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Obviously this commentary isn’t about fortune seekers
heading for the California Gold rush or cattle driving Cowboys headed to
Dodge City to kick up their heels, although it was the term used in both
cases in the days of yesteryear. Nevertheless it is about
“elephants,” albeit a different sort of “elephant.”
This term has also been used over time to describe elephantine
or gargantuan sized mineral deposits not commonly found around the world and
that is the focus of the following commentary.
A Time For Elephants?
In the world of mining, among the many other governing factors,
a mineral deposit’s size has always been and always will be a huge
factor in a discovery becoming an operating mine. In our current
world’s financial crisis and with the limited interest and funding
available to the mining industry, especially for junior exploration
companies, it would seem readily apparent that now more than ever, size
matters greatly. When Gold was far less expensive it used to take
approximately a one million oz resource to interest the majors in JV’s,
funding or a buy-out. Not so today with Gold trading at an all time high
range. Now it takes much less in situ when it comes to precious metals.
Base metals as well as Specialty Metals always are a cat of a different color
as we all know. When it comes to base metal discoveries being made today most
are under the gun in terms of share price and being able to find adequate
funding to advance their exploration and especially when it comes to Capex
for mine construction. In times of high demand and commodity bull markets
it’s a totally different scenario but that was then and this is now.
Now, even if the market malaise is only temporary most of the world is paying
little attention to metals and mines, but that will change and the typical
contrarian investor as always, will benefit the most.
Therein lies my main point, that when an
investor sees an “Elephant” sized mineral deposit in the making
they should not be complacent about it, but should get informed and do the
required due diligence. That’s how we all make money in the markets
when it comes to picking good investments. Keep reading because I know of two
such ‘Elephants’ of which I will later reveal and both are in the
USA and in mine friendly states.
China’s Impact
We all have read endlessly over the last couple years about
China’s onward march to dump dollars for commodity resources, buying
pell-mell around the globe and all the while raising export taxes on their
domestic metal reserves, some as high as 20%. I also have brought these
topics up more than a few times, along with a few other mining commentators.
But the fact remains! China is buying, whether to get out of US dollar
dominated paper assets or just because they have a longer term view with
respect to “Finite” resources than we in the west, and it will
have a profound effect on who gets what and at what price when the smoke
clears.
As one commentator stated the other day with regard to Rare
Earth Metals “We have highlighted on many occasions the power shift to
China in the resource sector and the growing need for other industrial
nations to seek alternative supply sources for themselves. Once supply
sources are firmly secured, China will be able to determine both material prices
and their export destinations. The fact that most of these investments are by
state-funded entities such as CNMC makes the situation particularly
precarious. At the far end of the pessimism, it will be a situation similar
to oil supplies which are controlled by a handful of countries. The
race has begun to secure supplies of rare metals. Investors should be
positioning themselves at the starting line and taking a look at companies
with proven deposits.” Link: www.resourceinvestor.com/News/2009/7/Pages/Race-for-rare-metals--And-China-is-winning.aspx.
Myself and many others with years of experience in the mining
industry feel the same thoughts expressed above apply to all the metals that
China currently ‘does’ and ‘will’ control production
of in future, if their buying spree goes unchecked and ‘If’ the
western world doesn’t get busy exploiting and securing their own
supplies of many high demand Base & Specialty Metals.
The greatest forward demands and price increases will be
minerals of the 21st Century needs and ones NOT having widespread
multi-national production. A prominent example is the fact that China
produces 7/8 of the world’s Magnesium supply (800,000 tonnes per year
worldwide), not to mention that the world’s production of Manganese (13
M tonnes per year worldwide) is limited primarily to S Africa, (and small
amounts in other non-western countries) with a whopping 46% of the total
coming from China itself and they in turn with added raw imports produce 95%
of all the world’s Electrolytic Manganese. As I’ve written in
past editorials the domestic production of both of these metals in Canada and
the US is almost non existent and both are high demand, multi use metals in
our modern world today. Should we buy our future mineral resources from China
with ridiculous export taxes and handling costs and then pay for
trans-oceanic shipping to continue to be productive nations or should we develop
the mines in our own backyard? We had better do the latter or quite likely
China will help develop and own them instead! *Note- Manganese and Magnesium
are not commonly referred to as Base Metals but rather “Specialty
Metals”.
