mine.
Take a look at where La Martiniere's high grade discoveries are:
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Last year, Detour Gold said it wouldn't be looking to acquire other companies until production begins at Detour Lake in 2013. Shortly after that in late September, Detour announced that it was acquiring Trade Wind Ventures.
As you can see, Balmoral already has a readymade buyer that wants exactly what they are finding. It is producing great results on practically every hole drilled.
Balmoral is repeating a path that is so very similar to West Timmins it's unbelievable. The geology, the grades, and the thickness of the intercepts management is finding from Martiniere West and East are very similar to what they saw in West Timmins.
The Comparison
Right now, Thunder Creek has an average grade of 5.64 grams per tonne (gpt) for 521,600 contained ounces of gold ("Au") in the Indicated category and 2,693,000 tonnes at an average grade of 5.89 gpt for 510,000 ounces Au in the Inferred category.*
*Based on Lake Shore Gold's Technical 43-101 Report on Thunder Creek, 12/29/2011
When you compare Thunder Creek to Balmoral's Martiniere, you will easily see what makes Martiniere so special.
With Thunder Creek, there is no ore above 350 vertical metres. The deposit starts 350 metres below surface.
On the other hand Martiniere West starts at surface.
My back-of-the-napkin calculation suggests Martinere West alone has probably drilled out 200-225k ounces at 11 gpt from surface to 250m.
That's not only twice the grade of Thunder Creek, but the discoveries at Martiniere are already exceeding Thunder Creek at shallow depth and is open in all directions.
Balmoral is more advanced than the West Timmins story ever was.
Balmoral also has a historic resource (non 43-101 compliant)* of nearly a million ounces of gold and in addition to the Detour area projects has an exciting new opportunity on its Northshore Property in Ontario that continues to expand in size.
West Timmins never had either as a backstop.
Balmoral also has over 82km to explore and is right next to what will become Canada's largest gold mine next year.
West Timmins never had that either.
Balmoral was built on the same concept as West Timmins - only its built bigger and better than before. For anyone that missed the West Timmins deal, Balmoral may be that second chance.
Now that you know the story, let's get into the more technical stuff.
Balmoral Project Overview
The majority of Balmoral's project portfolio is located in the province of Quebec -- a jurisdiction which combines an extraordinary mineral endowment with one of the most mining friendly legislative frameworks in the world.
So friendly, in fact, that Balmoral will be receiving over $2 million in rebates from the Quebec government for the money it has put into the ground. The more Balmoral spends, the more money it gets back.
Martiniere Gold System
Balmoral's discovery of a large new high-grade gold system at Martiniere represents one of the first new gold systems discovered in the Abitibi in 10 years.
Like the discovery of the Long Canyon Trend in Nevada which led to a double takeout (AuEX by Frontier and Frontier by Newmont - a double whammy for shareholders), Balmoral's discovery is opening new avenues to exploration and attracting significant industry attention.
Late last year, powerhouse Osisko Mining saw what was happening in the area and optioned to acquire up to 65% of Midland Exploration Inc.'s Casault property - right next to Balmoral's Detour East and Martiniere properties. (see picture below)
Highlights:
New Large Scale Gold Bearing System Open in All Directions
- Expanding High-Grade Gold Resource - West Zone
- 7 New Gold Discoveries Open for Resource Development
- New VMS System and Associated Bonanza Grade Gold-Silver Breccia Zone
- Already the Largest Gold System in the Belt Outside Detour Lake
Martiniere West
After 12 months of drilling the Martiniere gold system remains open in all directions and is the home of no fewer than 6 high grade zones including the West Zone.
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Highlights:
- Expanding, shallow, high-grade gold discovery with significant resource potential
- Greater than 75% "hit ratio"
- Open in all directions; drilling to resume June 2012
- Currently the most advanced of the Martiniere gold system discoveries
- Shallow, high grade zone located 45 km from Detour Gold Deposit
- Has moved from discovery to resource definition in less than 8 months
2011/2012 Drill Highlights
- 4.24 g/t gold over 22.59 metres
- 13.01 g/t gold over 12.00 metres
- 10.51 g/t gold over 9.72 metres
- 11.13 g/t gold over 7.10 metres
- 5.60 g/t gold over 24.92 metres
- 44.97 g/t gold over 2.33 metres
- 23.57 g/t gold over 3.74 metres
- 20.99 g/t gold over 2.30 metres
- 67.67 g/t gold over 1.36 metres
- Intercepts currently extend for 410 metres along strike, to 120 metres down dip - OPEN IN ALL DIRECTIONS
Martiniere East
- Recent New High-Grade Discoveries
- 12.93 g/t gold over 9.33 metres
- 18.72 g/t gold over 2.10 metres
- 76.40 g/t gold, 1390 g/t silver over 0.50 metres
- New zone of massive sulphide intersected; open in all directions;
- 4 New Gold Discoveries in December 2011
- 300 x 300 metres corridor of gold mineralization which is open in all directions
- All within approx. 1 km of the West Zone and at shallow depth
There's no doubt in my mind that Balmoral will continue to hit. But as I mentioned before, Balmoral also has strong backstops that West Timmins never had.