The days of the western world controlling the majority of the
global resources and being the only ones enjoying a lifestyle of
modernization amid plenty are over. The rest of the world wants in now and
they mean to modernize as rapidly as possible and raise the living standards at
home as well as gain greater control of these same resources. Nothing could
bode more strongly than for those investors who own minerals in the ground
“AT HOME”.
The Base & Specialty Metal Elephant Factor
Have you heard of any mining “Elephants” lately? Have you been
hunting for one? Are there any still out there? There have been numerous
elephant sized mines found worldwide in past, although obviously not all that
common in our everyday mining news. It’s not hard to understand that
mega sized mineral deposits should and will get the greatest attention by the
Major’s and the investment community, which means a far greater chance
of success for the junior miner making the discovery. Usually a plus or minus
20 year mine life is good enough to make a mine operational if they have the
grades and infrastructure, but even with that lifespan they may find it hard
to find financing in today’s fiscal environment. What about a 50 or 100
year lifespan? Obviously a mine of that size and scope would command a great
deal of major mining company attention, not to mention funding from the
investment sector.
So who are these two junior companies I spoke of earlier? Well
the latest is one with a mega sized deposit of Magnesium in Nevada called
Molycor Gold Corp (MOR-V on TSX) http://www.molycor.com/ whom while drilling
for Gold on their 100% owned Nevada Tami-Mosi claims just happened to run the
drill bit into 100’s of feet of 10% (average) grades of Magnesium in
Dolomite in each and every widely spaced drill-hole over the first 1 ½
miles of tested strike distance. Their recently released NI-43-101 Resource
study shows an Inferred Resource of over 50 Billion pounds of Magnesium with
the deposit stretching over 1 ½ miles. The deposit is conducive to
open-pit style mining and open at depth and to the north end of strike.
Obviously with further drill work that which has been defined
thus far may only contain a portion of the iceberg. I would suggest it would
be very worthwhile to visit the company website and begin your research
there. I would add that recent testing of the Tami-Mosi Dolomite by Teck
Cominco Global Discovery Labs has shown the ore to be of a high purity form
of Dolomite favorable to current Magnesium recovery processes. Also worth
mentioning is that apparently there will be an upcoming Private Placement on
this junior so if you have any interest after your due diligence give me a
call and I will help walk you thru the procedure.
The second company with an elephant by the tail is another of
the Reaugh Group (as is Molycor Gold Corp) called Rocher Deboule Minerals
Corp (RD-V on TSX) http://www.rdminerals.ca/ Rd Minerals also has a NI-43-101
Resource Study recently updated which gives an indicated and inferred total
of over 10 Billion pounds of Manganese. Their 100% owned Artillery Peak
Arizona deposit is also apparently open to potential size increases as many
other areas of the claims blocks have not yet been tested or drilled as yet,
and is also shown to be near surface for open pit style mining. They have
access to roads, power & water as well as being in a mine friendly state.
Some of these claim blocks were actually producing Manganese for the war
effort in the 1940’s. All the information you need with respect to both
company’s projects is contained in recent press releases on their
website.
So in conclusion with specific regard to these two
aforementioned junior miners, I would be paying very close attention to their
last few (and future) company news releases because with their respective
NI-43-101 Resource Instruments in place, whether those be ‘Indicated or
Inferred’ Resources, one simple FACT remains, both projects are now
proven to be “Elephant” sized mineral deposits and as such they
will sooner or later become a focus of interest for the cash rich investment
community and major mining entities. The groundwork has been laid, now
it’s just a case of adding to the over-all package. Two or three years
past when the markets were heated I’m very confident both companies
would have been trading at multiples of their current paltry share prices.
Those days of market frenzy will come again and sooner rather than later if
I’m correct as we are dealing with a worldwide rush for
‘Finite’ resources and the world won’t sit idly by and
watch China accumulate the cream of the crop for much longer before it
awakens to some new harsh realities in the world of mining. Let the past
history of these two charts below be a guide to the future of Manganese and
Magnesium and remember Canada and the US have ‘NO’ domestic
supply of Manganese period, and only one minor domestic supplier of Magnesium
in the US. I believe both of these Reaugh Group companies have tigers by the
tail simultaneously, or should I say “Elephants” by the tail.
Ken
Reser
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