Bigger and Better Backstops
While the main focus for me is Martiniere, Balmoral also has:
- Grasset Gold discovery: a "Classic" Abitibi setting with first positive I.D. of "Timiskaming-style" gold mineralization along Detour Trend
- High Grade Fenelon Project: A historic resource of high grade gold, with a positive pre-feasibilty (pre 43-101) at $350 gold in the upper zone. Multiple high-grade veins with local "bonanza-grades" including 2011 intercept of 97.33 g/t gold over 6.19 metres. Most recent historic grade estimate is 17.5 g/t gold (cut) - 33. 80 uncut - for intercepts above the 150 vertical metre level. It also already has a mining lease in place
- Northshore Property, Ontario: JV property with GTA Resources that is large gold-bearing system centered around a high-grade core. Drilling continues to expand and hit strong numbers with the most recent results hitting 240.00 metres grading 1.41 g/t gold.
- Detour East: 20 kilometre, early stage property directly adjacent to the 16 million ounce Detour Gold deposit development project
- N2: A historic resource of 18.3 mT @ 1.48 g/t gold - 775,000 ounces* Project hosts 5 known zones of gold mineralization which contain an aggregate historic geological resource* of 18.2 mt grading 1.48 g/t gold for an in-situ resource of 775,000 ounces of gold. All known zones open to depth in a "gold-soaked" environment indicative of the presence of a large gold-bearing system typically of the most productive regions of the Abitibi.
*The N2 property contains a historical geological resource estimate defined by Cyprus Exploration in 1994 based on near surface drilling of approximately 230 Diamond drill holes. The estimate is historical and not in compliance with NI 43-101, and the category of "geological resource" does not conform to current CIM definitions. The historical estimate is not supported by a technical report. A qualified person has not done the work necessary to verify the historical estimate as a current estimate under NI 43-101 and the estimate should not be relied upon.
More technical information and highlights can be found below.
The End Game
When Detour Gold begins production in 2013, it will have only two things left to please shareholders:
- Increase production
- Increase ounces
Detour has already publicly stated their intentions:
"The Company's (Detour Gold) strategy is to focus on high-grade mineralization found within a 50 km radius of its processing plant" - Gerald Panneton, CEO and President of Detour Gold - January 25, 2012
Balmoral is walking into a very promising position in the next 6 months in that as they continue to grow these zones out, especially with the grade profile, they will get to the point where it will make sense for somebody to make an offer.
With all of the drilling, Balmoral could soon have enough for someone to come and say, "I'll take that."
I am not the only one who thinks so:
"In the next 12 months, we believe Balmoral's aggressive exploration program may attain milestones that will provide a threshold into which the eastern extensions of the Sunday/Detour Lake structural belt emerge as a growing and recognized World-class gold district. We highlight that Balmoral's portfolio of properties could be the target of a take-over with an acquirer that searches for district-scale control." - Eric Lemieux, Laurentian Bank Securities, January 18, 2012
Eric also has a CDN$1.50 price target for Balmoral as of January 2012, while Marc Johnson of M Partners has a target price of CDN$1.75 as of September 12, 2011.
Balmoral is trading at CDN$0.57 per share.
The Big Guys are Watching
I am confident that someone will knock on Balmoral's door before their projects get even bigger and becomes expensive.
There's some very big players in Balmoral's immediate area and they all have tons of cash to spend. You can bet they are watching Balmoral's progression and you can bet Balmoral's management is telling them the story.
The big guys are watching Balmoral hit high grades on practically every hole.
They know Balmoral's gold disoveries are open in every direction and continue to grow.
They know Balmoral has been making new discoveries in record time.
They know Balmoral is right beside what will become Canada's largest gold mine next year.
They know Detour Gold has every intention of focusing on high-grade mineralization within 50km of its processing plant.
They know Balmoral has the largest land holdings in the area.
They know that Martiniere is the largest known gold system in the belt outside Detour Lake.
They know Balmoral's team has done it before.
If you were one of the big guys, would you make an offer?
Balmoral Resources Ltd.
Cdn Symbol: (TSX.V: BAR)
US Symbol: (OTCQX: BALMF)
*Please note that this report was originally published on May 13, 2012
We're biased towards Balmoral Resources Ltd. because they are an advertiser and we will be buying shares. You can do the math. Our reputation is built upon the companies we feature. That is why we invest in every company we feature in our Equedia Reports, including Balmoral Resources Ltd. It's your money to invest and we don't share in your profits or your losses, so please take responsibility for doing your own due diligence. Remember, past performance is not indicative of future performance. Just because many of the companies in our previous Equedia Reports have done well, doesn't mean they all will. Furthermore, Balmoral and its management have no control over our editorial content and any opinions expressed are those of our own.
Until next time,
Ivan Lo
Equedia Weekly
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